Wells Fargo (WFC), Centerbridge Partners Form $5B Lending Fund
Wells Fargo & Company WFC entered a strategic relationship with private equity firm Centerbridge Partners to provide direct lending to non-sponsor middle-market companies in North America.
For this, the companies will launch a fund, Overland Advisors, to lend more than $5 billion in senior secured loans. This will diversify the client market served by private credit and direct lending. The fund will also pursue other transactions, including traditional sponsor-backed direct lending opportunities.
Of the $5 billion, anchor investors, including wholly-owned subsidiaries of the Abu Dhabi Investment Authority and British Columbia Investment Management Corporation, will commit around $2 billion in initial equity commitments. Meanwhile, Wells Fargo will be a minority investor in the initiative and offer the loans to existing customers as an alternative to other financing options.
The fund will leverage Wells Fargo’s long-term relationships, extensive client network and preeminent position in the U.S. middle market and asset-based lending space.
Particularly, loans from direct-lending funds often carry a higher interest rate than traditional bank loans, making it attractive for private capital providers. Moreover, with higher interest rates and tight credit conditions, banks have also been eyeing opportunities to tap the market. Stricter regulation and increased costs have compelled banks to re-evaluate the types of loans and services they provide. Hence, the move is a strategic fit for WFC.
Per WFC management, “As a leader in U.S. middle market and asset-based lending, we are continually focused on finding ways to best serve our clients, and Overland can offer them options for alternative capital structures that can be used to pursue a broader set of growth and value creation initiatives across a variety of market conditions.”
Centerbridge Partners noted, “We believe Overland draws on the unique and complementary capabilities of both Centerbridge’s leading private credit underwriting capabilities and Wells Fargo’s nationwide sourcing and origination network to offer an attractive new proposition for borrowers in the private lending and direct credit space at a particularly compelling time.”
Over the past six months, shares of Wells Fargo have gained 9.4% compared with the industry’s rise of 1.7%.
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Currently, WFC carries a Zacks Rank #3 (Hold).
Bank Stocks Worth a Look
A couple of better-ranked stocks in the banking space are First Business Financial Services, Inc. FBIZ and Southside Bancshares, Inc. SBSI.
The consensus estimate for First Business Financial Services’ current-year earnings has been unchanged in the past 30 days. In the past six months, shares of FBIZ have declined 4.9%. The company currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The consensus estimate for Southside Bancshares’ current-year earnings has been unchanged over the past 30 days. SBSI shares have declined 14.5% over the past six months. The company currently sports a Zacks Rank of 1.
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Wells Fargo & Company (WFC) : Free Stock Analysis Report
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