Another day, another credit fundraise, this time from Monroe Capital. The Chicago-based firm’s Opportunistic Cred Fund I hit its final close with $286 million in commitments and will target “asset rich directly originated and secondary credit opportunities.” The fundraising is the latest in a string of middle market debuts poised to take advantage of choppy pricing in traditional capital markets.

Owl Rock Technology Income announced plans to deploy its $500 million war chest in technology sector direct loans earlier this week. Earlier,  Thoma Bravo reportedly turned to Blackstone CreditGolub Capital, Owl Rock Capital and Apollo Global to finance its $10.7 billion proposed acquisition of Anaplan.

Unlike leverage loan markets pricing in uncertainty, 70 percent of private credit providers surveyed by Baird earlier this spring said they were not requiring a pricing premium on loans to companies without direct business in Russia. Covenants are also largely remaining unchanged. That makes direct lenders more competitive just as premiums climb across bank loans. Thoma Bravo reportedly sought funding for its acquisition through direct lending because the target’s negative cash flow was a hard sell to banks in a rising interest rate environment.

Could that create an opportunity for direct lenders? Remember, private equity’s turn toward direct lenders during the pandemic gave credit funds access to deals that would have been out of reach in normal times. 

Private credit funds appear to be wagering that the market chop pushing dealmakers toward their products will persist.

Brandon Zero