Macro

Blackstone to Sell $450M Loans at 60 Cents on Dollar Amid Market Shift

Blackstone aims to sell $450 million in loans at a discount amid growing secondary market and non-bank lending trends.

By Mackenzie Crow

5/15, 17:35 EDT
S&P 500
iShares 20+ Year Treasury Bond ETF
iShares 7-10 Year Treasury Bond ETF
Blackstone Inc.
Morgan Stanley
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Key Takeaway

  • Blackstone Inc. aims to sell $450 million of loans, including distressed debt, from a 2017-acquired portfolio for liquidity.
  • The portfolio, bought for $2.4 billion from NewStar Financial, is being sold at around 60 cents on the dollar.
  • This move reflects a broader trend towards secondaries trading amid a deal drought and higher interest rates impacting cash distributions.

Blackstone's Strategic Loan Sale

Blackstone Inc. is in the process of selling approximately $450 million worth of loans, including some distressed assets, from an older fund to provide liquidity to its investors. This move comes as the fund, which acquired the loan portfolio for $2.4 billion in 2017 from NewStar Financial, has exited its reinvestment period. The portfolio in question comprises debt from various companies, including Arrivia, American Achievement Corp., BMC Software Inc., and Charter Communications Inc. A bid has been selected that values the portfolio at around 60 cents on the dollar, though the deal has not yet been finalized.

Evolving Secondary Market Dynamics

The secondary market for private investments, including credit secondaries, is witnessing significant growth amid a challenging environment for exits and asset sales. This is partly due to higher interest rates leading to a slowdown in cash distributions, especially in private equity. PJT Partners anticipates the volume of secondary deals to reach at least $135 billion this year, marking a 17% increase from 2023. Credit secondaries, a relatively new area, have emerged strongly due to the expansion of private credit to $1.7 trillion and banks' reduced lending activities. Most credit secondary transactions have involved first-lien direct loans, with pricing for partner-led portfolios in the first quarter ranging between 88 cents to 93 cents on the dollar.

Morgan Stanley's Real Estate Debt Acquisition

In a notable transaction, Morgan Stanley has agreed to purchase roughly $700 million of property loans from a venture that includes Blackstone Inc., Canada Pension Plan Investment Board, and Rialto Capital. These loans were originally made by the failed Signature Bank and are part of a larger portfolio that Blackstone and its partners acquired in a joint venture with the FDIC, which held about $17 billion of Signature's property loans. This sale highlights the active interest of investment firms in real estate lending, amidst a sluggish market for commercial-property deals.

Market Trends and Non-Bank Lending Growth

The commercial real estate financing landscape is witnessing a shift towards non-bank lending, with investment firms like PGIM and Brookfield stepping in to fill the gap left by traditional banks. This trend is driven by stricter capital regulations and the aftermath of U.S. regional bank failures. Investment firms are showing a keen interest in resilient or growing sectors such as logistics and multi-family rentals. Despite regulatory concerns over the rise of 'shadow banking,' the continued activity of non-bank entities in real estate lending indicates a confidence in the market's recovery and growth potential.