Guggenheim steps up direct lending to nearly $4 bln this year

  • Firm nearly matches 2015 activity in first three quarters
  • Added four people to team in past year
  • Exec sees more favorable terms for borrowers

With nearly $4 billion in loans so far in 2016, Guggenheim Partners said its direct lending business has almost matched its activity for all of 2015, despite keen competition.

The New York firm’s addition of four people to its direct-lending team in the past year appears to be paying off, even as lenders scramble to meet challenges from the broadly syndicated loan market and other direct credit providers.

The firm issued $3.7 billion in loans as of Sept. 30, nearly equaling its $3.8 billion total for 2015.

Joe McCurdy, head of origination, and David Richman, director, credited the firm’s flexibility to deal with any part of the capital structure as well as wide-ranging industry expertise from a deep bench of analysts.

The firm offers capital for leveraged buyouts, dividend recaps, acquisitions and growth financings from roughly $30 million to $500 million. “As deals scale up or scale down, we can address them from all yield spectrums,” McCurdy said in a phone interview. “We tend to be agnostic. We just look for good risk returns.”

With the loan market awash in capital from LPs seeking greater returns in a flat interest rate environment, plus more lenders entering the space, the leveraged-loan market appears more favorable for borrowers than lenders, McCurdy said.

Weakness in the broadly syndicated loan market cleared up earlier this year. It’s now a viable alternative for many companies, particularly in the larger side of the market.

“The more commoditized kind of easy transactions are super-competitive and are headed to syndicated land, given how hot that market has gotten,” McCurdy said.

Even with this trend, however, big banks exiting the leveraged-loan market has created opportunities in the middle market.

“The environment has pushed more toward doing more direct transactions rather than syndications,” McCurdy said. “Even if a borrower does a broadly syndicated loan, we can be a large anchor.”

Among its recent deals, Guggenheim served as a sole lender on a $250 million unitranche loan to a commercial mortgage services company to support the company’s strategic acquisition. It’s among the larger loans the firm provided this year.

On the smaller side, Guggenheim provided a $37.5 million first-lien loan to an online marine marketplace company to support an LBO.

The firm declined to identify either of the borrowers for the unitranche and first-lien loans.

Looking ahead, the firm expects robust activity. “The pipeline and the funnel continue to grow,” he said.

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