Blackstone raising $400m to boost private credit fund

Blackstone is set to borrow just under $400m (£322.27m) through a collateralised loan obligation (CLO) to bolster its $52bn flagship private credit fund.

The private equity giant launched the Blackstone Private Credit Fund – known as BCRED – in January 2021 for the US market, and it was one of the first private credit funds to be marketed to the ‘mass affluent’.

It now aims to grow the fund by tapping into new sources of leverage. The Financial Times has reported that Blackstone is in the final stages of raising funds through a CLO secured by the loans held within the BCRED portfolio.

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Blackstone will sell business loans that BCRED owns to the CLO as part of the deal, according to documents seen by the Financial Times, including debt from software maker Zendesk, cyber security business Mimecast and Unified Women’s Healthcare.

The deal will give Blackstone added firepower to tap into the fast-growing private credit market. Two of Blackstone’s largest rivals – HPS Investment Partners and Blue Owl – have already issued CLOs backed by large private loans.

One investor who looked at the deal told the Financial Times that it would give Blackstone a more “efficient source of capital” as it looks to broaden the lenders it can tap for financing.

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“It is definitively a more stable source of funding,” the investor reportedly said, adding that borrowing from CLOs “diversifies your funding and reduces your risk to a bilateral party”.

The deal is being marketed by Wells Fargo.

Earlier this month, a report from DBRS Morningstar found that portfolios of CLOs for small- and medium-sized enterprises (SMEs) across Europe have been “relatively stable” despite ongoing macro-economic uncertainty.

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