Adams Street private credit head highlights the benefits of lead lender status
Adams Street Partners is better able to undertake due diligence underlying investments and win repeat deals due to its lead lender status, according to partner and head of private credit Bill Sacher.
In a recent Q&A, Sacher said lead lenders are given better access to information throughout the underwriting process, have influence over capital structure design, directly negotiate loan documentation, and can receive incremental economics.
“All of this allows lead lenders to undertake private equity style due diligence to help drive superior risk-adjusted returns, seek to mitigate losses and make better informed underwriting judgments. Non-lead lenders typically lack this informational advantage,” he explained.
Read more: Blue Owl expands into real estate finance
He said being a lead lender had benefited the firm’s private credit business by offering better access to the market, more lead time and that it “allows us to showcase our abilities to our private equity sponsors as a lead lender”.
Despite the benefits, he didn’t rule out transactions where Adams Street was not the lead lender. He said the firm strives to be lead in the majority of transactions it does but that all deals are given consideration.
“In any event, if the due diligence process and documentation terms are not up to the standards we would otherwise have as a lead lender, we will generally not engage in those transactions”, he added.
Read more: Ares tops European direct lender rankings
Asked how private credit firms can become lead lenders, he said it was difficult to achieve without years of experience and relationship building as a credible lender.
“To entrust a lending partner to be a lead lender, a sponsor will look to a number of factors, including relationship, scale, and flexibility to be a solution provider, and the trust in that lender to provide certainty of financing,” he explained.
“To execute as a lead, lenders themselves must have experience and knowledge of financing processes, loan documentation, and the wherewithal and sophistication to communicate with a multi-lender group.”
Adams Street is a global private markets investment manager with $58bn (£46bn) under management. Its private credit team manages $9.7bn of assets.
Read more: Adams Street raises $1bn for first CLO
