(Bloomberg) -- A group of Wall Street lenders led by Morgan Stanley and Goldman Sachs Group Inc. swooped in to manage a roughly $2 billion bond sale for Ardonagh Group Ltd., a key win for banks over private credit firms that had offered a record-breaking loan to the UK insurance broker.
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The offering, announced on Monday, includes a mix of secured and unsecured bonds denominated in US dollars and euros, and confirms an earlier report by Bloomberg News. Private credit firms are still expected to provide a loan package of around $3 billion, according to people with knowledge of the matter, who asked not to be identified discussing confidential information.
Ardonagh, which counts Madison Dearborn Partners and HPS Investment Partners as major shareholders, had originally contemplated a private loan of as much as $5 billion to refinance debt, reorganize its balance sheet and fund acquisitions, Bloomberg News previously reported. That transaction would have ranked as the largest direct-lending deal on record, according to data compiled by Bloomberg.
The bond sale for Ardonagh is the latest in a series of wins for banks over the $1.7 trillion private credit market, as the prospect of interest rate cuts has given high-yield bonds and broadly syndicated leveraged loans a boost, making those financing options more attractive to borrowers.
Ardonagh didn’t respond to requests for comment, while representatives for Madison Dearborn, HPS, Morgan Stanley and Goldman Sachs declined to comment.
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Ardonagh is well-known in the rapidly-expanding private credit market, having secured what was then the biggest-ever loan from a group of private credit funds in 2020. Its latest deal is a rare example of banks and private credit funds working side-by-side on a new financing.
Ares Management Corp. is expected to lead the new private loan, which will have the same seniority as the secured bonds, according to the people. Other lenders include Antares Capital, Blue Owl Capital Inc., Intermediate Capital Group Plc, Oaktree Capital Management, HPS Investment Partners, Caisse de dépôt et placement du Québec, and GIC, the people said.
Representatives for all of those firms declined to comment.
In contrast to some of the high-profile acquisitions that banks and private credit firms are competing to finance, the bond deal for Ardonagh did not require banks to commit their own capital, one of the people said. That means they are simply acting as intermediaries connecting the borrower with third-party investors.
Banks are sounding out investors in the US with a proposed yield of around 9% on a $1 billion unsecured tranche and around 8% for a $500 million secured portion, according to separate people with knowledge of the offering. The three-part deal also includes a €500 million secured bond marketed to European investors, they said. Pricing is expected this week.
--With assistance from Colin Keatinge, Paul Cohen, Eleanor Duncan and Gowri Gurumurthy.
(Adds initial pricing discussions in last paragraph.)
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