French asset manager Eurazeo is set to launch a collateralised loan obligation (CLO) backed by broadly syndicated loans (BSLs). During a media breakfast in London, Nicolas Nedelec, a partner in private debt, indicated that the firm has the necessary balance sheet to support this initiative and can underwrite the equity tranche.
Eurazeo previously considered a private credit CLO but opted against it. Despite the growing interest in private credit CLOs since Barings introduced the first one in Europe last November, their adoption has been slower in Europe compared to the US. Moody’s Ratings suggests that private credit CLOs will remain a niche market in Europe due to challenges such as concentrated and largely unrated portfolios. Nedelec expressed concerns about the depth of the European market, stating, “You have to persuade investors,” and noted that Barings’ pricing was relatively wide compared to the assets.
In addition to CLOs, Eurazeo is venturing into asset-based finance, although Nedelec finds this challenging due to the European market's lack of sophistication. He highlighted opportunities in maritime finance, where Eurazeo has raised nearly €1 billion, driven by the green transformation that necessitates fleet modernization and refurbishment.
Eurazeo's private debt strategy manages €35.5 billion in assets, with €7 billion allocated to direct lending and €1.9 billion in corporate and asset-based finance. The firm is currently fundraising for its seventh direct lending fund, targeting €3 billion, which Nedelec anticipates will be oversubscribed by summer. This fund is expected to be significantly larger than its predecessor, which raised €2.3 billion, exceeding its €2 billion target.
Meanwhile, Standard Chartered has reported strong demand from high-net-worth individuals (HNWIs) for its newly launched European direct lending fund. This fund, introduced in response to the rising interest in private credit investments, focuses on privately originated loans from Western European companies, particularly those controlled by private equity funds. The fund favors first lien loans and defensive non-cyclical sectors like software, healthcare, and business services.
The fund also offers partial liquidity by investing in liquid assets such as leveraged loans and high-yield bonds. Dany Dupasquier, head of fund and alternative selection at Standard Chartered, noted that client interest in direct lending has surged due to mixed returns from public fixed income over the past five years and the ongoing demand for yield-enhancement solutions. He mentioned that the asset class currently provides a yield premium over US private credit, estimated at 100-150 basis points.
Dupasquier attributed this additional spread not solely to macroeconomic conditions but to a more favorable demand-supply dynamic that enhances economic terms for lenders and strengthens credit protections. He observed significant interest from HNWI clients, who view this new income solution as a complement to their existing US direct lending exposures. While Standard Chartered is focused on this fund for now, Dupasquier hinted at the possibility of introducing additional solutions in the future.
