Speak to almost any major firm active in the finance space and you’ll hear about private credit. The industry matured as banking regulations tightened in the wake of the 2008 crash, and has surged since banks pulled back on lending after the interest rate hikes from early 2022.
According to merchant banking, global advisory, and asset management firm M Capital Group, the overall size of the private credit market has grown from $1trn four years ago to $1.7trn in 2023.
The market is big, and growing – and law firms want a piece of it.
Following the recent hires of Philip Bowden (pictured) – the former co-head of legacy A&O’s global banking practice – former A&O acquisition finance partner Megan Lawrence, Cahill Gordon & Reindell finance duo Jake Keaveny and Warren Newton (both of whom are A&O alumni), and Cahill vertical hire Court Tisdale, Proskauer argues that it is uniquely well placed to capitalise on the boom.
As private credit grows it overlaps ever more with other forms of banking and lending. Where other firms seek to layer private credit expertise on top of existing banking and finance practices, Proskauer is adding banking and finance expertise to complement an established private credit offering.
‘It’s easier to build a practice around private credit if you already have the relationships’, says Bowden. ‘And we already have 20-30 years’ experience doing private credit work, whereas a lot of the other shops, certainly in London, have been doing it for five years or less.’
Global finance practice co-head Justin Breen concurs: ‘Everyone is trying to solve this problem, but they’re trying to solve it from different places. A lot of firms are trying to come into private credit from more of a pure designation bank space, whereas we’re approaching it from the other end.’
For Keaveny, the key distinction is in the nature of the clients. ‘It takes time to build relationships and gain the trust of private credit clients’, he says. ‘To be the first call for them really takes years. There are a lot of fund clients who are active in the LBO market. In the bank space, there’s really only a handful of players that are leading the bigger deals who you need to have credibility with, so it can be more straightforward to get your arms around that part of the market.’
Proskauer’s play is rooted in a belief that the private and public lending markets will become ever more tightly bound. Last month’s announcement that Citigroup and Apollo had partnered to provide a minimum of $25bn in direct loans, with Cravath acting for Citi and Paul Weiss for Apollo, gave strong support to this view.
Breen comments: ‘We believe the recent news relating to the Citi and Apollo joint venture is proof of concept of what we recognised a few years ago, which is that the private credit and syndicated lending markets are completely converging.’
Crucially, private capital is now about far more than private equity buyouts. ‘When most people think of private credit, they typically think of the sponsor LBO space, which is what gets all the headlines’, says Breen. ‘But there’s a lot more to our strategy – it goes beyond bread-and-butter acquisition finance. It’s single asset financings, securitised financing, real estate financing, infrastructure financing – all that stuff our clients are getting heavily involved in. We’re really focused on all things finance.’
In order to do this work, Proskauer realised that it needed broader banking and finance expertise. ‘Philip’s team is critical to my practice and our team is critical to his’, says Keaveny. ‘I certainly couldn’t get the work done I need to do at the firm without a very confident and reputable English law leveraged finance team.’
According to Bowden, the market is already taking notice: ‘What’s struck me since I landed here less than three months ago is the number of structured finance lawyers in the European market who have been reaching out to us. They’ve traditionally been more focused on bank clients, but they’re coming to us and making enquiries. A very senior lawyer from a US firm said to us the other day, “private credit are the new banks”. If your firm isn’t focusing on all things financing around that client base, you’re going to miss out.’
Keaveny echoes this point: ‘We’re starting on a very strong footing, The response from clients has been great, and we were able to get a new high deal into the market on the new platform right away.’
The deal, announced yesterday (10 October), saw the firm advise financing sources on high-yield bond issuances by parking infrastructure provider APCOA Group totalling €685m, as well as on an amendment to APCOA’s €110m revolving credit facility. Keaveny and Tisdale led on the high-yield bonds, while Bowden and Lawrence led on the revolving credit facility.
Looking ahead, Proskauer has its eye on further hires. ‘If you want to cover the full range of players in the European market’, says Bowden, ‘you need scale. And there’s only a small handful of players who are really building things at scale. You’ve got some very big players in the US who, when you look at their strategies in Europe, are trying to do something very constrained.
‘You need scale in London. You can’t be too narrow. The asset manager clients have all gone multi-strategy, and they all want the same thing – they want to go to a small number of firms who can do everything for them.
‘That’s one of the big trends I’ve seen in the last few years, and it’s only going to continue. We’ll likely see more change in this market in the next four or five years than in the last 20.’
Achieving this sort of scale will no doubt be costly. But Breen argues the firm is fully committed to its expansion push: ‘I’d love to spin a story that involved me working some magic to get people in the firm on board with the strategy, but the truth is that everyone was already on board. It just makes so much sense to us.
‘We don’t want to be everything to everyone, but we do want to be in the most important geographies and the most important product lines. So for us this was a complete no-brainer.
‘This was something we believe we needed: this wasn’t something that was just nice to do. This convergence and consolidation we’ve talked about is absolutely happening, and building this sort of scale across our practice is absolutely necessary if we want to stay on top of the market.’