BCI an anchor investor for business development company deal
Centerbridge Partners and Wells Fargo have come together to form a new venture called Overland Advisors. This partnership aims to pioneer a business development company focused on lending directly to middle-market companies, a segment of the private credit market that has seen relatively less competition.
Notably, the venture has already secured commitments from major institutional investors, including the Abu Dhabi Investment Authority and the British Columbia Investment Management Corporation (BCI).
“Even though Wells and Centerbridge are the first, they won’t be the last,” David Dobell, senior managing director, partnership portfolio at BCI, told Institutional Investor. “This is an overdue idea. Credit to Centerbridge and Wells to be the first to figure it out.”
Traditionally, middle-market loans have been extended to companies backed by private equity firms. While such companies undergo rigorous scrutiny by private equity, they are currently in high demand.
“The vast majority of private credit is sponsored deals,” Dobell said. “Not that there’s anything wrong with it, but it’s very competitive with few barriers to entry.”
Leveraging relationships
Overland Advisors will invest in non-sponsor-backed deals, with Wells Fargo leveraging its relationships with smaller companies to source opportunities. This approach gives the firm access to a broader pool of companies and potential deals, along with enhanced transparency into their operations.
“Direct lending is a transactional business focused on Wall Street. We want to turn it into a relationship business focused on Main Street,” said Jeff Aronson, co-founder of Centerbridge, as quoted in Institutional Investor. “This pairing of Wells Fargo’s sourcing, which really is unrivaled, with our credit underwriting, I think it’s a game-changer.”
While Wells Fargo's strategic capital business is relatively smaller compared to its peers, its strong focus on investment, commercial, corporate, and individual banking positions it uniquely in the market.
“To really cover the US market away from the sponsor world, you would need hundreds or even thousands of relationship officers in virtually every state in the country. That’s impossible even for the biggest direct lenders to crack,” Aronson added.
Wells Fargo’s advantage is being able to provide its clients with a previously unavailable financing option.
“We have strong relationships with our clients, many that span decades, and when clients come to their bankers for advice, Overland allows them to bring a direct lending product into the conversation,” said David Marks, executive vice president at Wells Fargo’s commercial banking business.
Overland Advisors plans to raise a minimum of $5 billion in investable capital, including $2.5 billion in equity commitments. The Abu Dhabi Investment Authority and BCI serve as anchor investors, contributing nearly $2 billion in initial equity commitments.
As Overland gears up to deploy capital, it anticipates gaining access to co-investment opportunities. The venture aims to commence lending by the end of the fourth quarter or early 2024.
“This is an area that is largely untapped with enormous barriers to entry,” said Dobell “On a risk-adjusted basis, it’s even more attractive than traditional private credit.
