JPMorgan Chase & Co. is dramatically ramping up its direct-lending effort, setting aside an additional $50 billion to capture a bigger chunk of the fast-growing market.
The bank is making the fresh commitment after deploying more than $10 billion from its balance sheet across over 100 private credit deals since 2021, according to Troy Rohrbaugh, co-head of JPMorgan’s commercial and investment bank, and global head of capital markets Kevin Foley. The firm has teamed up with a group of co-lending partners, which have allocated nearly $15 billion more to the effort as well.
It’s “a number that we’re totally comfortable going to, assuming the environment and the risk makes sense, which we think it does at the moment,” Rohrbaugh said in an interview. “If we get there and we feel like we need to continue, there’s certainly the capacity to do it.”
JPMorgan spent much of last year pulling together an initial group for the co-lending program, where it originates the loans and then invests in them alongside the other firms. The group currently comprises seven companies, according to people familiar with the matter, including FS Investments, Cliffwater, Shenkman Capital Management, Octagon Credit Investors and Soros Fund Management.
Rohrbaugh and Foley declined to give further details on the initiative. Bloomberg News previously reported on FS, Cliffwater and Shenkman partnering with JPMorgan. A representative for Octagon declined to comment. Representatives for Soros Fund Management didn’t respond to a request for comment.
JPMorgan’s expanded effort underscores how banks are increasingly staking their claim in the $1.6 trillion market that had previously been the domain of asset managers and credit shops. As titans such as Blackstone Inc., Ares Management Corp. and Apollo Global Management Inc. pour money into ever-larger deals, the likes of JPMorgan, Citigroup Inc. and Goldman Sachs Group Inc. have sought to defend their traditional lending turf with offerings of their own.
JPMorgan is offering its direct-loan product to its vast network of middle-market clients as well as private equity sponsors, and has already done deals ranging from $50 million to $4.5 billion, according to the executives. With some clients opting for alternatives such as syndicated loans, JPMorgan can be “product-agnostic” by boosting its direct-loan capacity to provide offerings in conjunction with those traditional lending products, Foley said.
Last year, the biggest US bank merged its commercial bank with its corporate and investment bank to create the unit that Rohrbaugh now runs alongside Doug Petno. Combining the “origination machine” of more than 2,000 commercial bankers with the existing partnership between the trading and capital-markets businesses puts JPMorgan in a “unique and different place,” Rohrbaugh said.
Private credit has boomed in the past decade, with the asset class more than tripling in size to mint numerous billionaires along the way. The trend ate into banks’ traditional leveraged-finance businesses enough that they’ve broken into the space themselves. More recently, they’ve tried to poach business back as borrowing costs in the leveraged-finance markets fell.
And as banks dig deeper into the direct-lending space, asset managers including Apollo and Blackstone have been encroaching on banks’ traditional turf as well. In pursuit of more dollars and Wall Street clout, money managers have been vying to lend to the world’s top-rated companies. That’s put them squarely in the banks’ domain, prompting some executives to predict borrowers soon won’t be able to distinguish between the two worlds.
‘Animal Spirits’
A long-awaited rebound in deals should spark an increase in activity in the space, offering more fodder for JPMorgan’s co-lending program, according to the executives. The bank is “totally open” to adding more co-lenders to the group, Rohrbaugh said, adding that such growth paves the way for larger deals.
“Everyone keeps referring to the animal spirits in M&A — we’re definitely seeing that,” Foley said. “Activity levels have picked up dramatically over the last several months, and so what we expect is utilization within the co-lending program is going to pick up significantly.”
Some potential partners were reluctant to join the effort as it was being created due to terms and fees floated, Bloomberg reported at the time. The JPMorgan executives said they cast a wide net in initial outreach and expected it wouldn’t be a fit for all firms.
JPMorgan’s megabank rivals have also sought to make inroads in private credit. Citigroup announced its partnership with Apollo in September, agreeing to work together on $25 billion worth of deals over five years. In 2023, Wells Fargo & Co. joined forces with Centerbridge Partners on a $5 billion direct-lending fund.
Goldman formed a capital-solutions group earlier this year to position itself for the growth in private credit. Both Goldman and JPMorgan offer clients access to private-credit assets through their asset-management arms as well.
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