FinTech IntraFi has reportedly raised upward of $2 billion in the leveraged loan market.
That’s according to a report Monday (Aug. 11) from Bloomberg News, which characterized this as a victory for banks against private credit firms, which had in recent months discussed providing a debt package.
Sources with knowledge of the matter told Bloomberg that a collection of banks led by Morgan Stanley sold debt on behalf of IntraFi to let the company pay its private equity owners a dividend and refinance part of its riskier debt.
The Bloomberg report noted that Wall Street banking giants have capitalized on favorable credit conditions in the public debt markets to raise billions of dollars in loans and bonds. In doing so, the report added, they’ve priced out direct lenders, which normally extend debt at costly but more flexible terms. Bank-led loan launches jumped to more than $222 billion last month, according to data compiled by the news outlet.
PYMNTS wrote about the interconnected nature of banks, FinTechs and private credit operations earlier this year.
“The private credit firms — including venture capital companies, buyout funds, hedge funds, direct lenders and others — are in turn significant partners for FinTech platforms that, themselves, extend loans,” that report said. “The capital flows that connect banks, private credit firms, FinTechs and the latter’s end customers is increasingly interwoven, with risks and rewards extending across that continuum.”
According to the Federal Reserve Bank of Boston, research shows that banks have been increasing their exposure to non-bank financial institutions (NBFI), a group that includes private equity (PE) and private credit (PC). The Fed data showed that large banks’ total loan commitments to PE/PC funds came to approximately $300 billion, at the end of 2023, up from less than $10 billion 10 years earlier.
The central bank argued that “understanding the scale and complexity of bank-NBFI connections is important for identifying potential risks to financial stability — that is, the financial system’s ability to continue supplying capital to the economy if strained by shocks.” The PE and PC companies then put money to work in the economy.
However, the report went on to say when these firms are hit by shocks, “they tend to draw down their bank lines of credit at a faster rate than firms with only bank credit. This creates a channel through which PC funds may increase banks’ credit and liquidity risks, on balance.”