Good morning, Hubsters. MK Flynn here with today’s Wire.
We’ll start with a sobering note about the impact of rising interest rates on private equity-backed deals, but we’ll end on a more upbeat note about a celebrity who’s opening up a PE firm.
Gun shy. This morning, Bank of America, Goldman Sachs and Credit Suisse are reportedly busy making calls to try to offload $15 billion of buyout debt in the acquisition of Citrix by Vista Equity Partners and Elliott Management, reports the Financial Times, citing people briefed on the plans.
The deal was announced in January, when debt was a lot less expensive. Over the summer, the banks decided to delay their leveraged loan and high-yield bond offerings until after Labor Day, when they hoped the market would be more receptive, Bloomberg reported back in July.
How the market responds to the calls now “will be a signal of [how] the market values . . . risk,” John McClain, a portfolio manager at Brandywine Global, told the FT. “Investors are a little bit gun-shy. You see private credit taking a step back after licking a couple of wounds.”
“The struggle the banks have had in offloading the Citrix debt is likely to influence their willingness to fund future private equity buyouts,” the FT wrote. “Bankers and investors said the terms of new funding packages have become much less advantageous for acquiring companies, reflecting the volatility buffeting financial markets and a sharp increase in borrowing costs after the Federal Reserve embarked on a string of interest rate rises.”
Opportunity knocks. Hamilton Lane argues that this is an opportunistic moment for private lenders. Earlier in the week, the firm announced the final closing of Hamilton Lane Strategic Opportunities Fund VII. The fund, which is the largest ever within the series, represents approximately $953 million in commitments from a diverse set of institutions, including returning and new investors across North America, Asia, EMEA and Latin America, said the firm.
“This is a unique moment for private credit as an asset class,” said Nayef Perry, global co-head of direct credit, said in a statement. “Volatility concerns and rising interest rates are attracting investors to private credit due to its floating rate nature and historical consistency of performance through up and down markets. Additionally, periods of market uncertainty tend to negatively impact the public credit markets, which creates opportunities for private lenders who are well-equipped to navigate complexity and provide certainty of capital to borrowers.”
For more, see Private Debt Investor’s story.
“The password is …” Earlier in the week, we reported that Bitwarden, an open-source password manager, has secured a $100 million minority growth investment from growth equity firm PSG with participation from return backer Battery Ventures.
PE Hub reporter Obey Martin Manayiti reached out to Tom Reardon, managing director at PSG for more on the deal. Here’s their exchange:
How does this deal symbolize PSG’s investment thesis?
PSG’s investment in Bitwarden represents a proprietary opportunity to back what we see as a fast-growing and product-led enterprise software business in a large market.
What is driving deals in this space?
The decentralization of work and the mixing of “personal” and “work” devices have forced individuals to create, manage and remember dozens of online credentials, especially given the proliferation and adoption of cloud-based apps. This commonly leads to password reuse across multiple accounts and puts end users at risk for password theft.
Enterprises are feeling the impacts of poor credential hygiene, with over half of IT teams reporting a cyberattack in the past year.
What is going to drive growth of Bitwarden?
Bitwarden’s differentiation exists in that it’s an open-source and fully customizable password manager built to work seamlessly on any device to help individuals and businesses operate safely online, and its growth will continue to be driven by the company’s experienced leadership team and the product’s strong community engagement of millions of users.
Star struck. The Kardashians are coming to private equity.
PE Hub’s Iris Dorbian writes:
“When you think about it, it was bound to happen. After conquering reality TV, social media, retail and the gossip pages, Kim Kardashian is now dipping her very enterprising toes into private equity. Yes, that’s right, the face that launched a million hits on Instagram and numerous other platforms, is teaming up with former Carlyle executive Jay Sammons to launch their very own buyout shop SKKY Partners.”
Sammons was most recently Carlyle’s global head of consumer, media and retail.
Kardashian is squeezing in law studies in between her multiple business ventures valued at over $1 billion and starring in her family’s reality TV show.
“I’m excited to launch SKKY Partners to invest in the next generation of consumer brands, leveraging my experience founding and building global businesses and partnering with innovative companies to help them grow,” Kardashian said in a statement. “I look forward to working closely with Jay and our team to identify distinctive investment opportunities and build the firm’s portfolio of world class companies for our investors.”
Kardashian’s mother Kris Jenner will serve as a partner in the firm.
Season two of The Kardashians will premiere September 22.
That’s all for now. PE Hub Europe editor Craig McGlashan will write tomorrow’s Wire, as PE Hub reporter Aaron Weitzman is off this week.
And I’ll be back with more on Monday.
All the best,