Jefferies Financial Group Inc. is deepening its foray into the private credit sector with the launch of its first private business development company (BDC), which aims to provide first-lien senior secured loans to private equity-backed US companies.
The new venture, initiated by Jefferies Credit Partners, is set to be anchored by a $625 million equity investment from the Abu Dhabi Investment Authority, providing the BDC with an initial $1.7 billion of investable capital. This move comes as the private credit industry, now worth $1.5 trillion, sees companies seeking alternatives to volatile broadly syndicated financial markets and investors seeking higher yields.
The value proposition of the new Jefferies platform, according to Jason Kennedy, CEO and president of the BDC, is its powerful sourcing engine facilitated by over 1,400 investment bankers. The BDC will focus on lending to mid-sized companies with more than $75 million in EBITDA, which exhibit established track records, seasoned management, and operational scale. The fund has already deployed 12% of available capital and is prepared to leverage more buyout and financing opportunities as they appear on the market.
Jefferies' decision to launch a non-traded BDC is part of a larger industry trend, with firms such as Golub Capital, HPS Investment Partners, Blue Owl Capital, Apollo Global Management, and Fidelity initiating similar structures. The non-traded nature of these BDCs provides an attractive avenue for investors eager for exposure to private credit, offering higher potential returns compared to public markets.
This new venture by Jefferies demonstrates the strong tailwinds currently present in the private credit market. Jefferies Finance is contributing capital alongside ADIA to launch the fund and initiate global marketing efforts, indicating the company's confidence in the continued growth and attractiveness of the private credit market. Thomas Brady, president of Jefferies Finance, affirmed the strength of the market and the timing of their BDC launch in a recent statement.
