Non-bank lenders spot fund financing opportunities

Volatility arising from the coronavirus will give non-bank lenders an opportunity to gain market share from traditional lenders in the fund financing space, sources say. Insurance companies and specialty finance companies have different maturity spectrums, different funding costs and capital requirements compared to banks, says Khizer Ahmed. This means that they respond differently to dislocations. Neuberger Berman Private Equity Limited, a closed end PE fund, moved its $200 million revolving line of credit from JP Morgan to Massachusetts Mutual Life Insurance Company in December. The facility was increased from an initial $200 million in December to $300 million in May. More transactions of this kind are expected. Traditional lenders have slowed the pace of balance sheet deployment, sources say, and risk is being repriced, so borrowers can expect loan to value rates to fall. As a result, borrowers will have to provide greater equity cushions than before. “We haven’t come across any instances where a lender has called an event of default with respect to valuation pressures around private capital portfolios,” says Ahmed