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Citigroup has struck a deal with BlackRock’s private credit arm to extend up to €15bn of loans to companies and leveraged buyout groups across Europe, as the US bank looks to expand its private lending abilities.
The Wall Street bank and BlackRock’s HPS Investment Partners on Monday said they had committed to finance up to €15bn in junk debt to clients in Europe over five years.
They added they expected the partnership, which relies on Citi’s investment and commercial bankers sourcing deals that BlackRock funds can invest in, would eventually extend into the Middle East.
The deal will include bringing complicated financings to BlackRock, including junior and mezzanine debt.
The tie-up with BlackRock is the latest of its kind for Citi — the third-largest US bank by assets — as it looks to bolster its investment banking franchise.
The New York-headquartered bank struck a similar deal in 2024 with Apollo Global Management, with the two partnering to finance $25bn of private lending in the US.
Banks have turned to a range of partnerships as they look to win back business that has shifted to private investment groups over the past decade, as post-crisis regulations stymied riskier lending.
Those stiffer regulations, designed to safeguard the financial system, have pushed trillions of dollars of lending to investment groups such as Apollo, Blackstone, KKR and Ares Management that, unlike banks, are not backstopped by the Federal Reserve.
These private credit firms are now a critical source of capital to the buyout industry, often financing riskier and more highly leveraged takeovers than their counterparts in public fixed-income and loan markets.
Citi, along with Wells Fargo, has partnered with asset managers to offer clients private-credit financings. Others, like Goldman Sachs and Morgan Stanley, have relied on dedicated funds raised by their wealth or asset management arms to provide private loans.
JPMorgan Chase, the world’s biggest bank, has found a middle ground, partnering with some funds while also keeping some of the private loans it originates on its own balance sheet.
The partnerships also provide a needed source of new deals to private credit funds, which generally do not have their own extensive networks of bankers who can pitch loans to corporate clients.
Matthieu Boulanger, the head of BlackRock HPS’s European business, said the collaboration would “enable us to leverage Citi’s extensive network and origination pipeline in [Europe and the Middle East]”.
New leveraged buyouts now often receive pitches from both private credit firms and banks, with private equity sponsors able to weigh up the competing costs.
Citi tapped its partnership with Apollo as it was advising aerospace group Boeing on the $10.6bn sale of a digital aviation unit known as Jeppesen last year.
Private equity group Thoma Bravo, which bought the company, ultimately funded the takeover with a financing package led by Apollo, which had been brought into the fray early because of its partnership with Citi.
John McAuley, Citi’s co-head of debt capital markets, said on Monday the deal with HPS would help the bank “meet the increasing demand from our corporate and sponsor clients for tailored private credit solutions”.
Private credit has nonetheless come under intense scrutiny this year, as investors question the quality of private credit loans, including a large swath of lending to enterprise software companies that may be impacted by advances in AI.
Retail-focused private credit funds have suffered a surge of redemption requests, with many firms — including BlackRock — limiting withdrawals as a result.
BlackRock has pushed headfirst into private markets as chief executive Larry Fink has moved to make the world’s largest asset manager a major player in fast-growth corners of finance. The group last year completed its $12bn takeover of HPS.
