(Bloomberg) -- CIFC Asset Management LLC, one of the biggest managers of collateralized-loan obligations in the U.S., has agreed to buy LBC Credit Partners to expand into the burgeoning private credit market.
With the acquisition, CIFC will enter into the business of direct middle-market loans and gain $3 billion of assets under management, CIFC said in a statement. LBC will become a subsidiary of CIFC and retain its strategy and senior management.
The private credit market has doubled in size over the past few years to about $1 trillion from around $500 million in 2015, according to data from research firm Preqin, as asset-management companies seized on banks' pullback from lending to small and mid-sized firms. Direct lending has a five-year internal rate of return of 8.7%, according to Preqin.
The New York-based CIFC has more than $35 billion under management, with the bulk in collateralized loan obligations that repackage leveraged loans in to bonds of different risk profile. In recent years, the alternative credit firm has expanded its reach, setting up a presence in Europe and foraying into distressed debt.
“Direct lending is highly complementary to our existing lines of business,” Steve Vaccaro, chief executive officer and chief investment officer of CIFC, said in the statement. “Partnering with LBC through this acquisition is a natural next step in our evolution as we seek to continue generating attractive returns for institutional investors across the entire credit spectrum.”
The transaction is expected to close by year end. The terms were not disclosed.
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