Apollo Global Management, alongside Carlyle Group and Ares Management, has taken part in the first publicly known issuance of significant risk transfer (SRT) securities referencing loans extended to business development companies (BDCs) – a structural innovation that may signal a broader shift in how banks manage exposure to the fast-growing private credit sector, according to a report by Bloomberg.
Japan’s Sumitomo Mitsui Banking Corporation (SMBC) earlier this year offloaded risk from at least $3bn in BDC credit lines, according to sources familiar with the matter. The synthetic securitisation package – designed to provide regulatory capital relief – marks the first of its kind to reference BDC assets.
The transaction merges two of Wall Street’s fastest-growing markets: private credit and capital relief trades. Global loan volumes backing SRTs are forecast to rise as much as 15% to $320bn this year, per Bloomberg Intelligence estimates, as banks look to free up capital for new originations or return to shareholders.
Private credit, meanwhile, has surged to a $1.6tn asset class, with BDCs raising a record $24bn in US bond issuance in 2024 alone to support sponsor-backed transactions and portfolio expansion.
Sources note that the structure references a diversified mix of drawn and undrawn revolving credit facilities to BDCs.
