GE Capital and Asset Manager CIFC Team Up on Loans
GE Capital, a financing arm of General Electric Co. (GE), has formed a strategic alliance with $10 billion asset manager CIFC Corp. (DFR) to explore lending opportunities, underscoring the growing role of nonbank creditors in the financial markets.
The agreement will involve a unit of GE Capital shifting the management of a $700 million pool of loans, in the form of collateralized loan obligations, to the oversight of a CIFC unit and both companies reviewing new business opportunities as they develop.
Peter Gleysteen, chief executive of CIFC, said the five-year alliance will bring CIFC’s institutional investors closer to the process of originating loans, rather than the current way loans are sold down or “syndicated.”
The provision of credit by institutional investors to smaller- and mid-sized companies comes as banks, which historically have originated most loans and then sold them down, are shifting their strategies in the face of new capital-intensive regulations.
“As a bank like GE Capital looks to grow its business, it will increasingly do so by having institutional and other investors co-lend alongside them,” said Mr. Gleysteen in an interview. “Banks continue to originate virtually all private debt in the U.S. But the capital is increasingly provided by investors who are not banks.”
GE Capital is one of the largest middle-market lenders in the U.S., and CIFC is a specialized manager known for funds dedicated to CLOs.
Under the agreement, a council will be formed by GE and CIFC to look at new opportunities in lending and investment advice for third parties. Heading that council will be CIFC’s Mr. Gleysteen and Neeraj Mehta, a GE officer.
GE Capital will receive 1 million shares of CIFC common stock, warrants to buy two million shares of a newly created class of nonvoting CIFC preferred stock and $4.88 million in cash from CIFC. GE has the right to appoint an executive to CIFC’s board.