Private Credit – An Existential Threat to Banks in Mining?

By Tshepo Magagane

YES!

Project Finance as a product is already under pressure from increasing regulations – why you have seen so many banks exit sectors such as aircraft/shipping – they could simply not extend the tenors of 7-10 years that were required.

PF in mining normally has tenors of c5yrs – this is increasingly difficult for banking institutions…

…over a decade back, we were already thinking about how you do refins with Project Bonds!

We have seen Private Credit dip their toes in the coal sector in Australia – they will get a hang of it and then they will totally displace bank PF.

Remember that the likes of Red Kite / Orion already do offer credit products – and banks can’t compete with them eg no hedging, no sweeps, little covenants, quick DD, etc…

…so all these financial institutions and DFIs who are going, we only do bankable projects; watch out, your role is going to be wiped out!

I am reminded of this paragraph from A Dance with Dragons:

Our rulers were old men with withered cocks and crones whose puckered cunts were dry as dust. They sat atop their pyramids sipping apricot wine and talking of the glories of the Old Empire whilst the centuries slipped by and the very bricks of the city crumbled all around them. Custom and caution had an iron grip upon us till you awakened us with fire and blood. A new time has come, and new things are possible.

PS: Blackstone on PC:

Private credit brings investors directly up to borrowers – a “farm-to-table” model that we believe will continue to prove attractive even as interest rates decline.

PPS:

Blackstone Closes First Series of Evergreen Institutional U.S. Direct Lending Fund with $22 Billion of Investable Capital; Brings Global Direct Lending Platform to over $123 Billion in AUM

BXCI deployed or committed $40 billion in direct lending through the third quarter, more than double the total for all of 2023. This includes lead roles in some of the largest deals of the year with CoreWeave ($7.5B), Squarespace ($2.7B), Fidelis ($2B), and Davies (£1.5B), as well as recent proprietary middle-market transactions for Permira’s Acuity Knowledge Partners ($600M), Graham Partners’ Gatekeeper Systems ($550M), and publicly listed Loar ($360M), where BXCI served as the sole lender.

PPPS: Bloomberg:

Apollo Global Management’s Marc Rowan went so far as to predict that—in just 18 months—some borrowers won’t be able to tell the difference. The $1.7 trillion private credit market has famously swelled in size by providing capital to private, non-investment-grade companies or other businesses that can’t get traditional bank financing. Now, asset managers like Apollo and rival Blackstone are also trying to lend more to established businesses—putting them in a position to further unseat the big incumbents. “There’s going to be a blur,” Rowan said at the Future Investment Initiative in Riyadh. So what are giants like Citigroup and Goldman Sachs doing about this threat? Well joining in of course. Many are partnering with big asset managers on private credit deals as they hunt for ways to maintain revenue without tying up their balance sheets.