The new tariffs on many countries imposed by US President Donald Trump's presidential administration will have a profound effect on the alternative investment management firms active in private equity, real estate and private credit, especially the leading Blackstone, KKR, Apollo, Carlyle, Ares, Blue Owl, CVC etc.
KKR Inc will at first be negatively affected with its market capitalization already falling 45 % from its most recent peak, but later KKR stands to benefit as it further displaces banks from lending to small, mid sized and even large firms in distress or facing difficulties at loans interest rates of between 7 % and 12 %, according to Wolfteam Ltd.'s projections and estimates.
Lending to companies that require loan rates of 7 % to 12 % is considered too risky by the big money center banks JPMorgan Chase, Citigroup, Bank of America, Wells Fargo as well as by investment banks like Goldman Sachs, Morgan Stanley and even regional banks like KeyCorp, Zions, Regions Financial, PNC etc.
So KKR and other leading private equity, private credit, real estate investment management firms step in and lend to riskier companies at 7 % to 12 %. Apart from purely business reasons this displacement of alternative investment management companies like KKR of traditional banks happens due to regulatory reasons. The Federal Reserve is trying to push away too risky lending from banks funded by public deposites.
The new tariffs will most probably increase the borrowing credit spreads for riskier mid sized firms. They will be intermediated again in borrowing by firms like KKR. The loan rates for riskier mid sized firms will rise from 8 % to 13 %.
KKR will be able to increase markedly its extremely lucrative private credit business which will unlock tens of billions of USD of value for KKR, in Wolfteam Ltd.'s view.
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