What systemic risk?

Private credit fears overblown


Happy Friday. Here’s what we’ve got today…

  • A look at private credit’s systemic risk (or lack thereof), according to Arrow Global CEO

  • The deal sheet, plus Kingswood Capital Management’s deal for Save Mart


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Despite lack of regulation, private credit doesn’t pose systemic risks, Arrow Global CEO says

By Bob Clair

Alongside private credit’s explosive growth, concerns have been raised about the level of risk in an unregulated and increasingly important asset class.

To date, private credit has largely avoided the regulatory and reporting requirements traditional banks are beholden to. Some industry observers, including the Bank of England, say this lack of transparency heightens the risk of a systemic event by limiting regulators’ ability to understand and monitor links between private credit and other parts of the financial system.

The U.S. Financial Stability Oversight Council echoed these fears in its 2023 Annual Report, writing that “An unexpected rate of default [by private-credit borrowers] may have a cascading effect across broader financial markets.”

However, Zach Lewy, CEO, CIO, and Fund Principal at Arrow Global, told Transacted that these fears are overblown: a bad apple in the private credit market does not have the power to infect the barrel.

“I’m not convinced there’s a systemic risk,” Lewy said. “There’s so much capital in private credit and these non-banks, but are they run in such a fashion that there are black holes that cascade back into state guarantees and cause huge losses for taxpayers? I don’t see that.”

“Will you have an occasional bad company that blows up? Yes. Will that cause losses to the banking system? Yes. But, if you follow the history of the banking industry, that happens, but it’s not a systemic risk,” he said.

Lewy, who founded the Manchester, England-based firm in 2005, explained further:

“If you look at the limits on private credit — you have to go get the money from somewhere, usually insurance companies or pension funds, and you’re so limited based on how many there are, building up something that would amount to a systemic banking bubble that can cascade into a 2008-type thing I think is really unlikely.”

As for whether private credit is a temporary fad, Lewy classed market participants into two buckets: “residents,” or firms in it for the long haul, and “tourists,” those likely to flee when conditions change.

“That’s the case across the board, whether it’s venture debt, whether it’s private credit, you’ll have some residents which are businesses that exist to fund that space,” Lewy said. “Then you’ll have what I describe as ‘tourists,’ people that are multi-strat, have flexible mandates, which, if I was typecasting, I’d say are hedge funds but could also be investment banks. They have flexible mandates, so they live by the sword and die by the sword. Those with flexible mandates get involved in certain asset classes when they are interesting but also get out of it when they aren’t so interesting.”

For his own firm, Lewy sees some level of benefit from a ‘tourist’ market exit.

“When they leave, the pricing goes up, and the attractiveness goes up, but it really doesn’t affect the residents very directly. The residents keep their heads down and do what they do, but the weight of money coming from the tourists with multi-strat mandates can affect the overall liquidity environment of a given strategy. That is happening right now in every asset class.”

Lewy added that private credit has gained popularity because, in the short term, with the interest rates remaining high, the return on credit is higher and the return on equity is lower which has caused a “rebalancing shift in portfolios.”

For the long term, private credit is still a work in progress, he said.

“It’s a secular trend and a work in progress in terms of implementation. Everything from bridge lending to construction lending to agricultural and small business lending, specialty mortgages, backing private equity acquisition — 50 years ago that all would be done by banks. Private debt steps in where you need a real business partner with a operational commercial skill set.”

Going forward, Lewy said he envisions banks and private credit working together as they do in Northern Europe.

“Banks find a way to let private credit do the last mile of lending and then they can be the wholesale finance source to facilitate everyone being efficient.”


Vertex Pharmaceuticals (Nasdaq: VRTX) agreed to buy Alpine Immune Sciences (Nasdaq: ALPN), a developer of immune synapse therapeutics targeting cancer and autoimmune disease, for around $4.9 billion.

KKR & Co. is exploring exit options, including a potential sale or IPO, for BMC Software, an IT solutions company that could be worth around $15 billion, per Bloomberg.

Clearlake Capital is considering a renewed approach for Blackbaud (Nasdaq: BLKB), a provider of enterprise education software tools trading at a market value above $4 billion.

Janux Therapeutics, a biotech developing tumor-activated cancer immunotherapies trading at a $2.3 billion market value, is exploring strategic options including a potential sale after receiving inbound takeover interest.

Providence Equity Partners is preparing to sell Superstruct Entertainment, a live music and events investment platform, with Blackstone and CVC amongst potential bidders for the rumored €1.5 billion asset, per Reuters.

Peak Rock Capital agreed to acquire HuFriedyGroup, a global provider of infection prevention solutions and dental instruments, from Steris (NYSE: STE) for $787.5 million.

OceanSound Partners and Energy Impact Partners acquired Message Broadcast from LINK Mobility Group for $260 million.

Secur-Serv, a unit of Transom Capital-owned Scantron Corporation, acquired Btech, a provider of managed IT services for credit unions.

eBay has agreed to acquire Goldin, an auction house and marketplace for sports memorabilia whose backers include the Chernin Group, Stripes, and D1 Capital Partners.

BearCom, a Siris Capital Group portfolio company, acquired The Surveillance Shop, a Calgary-based commercial security systems integrator.

Gauge Capital acquired Lucent Health, a provider of self-funded health plans and benefits administration services, from NaviMed Capital.

Harkness Capital Partners invested in Best Roofing, a provider of commercial and industrial roofing services.

Highland, a portfolio company of HCI Equity Partners, acquired Fidelity Roof Co., a provider of commercial and residential roofing services.

RESA Power, a portfolio company of Investcorp, acquired Mountain States Transformer Service, a provider of maintenance services for electrical distribution equipment

Serent Capital invested in Traumasoft, a provider of EMS and ambulance software solutions.

Verdantas, a Tree Line Capital Partners portfolio company, acquired CT Consultants, a provider of engineering and construction management services.

Grocery Outlet acquired Bargain Barn, a closeout retailer, from Gen Cap America.

Brookfield is in talks to acquire a majority stake in private credit platform Castlelake.

Postman, a provider of API development tools, has acquired Orbit, a community growth tool for developers.

Zscaler has acquired Airgap Networks, a provider of cybersecurity network segmentation technologies with backing from Storm Ventures, Cervin, Engineering Capital, and Sorenson Ventures.


Proficient Auto Logistics, a fleet provider of automotive transport services, filed for a Nasdaq IPO.


Tech, Vertical SaaS, & Misc. Enterprise

Cyera, a developer of data security and governance tools, raised $300 million in Series C funding at a $1.4 billion valuation from Insight Partners, Technology Crossover Ventures, Coatue, Spark Capital, Georgian, AT&T Ventures, Sequoia, Accel, Redpoint, and Cyberstarts.

Factorial, a developer of HR management software for small and medium-sized businesses, raised $80 million in new funding from General Catalyst.

Auradine, a provider of web infrastructure solutions, raised $80 million in Series B funding from StepStone Group, Top Tier Capital Partners, MVP Ventures, and Maverick Capital.

Anrok, a developer of tax compliance tools focused on digital businesses, raised $30 million in Series B funding. Khosla Ventures led the round, with participation from Sequoia Capital, Index Ventures, and individual investors Karen Peacock, David Faugno, Alex Estevez, and Elad Gil.

Simbian, developer of an AI-powered cybersecurity platform, raised $10 million in seed funding from Cota Capital, Icon Ventures, Firebolt, and Rain Capital.

PeerDB, a startup providing data movement and migration solutions for PostgreSQL, raised $3.6 million in seed funding. 8VC led, with participation from Y Combinator, Wayfinder Ventures, Webb Investment Network, Flex Capital, Rogue Capital, Pioneer Fund, and Orange Collective.

Ikas, a provider of e-commerce management platforms for businesses, raised $20 million in Series A funding. The International Finance Corporation led, with participation from Re-Pie Portföy.


FloQast, a developer of an accounting software platform, raised $100 million in Series E funding at a $1.6 billion valuation. ICONIQ Growth led, with participation from BDT & MSD Partners, World Innovation Lab, Meritech Capital, and Sapphire Ventures.

Mimo, a London-based SMB financial management software startup, raised £15.5 million in new funding led by Northzone, with participation from Cocoa Ventures, Seedcamp, and Upfin VC.

Media & Consumer

Yoshi Mobility, a Nashville-based mobile car care company, raised $26 million in Series C funding. General Motors Ventures led, with participation from Bridgestone Americas, Universal Motors Agencies, and Shikra Limited.

Udio, a developer of an AI-powered music generator, raised $10 million in seed funding led by Andreessen Horowitz.

TaxDown, a provider of tax preparation and filing software, raised €5 million from Base10, JME Ventures, Abac Nest, and 4Founders Capital.


Elucent Medical, a developer of surgical navigation and in-situ spatial intelligence tech, raised $42.5 million in Series C funding from Vensana Capital and RC Capital.

Industrials, Greentech, & Other

Nexamp, a provider of solar and energy storage solutions, raised $520 million from Manulife Investment Management, Generate Capital, and Mitsubishi.

SunCulture, a developer of off-grid solar irrigation systems, raised $27 million in Series B funding led by InfraCo Africa and Acumen, with participation from Reed Hastings and Eric Schmidt.

Weenat, a provider of agritech solutions focused on water and meteorological sensors raised $8 million in Series C funding led by ECBF, with participation from Pymwymic, LIBERSET, and IDIA Capital Investissement.

Carrar, a provider of battery modules and thermal management systems for electric vehicles, raised $5.3 million in Series A funding. Salida B.V. and OurCrowd co-led, with participation from NextGear, Gentherm, Next Leap Ventures, and Dive Digital.


Hellman & Friedman raised $22.3 billion for its 11th flagship buyout fund.

Compass Group Equity Partners raised $408 million for its latest buyout fund.

Lone View Capital raised $850 million for its debut buyout fund.

Lakestar raised $600 million for across two new early-stage funds.


1. California family learns about private-equity hardball while selling supermarket chain.

• The sale of California supermarket Save Mart to Kingswood Capital Management. — Financial Times


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