(Bloomberg) -- Palmer Square Capital BDC Inc., a type of private lender known as a business development company, went public on Wednesday, and three other BDCs have filed in January to do the same. 

Firms are streaming into the market after valuations for BDCs have surged in recent months, bringing the first notable public offerings in the space in about two years. In the queue to go public are funds managed by Blue Owl Capital Inc., Churchill Asset Management and Morgan Stanley. 

Three of the four are first-time public issuers for BDCs, while Blue Owl has listed them before. BDCs, which make loans to companies that are typically small or medium-sized, have broadly been trading at discounts to the net value of their assets for much of the last 18 months. But the debt market rally that began in November turned that discount into a slight premium, according to a market index.     

Read more: How Private Credit Gives Banks a Run for Their Money: QuickTake

“The IPO window for BDCs is short and BDCs are trading as close to book value as they have in a while,” said James Morrow, founder and chief executive of Callodine Capital Management, an investor in public BDCs. “We are expecting to see higher dividend rates going forward and think these IPOs are a good sign of investor demand.”

BDCs may originally be set up as private vehicles, and may charge lower fees when they’re not yet public. Private BDCs often aim to go public within a stated time frame, and selling shares makes it easier for initial investors to cash out.   

“There has been robust deployment opportunities over the past few years to build up these portfolios for an IPO,” Bloomberg Intelligence BDC analyst Ethan Kaye said. 

The companies, which also buy broadly-syndicated loans and make other kinds of investments, can avoid paying corporate-level income taxes as long as they meet a series of conditions, including paying out at least 90% of their taxable income to shareholders. The four entities that filed this month to go public were formed in 2020 or earlier.  

“We’ve been eying the IPO market since post COVID and preparing ourselves for the same length of time,” said Christopher Long, chairman and chief executive officer of Palmer Square Capital BDC, in an interview with Bloomberg.

Palmer Square’s BDC raised about $90 million of gross proceeds. It was priced at $16.45 a share. 

Nuveen Churchill Direct Lending plans to sell shares sometime around Jan. 24, and Blue Owl Capital Corporation III aims to go public through a direct listing around Jan. 25. 

“A lot of these private vehicles have been sitting around waiting for the public listing market to open and valuations to improve,” said Clay Montgomery, vice president with the private credit team of Moody’s Investors Service. “The manager made a soft promise to their investors that they weren’t going to keep their money locked up forever and going public allows investors to eventually trade out of the stock.”

Deals

  • Citigroup Inc. is teaming up with LuminArx Capital Management on a new private-lending strategy, including asset-backed credit and corporate debt.
  • Banks and direct lenders are considering financing the potential buyout of fire safety specialist Eurofeu
  • Electrical Components International Inc. is having discussions with private lenders for a new loan of between $800 million and $900 million to help refinance debt coming due next year
  • Mizuho Financial Group Inc. plans to dramatically ramp up its expansion into private markets to tap growing demand from Japanese institutional investors
  • Goldman Sachs Group Inc. is leading the financing to back the take private of Byggfatka Group Nordic Holdco AB, a Swedish software company servicing the construction industry
  • Silver Point Finance provided a $265 million credit facility that matures in January 2030 to energy services company TETRA Technologies
  • The Ardonagh Group Ltd. is seeking as much as $5 billion to help refinance debt, re-organize its balance sheet and fund fresh acquisitions in what would be the largest ever direct-lending deal
  • Castlelake LP is providing fintech servicing firm Vervent Inc. with as much as $180 million to finance origination for a handful of unsecured credit card programs as part of a new forward flow agreement

Fundraising

  • Investcorp Holdings, the Middle East’s biggest alternative investment firm, aims to double its infrastructure assets under management to $10 billion over the next five years
  • Bridgepoint Group PLC is looking to raise €4 billion for its fourth direct lending fund

Job Moves

  • David Hirschmann and Ariadna Stefanescu were appointed co-heads of Permira Credit after former head James Greenwood stepped down from the business in 2023
  • Carlyle Group Inc appointed Peter Mackie to global head of credit distribution replacing Andrew Curry, who is leaving the firm
  • Arrow Global Group has hired Robert Leary as the new chair of its board of directors
  • Hayfin Capital Management has received approval to open a new office in Dubai, where Jack Richardson, a principal in the global partner solutions group, will be permanently based

Did You Miss?

  • GoldenTree’s Tananbaum Sees Private Credit Spreads Narrowing
  • Private Credit Needs Regulations to Curb Risks, Masters Says
  • Evercore Grows Real Estate Arm as Clients Look to Private Credit
  • Citi Prefers India’s Private Lenders Over State-Owned Banks
  • JPMorgan Sees a Record $30 Billion Private Debt Changing Hands
  • Large Backers of Private Equity Are Asking For Their Money Back

©2024 Bloomberg L.P.