By Katy Burne
GE Capital, a financing arm of General Electric, has formed a strategic alliance with $10 billion asset manager CIFC Corp. to explore lending opportunities, underscoring the growing role of non-bank 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 investments as they arise.
Peter Gleysteen, chief executive of CIFC, said the five-year alliance will bring CIFC's institutional investors closer to the process of originating loans as banks do, rather than participating when loans are sold down, or syndicated, by banks in charge of a deal.
"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 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 Gleysteen of CIFC and Neeraj Mehta, a GE officer.
GE Capital will receive 1 million shares of CIFC common stock, warrants to buy 2 million shares of a newly created class of non-voting CIFC preferred stock, and $4.88 million in cash from CIFC. GE has the right to appoint an executive to CIFC's board.
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