Pandemic Turmoil Is Driving Borrowers to Private Credit, JPMorgan Says

JPMorgan Chase & Co.’s private credit team is seeing a stream of new business emerge from the financial disruption that is still rippling from the outbreak of the novel coronavirus.

Borrowers suddenly have temporary financing needs as their traditional sources of capital have dried up, according toMeg McClellan., J.P. Morgan Asset Management’s head of private credit. For example, real estate developers and a startup company in the health care sector have all recently approached the firm for financing after difficulty obtaining it elsewhere during the pandemic, McClellan said in a phone interview.

Within real estate, the borrowers had been shut out from the commercial mortgage-backed securities market. They talked to J.P. Morgan Asset Management about securing new loans maturing in two or three years, which would help bridge them through the crisis until longer-term financing in the CMBS market is again accessible, according to McClellan.

贷款支持的“高质量”ties and multifamily real estate, with yields ranging from 500 basis points (5 percent) to 700 basis points, she said. These bridges are “incredible from a risk-reward perspective,” making them a good investment while helping borrowers finance themselves temporarily.

Beyond real estate, difficult debt markets have led a small health care company seeking $15 million to $25 million to recently turn to JPMorgan for private credit, according to McClellan.

“Typically, they would maybe go to a venture debt fund,” she said. “But they’re trying to find alternate sources of financing because they need to raise for some immediate expansion and investment plans.”

Before the deadly outbreak of Covid-19 — the disease caused by the novel coronavirus that has prompted businesses to shut down to slow its spread — J.P. Morgan Asset Management had been “very defensive” about direct lending to companies, according to McClellan.

担心蓬勃发展的行业已成为too crowded，JPMORGAN的全球替代投资负责人安东尼PIL，告诉亚博赞助欧冠去年，他一般避免直接贷款公司信贷。PIL看到这种交易与当时的收益率过于危险。

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“我们可能在六个月前看到了信贷周期在牙齿里很长时间，”麦克洛兰说，他们在1月份成为私人信贷负责人。她的立场是作为JPMORGAN推动的一部分，扩大其私人信贷业务，跨越房地产，基础设施和企业债务，遭受困扰的投资。

“没有人会预测大流行和这种可怕的悲剧，将是结束该循环的催化剂，”麦克洛兰说。“现在，在我们通过它思考，这是一个问题，暂时中断的问题是什么？”

麦克莱伦认为冠状病毒大流行病的心理方面可能会在留在家庭订单中举起，潜在地重塑一些行业。

“旅行备份速度有多快？”她说。她建议，旅游和零售业可能会看到较慢的回收率，而人们对办公空间的看法也可能会改变大流行后。

Unlike the Federal Reserve’s “broad-brush” measures taken last month to prop up public markets amidthe turmoil, McClellan sees private markets having “the luxury” of a more targeted approach to supporting companies in the crisis. She said her group can help get individual “companies up and running again” when their usual lenders have stepped back in the tumult due to their ownliquidity concerns.

Meanwhile, J.P. Morgan Asset Management is working with borrowers in its own portfolio to preserve their long-term value in the pandemic. The asset manager may provide forbearance on some loans or renegotiate deal terms, McClellan said. Some borrowers may need more breathing room as they renegotiate rental agreements to avoid bankruptcy in the temporary economic shutdown.

根据McClellan的说法，这些讨论往往在公共市场中往往更具挑战性，在单一交易中有许多债务投资者。

For its part, J.P. Morgan Asset Management has seen a “relatively smooth transition” to client outreach using conferencing technology in place of onsite visits — even with the now typical dogs, kids, and others in the background, according to McClellan. She said the group’s institutional clients have begun contemplating new allocations in the wake of the extreme market volatility in the first quarter.

根据McC亚博赞助欧冠lellan的说法，一些机构投资者现在正在考虑如何进入近期循环问题之前的私人信贷。其他人询问公众的替代方案fixed-income investments, she said, evaluating opportunities in asset-based lending such as high-quality real estate debt.

“The big catalyst for shifts in portfolios is ultimately going to be where we land on developed-market interest rates,” she said, predicting low yields may continue to spur investors to look inside private credit markets for bigger returns.

与此同时，根据Virtual会议所取代的旅行，J.P.Micgan资产管理一直致力于在McClellan的说法，在大流行中，J.P.摩根资产管理一直致力于将其与全球客户的沟通。

“The pace has picked up,” she said. “And the types of conversations we’re having has clearly changed quite a bit around risk and portfolio positioning.”