Blackstone Says Private Credit Is Coming for Asset-Based Debt

“Today, we are a very small portion of the whole asset based finance market,” he said in an interview. “There’s a lot of room to run.”

A lot of what we’re doing is partnering with regional banks. They have internal loan origination capabilities through relationships with local platforms that make auto loans, home improvement loans and any other product that is important to their deposit base. We can buy those loans, but we can also partner with them to augment their business, meaning they originate the same or more, but don’t keep all of it on their balance sheet.

From my perspective, it’s been remarkable that we haven’t had a larger contraction of credit at the consumer level. That’s probably one of the things encouraging a lot of people to change their calls to a soft landing – if credit was unavailable and with the consumer being two-thirds of the economy, we might have a different outcome.

Private credit took on corporate markets first and is now handling multi-billion dollar financings, competing with banks for those transactions. Will we see something similar in asset backed financings? You’re hitting the nail on the head. A loan originator’s largest liability is their ability to sell loans and continue their business. Therefore, originators tend to have very conservative capital structures. We’re partnering with them over time and it’s important they can service their customers. That’s really what we care about. Our customers are insurance companies and pension funds. Their customers are the consumers, and we need those consumers to have a good experience.

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