Strategic View: In a major show of force, a direct-lending club led by Ares Management has financed a $2.5 billion LBO of a US-based software firm. This deal, one of the largest private loans of Q2, was done without any bank involvement, proving that private credit clubs now fully control the US mid-to-upper middle market.
Full story: The “passing of the torch” is complete. When a PE sponsor needed to finance a $2.5 billion LBO* this quarter, they did not call the banks. They called Ares. The private credit giant then assembled a “club of five” direct lenders to underwrite the entire debt package, from senior secured to mezzanine.
This deal is a turning point. For years, a transaction of this size would have been a “broadly syndicated loan” (BSL), run by a syndicate of 10-20 banks. But as banks remain on the sidelines, held back by new “Basel III Endgame” capital rules, the private credit world has stepped into the void. This is no longer a “niche” product; it is the market.
By forming a club, Ares and its partners (reportedly including HPS, KKR Credit, and Golub Capital) offered the PE sponsor two things the banks could not: speed and certainty. The club spoke with one voice, conducted diligence in weeks (not months), and guaranteed the closing. This “certainty premium” was worth more to the sponsor than any minor cost savings from a public syndicate.
This transaction proves that the private credit “club deal” has scaled. It is now the default financing tool for the entire US middle market, from $100 million deals to $5 billion-plus LBOs. The banks, once the rulers of this space, are now just one option among many.
*LBO: Leveraged Buyout, an acquisition of a company using a significant amount of borrowed money.
Summary: Ares’s $2.5B all-private debt club deal is a “crossing the Rubicon” moment. It matters because it proves that direct lender clubs, freed from banking regulations, have the scale and appetite to displace banks entirely, now owning the U.S. LBO financing market from top to bottom.
Source: Bloomberg
