Citigroup and HPS Investment Partners, the private credit arm of BlackRock, have launched a €15 billion private capital program targeting corporate borrowers across Europe, the Middle East, and Africa.
The structure is straightforward: Citi originates the deals, HPS puts up the majority of the capital, and the credit risk shifts off Citi’s balance sheet onto HPS. For HPS, which manages $381 billion in assets, it’s a pipeline of deal flow from one of the world’s largest banks.
The program operates on an initial five-year term and focuses on sub-investment-grade debt. Target borrowers include corporate entities and sponsor-backed companies across Continental Europe and the UK. The program is also set to expand into the Middle East.
Citi’s role as the originator is critical. The bank maintains its client relationships, keeps earning fees, and stays relevant in the lending market without loading up its own balance sheet with risk-weighted assets. HPS gets access to Citi’s deal-sourcing infrastructure.
After the 2008 financial crisis, banks got hit with stricter capital requirements. Private credit firms, unburdened by those same rules, stepped in to fill the gap. BlackRock’s acquisition of HPS has only accelerated this trend. With $381 billion in AUM, HPS has the firepower to absorb enormous volumes of credit risk.
For institutional investors allocating to private credit through managers like HPS, this partnership provides a more diversified deal pipeline. The deal also underscores how competitive the European private lending market has become.