Blackstone's private credit fund, BCRED, is marketing an $850 million investment-grade bond deal, according to Bloomberg.

The move comes as business development companies (BDCs) step up borrowing following a stretch of limited issuance.

BCRED was looking to raise $500 million from the investment-grade note sale. The firm has hired Deutsche Bank, Morgan Stanley, Wells Fargo, Mitsubishi UFJ Financial Group, and Royal Bank of Canada to work on the deal. 

The five-year notes are expected to be priced at a yield of 2.3 percentage points over Treasuries, coming in roughly 25 basis points under earlier price guidance, and will be allocated to "general corporate purposes."

In January, BCRED raised $700 million in aggregate principal for its private credit fund, a regulatory filing stated.

This deal comes amid a market downturn that has driven spreads on comparable fund debt to their highest levels in years. 

Underwriting Quality In Question

The widening has been fueled in part by worries about underwriting quality and the sector’s exposure to software firms that could be disrupted by advances in artificial intelligence.

A recent report from Morgan Stanley noted that “while certain AI disruption risks are valid in a narrow context, many are overstated, in our view, particularly for mission-critical, enterprise-grade software systems where durability, compliance, proprietary data and integration depth remain paramount.”

Morgan Stanley believes that rather than signaling a decline, artificial intelligence may act as a “net positive tailwind for well-positioned software incumbents.”

Earlier this month, Blue Owl Capital (NYSE:OWL) held a similar BDC offering, raising $400 million from bond investors. 

The bonds were issued by Blue Owl Capital Corp (OBDC) and are investment-grade rated notes. The bonds are yielding 6.4% and are set to mature in September 2028, according to an SEC filing, 

Pacific Investment Management Co. (PIMCO) acquired all of the $400 million bond offering shortly after, though it is unclear whether the bank plans to retain the bonds. Trace data indicated that at least one secondary-market trade exceeding $5 million has already taken place since the issuance.

Meanwhile, Goldman Sachs' private credit fund raised $750 million of 6.150% senior unsecured notes maturing in 2031. The non-traded BDC raised the funds to pay down borrowings on secured credit facilities and for general corporate purposes, Fitch Ratings reported.

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