Per reliable sources, the Canadian life insurer
Sun Life Financial Inc. ( SLF Quick Quote SLF - Free Report) is in advanced talks to acquire Crescent Capital Group, the $28-billion worth credit manager.
The news doesn’t come as a surprise as management on the company’s recent earnings conference call stated that it wants to make an acquisition in the low investment grade private credit space.
The insurer expressed its willingness to spend from $500 million to $1 billion on firms with operations in North America and Europe with more than $10 billion of managed assets in mid-market lending, mezzanine financing or other areas of the private credit space.
Last month, SunLife completed the acquisition of a majority stake in InfraRed Capital Partners. As a leader in global infrastructure investing including renewable energy, InfraRed will broaden the company’s management suite of alternative investment solutions. The deal brings SLC Management’s, (one of the company’s unit ) assets under management as of Jun 30 to above $100 billion on a pro forma basis.
The company’s strong capital and cash position along with a low leverage ratio of 23.2% (below its target of 25% at the end of the second quarter) provides it with flexibility for investments in organic and M&A growth as well as protection against economic volatility.
SunLife is seeking to make investment in the private credit domain, which ensures a greater yield, thus creating an opportunity to generate higher income.
Private credit is loan given to small businesses by non-bank entities or investors. Growth in private credit represented about 8% of the expansion in credit to non-financial corporates (NFCs) in advanced economies (AEs) during the 2010-18 period. Surveys indicate that nearly half of private credit asset managers invest primarily in the United States with one-fourth focus directed toward the United Kingdom and the remainder spread across the world.
Private credit space witnessed huge growth after the Great Financial Crisis (GFC) of 2007-09. Post GFC, the expansion of private credit was fuelled by the combination of stagnating bank asset growth and attractive private debt yields relative to syndicated loans.
Year to date, the stock has lost 7% compared with its
industry's decline of 18.3%.
It carries a Zacks Rank #2 (Buy), currently. Some other stocks worth considering from the same space are Manulife Financial Corp. (
MFC Quick Quote MFC - Free Report) , Assurant Inc. ( AIZ Quick Quote AIZ - Free Report) and Primerica Inc. ( PRI Quick Quote PRI - Free Report) . While Manulife currently sports a Zacks Rank #1 (Strong Buy), the other two stocks carry the same Zacks Rank as Sun Life at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Earnings of Manulife, Assurant and Primerica surpassed estimates in the last reported quarter by 30.23%, 23.32% and 15.09%, respectively.
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