Bond giant Pimco is trying to capitalise on some large borrowers’ urgent need for cash by doing private deals in public markets, in the latest sign of how the traditional dividing lines between these two sectors are starting to blur.
The $2.3tn-in-assets fund manager, which has historically focused primarily on publicly traded fixed income, has led a spate of private placement transactions in recent months, taking large positions in high-profile deals. These include financing wartime debt for Middle Eastern governments, lending to a Blue Owl private credit fund whose shares had sold off, and contributing a major part of the funding for huge data centre projects for Meta and Oracle.
The deals highlight how the traditional boundaries between private credit — where lenders bypass traditional banks to lend money directly to borrowers — and public credit markets are blurring, as fund firms with huge financial firepower take more control of the underwriting process.
Private investment groups such as Apollo Global, KKR and Blackstone are increasingly using their heft and large insurance mandates to anchor multibillion-dollar deals. A number of borrowers, meanwhile, have been struggling to raise cash in public markets because of investor jitters about the Iran war and a flood of AI-linked issuance.
“It’s an area where we can use our size and scale to drive terms,” Dan Ivascyn, chief investment officer of Pimco, told the FT. “Today, you have a window of opportunity to unlock some of the better value that we’ve seen in quite some time.
“You have a lot of supply, reduced demand and a background of uncertainty that’s creating a sense of urgency for borrowers to lock in funding,” he added. “We will look to continue to be active here.”
Private placements allow borrowers to raise capital with greater flexibility and privacy, although this can limit the number of investors they can access and mean they have to pay more interest. Investors, meanwhile, can often negotiate higher yields and better terms in return for taking on extra risks, such as a limited ability to sell in times of stress or more concentrated exposure to one issuer.
The rising popularity of such deals reflects the rapid growth of the private credit industry over the past decade or so to more than $3tn in size, according to PitchBook, with investors willing to sacrifice liquidity in the hope of better returns.
“The public and private markets have become intertwined,” said John Aylward, chief investment officer at credit hedge fund firm Sona Asset Management.
Bilateral transactions — where lenders negotiate with borrowers, bypassing intermediaries — were on the rise because public markets were “not sufficiently flexible to provide creative solutions”, he added.
This mechanism was recently used by Gulf states Abu Dhabi, Qatar and Kuwait, which discreetly raised almost $10bn from Pimco amid the Iran war, according to people familiar with the matter.
“That area of the market always trades a little cheap because of some of the geopolitical risks and uncertainty,” said Ivascyn, adding that he had “always had significant core holdings in the region”.
Taking bond sales private, rather than through a bank syndication, can give Pimco extra yield while governments are able to raise money quickly, according to people familiar with the firm’s dealmaking.
In particular, a bet on Colombia is paying off after Pimco bought some $6bn of the South American nation’s peso bonds in private placements late last year.
The bond sales covered a large part of Colombia’s annual borrowing needs before elections this year and were done at yields slightly above market pricing at the time. The bonds have rallied since rightwing populist Abelardo de la Espriella won presidential elections this month.
Pimco’s focus on multibillion-dollar private deals with emerging market governments marks a major step up in size from the smaller-scale private lending to companies that has historically been more common in these markets.
Pimco, which now accounts for about one-fifth of foreign holdings of Colombia’s main local bonds, according to holdings data, has spread these purchases since last year across dozens of funds.
While investment-grade bonds are typically broadly syndicated, newer transactions with more complex structures, such as data centre loans, were sometimes better suited to anchor investors who can commit significant capital, said Nathaniel Rosenbaum, head of US high-grade credit strategy at JPMorgan.
Pimco has also tried to capitalise on mounting anxiety surrounding the health of private loans to companies, which has led to investors trying to withdraw billions of dollars from private credit funds this year and warnings of further problems to come.
In an unusual move, in April Pimco scooped up the entirety of a $400mn investment-grade bond issuance by a Blue Owl private credit fund, shortly after the asset manager was hit by redemption requests from retail investors in some of its funds. Blue Owl declined to comment.
Ivascyn said the Blue Owl purchase was “somewhat a one-off investment during the peak fear around [private credit] performance”, adding that the firm viewed the trade as “highly selective . . . and almost business as usual”.
In April, Pimco was the anchor investor for a massive private bond sale for Oracle’s new data centre campus in Michigan. It then used the so-called 144A market — a semi-private marketplace, accessible only to large institutions, which offers less liquidity than public markets — to sell part of its investment.
At the time, Wall Street banks had limited appetite to lend, according to people familiar with the deal, because the tech firm had already borrowed nearly $56bn for two other similar projects in Texas, Wisconsin and New Mexico.
Pimco had already purchased the lion’s share of Meta’s $27bn bond offering to fund its flagship “Hyperion” data centre in Louisiana late last year.
“Pimco, believe it or not, was one of the very few firms that was collaborative and willing to commit to the majority of the bonds very early on,” said a person familiar with the deal.
The asset manager bought about $10bn out of the $14bn Oracle offering at a discount before selling a portion of the bonds to other investors in the 144A market, the people said.
Additional reporting by Eric Platt in New York
