Downtown-based TCW Group Inc. is expanding its partnership with PNC Financial Services Group Inc. to provide private credit options to middle-market companies.
The institutions will create a team to manage these investments, with an eye on launching this fall. They expect to have $2.5 billion in investor equity capital for the first year, thanks to the coffers of both PNC and Nippon Life, a minority owner of TCW.
This partnership is just the latest action between TWC and Pittsburgh-based PNC, which have worked together on a variety of initiatives for the past 15-plus years.
“We are thrilled to partner with PNC to expand our direct-lending capabilities and provide financing to a critical segment of U.S. companies, as well as offer a differentiated investment solution for clients,” Katie Koch, president and chief executive of TCW, said in a statement. “PNC and TCW have a long history of developing creative solutions across a number of joint financings, and this partnership represents an exciting opportunity to capture significant market share of the expanding private credit market by leveraging the strengths of both our firms.”
PNC boasts a nationwide clientele of these middle-market businesses. Through this partnership, it plans to direct those clients to TWC for lines of credit.
“Combining the power and legacy of PNC’s broad lending capabilities with TCW’s private credit group will deliver significant benefit to companies seeking growth opportunities,” William Demchak, chairman and chief executive of PNC, said in a statement.
Speaking at the Milken Institute Global Conference this month, Koch said the institutions are targeting companies with earnings before interest, taxes, depreciation and amortization of between $15 million to $75 million. Describing TCW as an “early entrant” to private credit, she added that PNC is the firm’s top fund financing partner, with more than 40 co-financings done together.
While not getting into specifics, Koch added in response to interviewers at the conference that she expects the $2.5 billion starting point to grow significantly, especially as it becomes apparent that partnerships such as this one this will need to be deployed in response to inflationary pressures.
“Banks are under some regulatory pressure and private credit managers have the capital to allocate and to lend, and banks have great origination capabilities,” she said. “Those two things are going to have to cooperate so we can continue to put credit out into the U.S. market.”
Although it had done business with clients here for years, PNC – through subsidiary PNC Bank –formally expanded into L.A. only last year with an office in Century City. In August, that outpost continued to expand its executive team with an eye on corporate banking and wealth management.
L.A. Regional President Todd Wilson last year told the Business Journal that he had been bolstering staff headcount and business expansion for several years, on the heels of PNC’s acquisition of BBVA in 2021, which produced PNC’s only branch in the county – in Lynwood. The bank has, in particular, boosted its investments in women’s business advocacy, early childhood education and community-building ventures.
With more than $205 billion in assets under management, TCW was no. 4 on the Business Journal’s list of money management firms last year. Koch took over as CEO of the firm last year. Other recent deals for the company include the closing of a $400 million collateralized loan obligation fund in August, its second such deal of the year.
