Brookfield strikes deal with debt firm Castlelake in drive to expand credit business

financialpost.com:

Brookfield Asset Management Inc. struck a partnership with Castlelake LP to get a majority share of the private debt firm’s fee-related earnings, another move in the Canadian investing giant’s effort to grow its credit business.

Brookfield Asset will invest about US$1.5 billion, including money that the firm’s reinsurance arm will place in Castlelake’s strategies, the firms said in a statement Monday. Castlelake will still operate independently and retains majority ownership of its earnings tied to performance.

Toronto-based Brookfield Asset recently formed a credit arm to drive growth alongside its traditional real estate and infrastructure funds. It’s looking to manage more credit assets for insurers, including its own, and has turned to partnerships in many instances.

The Castlelake deal “helps to deploy some of its significant cash (US$2.7 billion) on its balance sheet and we think there could be an opportunity to take a greater stake in Castlelake over time,” RBC Capital Markets analyst Geoffrey Kwan said in a research note.

Brookfield shares were up 1.2 per cent in New York in early afternoon trading.

The company also has partnerships with Oaktree Capital Management — in which it acquired a majority stake in 2019 — as well as European credit manager LCM Partners, Primary Wave and 17Capital.

Alternative-asset managers have been pushing into areas beyond traditional buyouts as rising interest rates have made borrowing more expensive. That’s led to a boom in private credit, which jumped in to fill a lending void as traditional banks retrenched. Private equity firms have also been buying stakes in insurers to influence how they invest and grow their balance sheets.

Brookfield Asset expects credit to be its fastest