Corporate Private Credit Market¹

Strong Start to New Year

• 1Q 2024 market origination was $23 billion, in line with 4Q 2023 production and significantly higher than 1Q 2023 as issuers have seemingly come to terms with higher interest rate environment.
• Average deal size was $269 million across 85 transactions.
• Over 35% of issuance volume came from new entrants to the private placement market, including a Credit Tenant Lease transaction over $2 billion.
• North America led in volume with 74% of total issuance, followed by Europe at 22%, Australia at 3% and LatAm at 1%.
• USD-led currency issuance was at 84%, followed by 7% in Euro, 5% in GBP, 2% in Yen and 2% in CAD.
• Trend of delayed fundings remained low at 12%.

MIM Corporate Private Credit Activity

• Deal momentum picked up vs Q1 2023, as MIM origination for the first quarter totaled $1.3 billion, driven by directly-originated and more unique agented transactions.
• MIM remained disciplined in seeking relative value, passing on several oversubscribed deals that faced price tightening beyond appropriate levels. 
• We expect this market momentum to continue as issuers seek efficient private funding.
• Based on our findings MIM originated more in Europe ~31% (UK and Europe) than the Market at 22%.

MIM’s Outlook for 2024

• Our revised outlook for 2024 no longer expects a U.S. recession, due to the strength of the labor market and a rebound in manufacturing activity.
• We now expect the Fed will cut rates beginning in 2nd half 2024.
• Higher growth and fewer rate cuts suggest a higher 10-year U.S. Treasury yield, ending 2024 at 4.5%.
• We expect private credit markets continue to offer attractive yields in excess of public markets with substantial credit protection. We remain mindful of outcomes in which economic conditions deviate from market expectations and seek to be compensated appropriately.

Infrastructure Debt Market¹

Significant Activity and Strong Outlook Globally

• Q1 2024 saw significant activity in infrastructure debt globally with a very strong outlook for the remainder of the year.
• M&A activity continued to gain momentum through the quarter. We saw strong deal flow in the transportation (airports and ports) sector and regulated utilities.
• Activity continues to accelerate in key infrastructure sectors including digital, transmission, transportation and water. Energy transition and security remain highly relevant as well.
• Agented deal flow continues to be complemented by strong issuance of bilateral, directly-sourced transactions. Full year expectations remain positive, with a number of transactions in active dialogue and a strong pipeline of assets across our core infrastructure sectors.

Origination Focuses on Bilateral, Direct Deals

• Origination volume was $1.2 billion for Q1.
• Transactions MIM originated were mainly through proprietary channels. Only 20% were from the agented market.
• The agented deals are broadly shown and typically highly oversubscribed, as a result of which investor allocations are subject to significant scale-backs.

MIM Outlook for 2024

• The deal pipeline is robust; we continue to see diversified global opportunities.
• Proprietary deal flow remains very strong, as sponsors continue to value certainty of execution and reliable partners for M&A, refinancing and capex needs.
• MIM expects ongoing disruptions in bank lending to create opportunities in the Americas for private credit to fill funding gaps, as sponsors seek tailored private solutions to support financing needs via long-term partners.
• We anticipate an uptick in energy transition and security opportunities, as well as digital infrastructure globally. MIM expects the asset class to perform well, given stability of highly contracted and/or predictable cash flows.

Private Structured Credit Market¹

Robust sentiment and demand in Q1 2024

• Structured products market sentiment and demand remained strong in Q1 2024, as investors looked to lock in higher yields in advance of anticipated Fed rate cuts. As a result, spreads tightened across all public securitized products.
• In sympathy, private markets also saw significant spread tightening during Q1 with certain sectors seeing spreads move by 50-75 bps from prior quarter levels.

Looking to 2Q 2024

• As we enter Q2, investor demand is still solid for securitized products, with spread tightening slowing from the sharp moves seen earlier in 2024 in our view.
• MIM continues to look for private transactions that offer attractive spreads and have maintained wider levels, resulting in a pickup to public market spreads.
• We expect private market spreads to continue a tightening bias supported by strong investor demand.

Active Deals in Our Pipeline

• MIM PSC is engaged in active discussions on a variety of deals in our pipeline. Our rigorous deal selection isolates the most attractive opportunities offering balanced relative value and structural features to provide investors downside protection.
• We continue to concentrate on bilateral and club deals which offer better negotiating power, pricing and allocations.

Endnotes
¹ MetLife Investment Management, Private Placement Monitor Credit quality assessments were performed internally by MIM and have not been verified by independent sources. Any internal ratings (i.e., MetLife ratings) presented in this document were developed internally by MIM. Such ratings are not recognized ratings used by other investment managers or funds, including those investing in the sectors in which MIM invests. Other ratings, including those published by an independent credit ratings agency, may be more relevant in evaluating creditworthiness or may present the credit quality of issuers or assets in a more or less favorable manner than such internal ratings do. MIM’s internal ratings are subjective; MIM has an incentive to assign internal ratings in a manner that more closely meet investor and/or yield expectations, or otherwise provides an advantage to MIM. Accordingly, such internal ratings should be viewed as one factor among other factors for evaluating creditworthiness, and you should make your own determination as to the weight you place on such internal ratings. Please contact MIM for additional information on how such ratings are derived.

Disclosure
This material is intended solely for Institutional Investors, Qualified Investors and Professional Investors. This analysis is not intended for distribution with Retail Investors.
This document has been prepared by MetLife Investment Management (“MIM”)¹ solely for informational purposes and does not constitute a recommendation regarding any investments or the provision of any investment advice, or constitute or form part of any advertisement of, offer for sale or subscription of, solicitation or invitation of any offer or recommendation to purchase or subscribe for any securities or investment advisory services. The views expressed herein are solely those of MIM and do not necessarily reflect, nor are they necessarily consistent with, the views held by, or the forecasts utilized by, the entities within the MetLife enterprise that provide insurance products, annuities and employee benefit programs. The information and opinions presented or contained in this document are provided as of the date it was written. It should be understood that subsequent developments may materially affect the information contained in this document, which none of MIM, its affiliates, advisors or representatives are under an obligation to update, revise or affirm. It is not MIM’s intention to provide, and you may not rely on this document as providing, a recommendation with respect to any particular investment strategy or investment. Affiliates of MIM may perform services for, solicit business from, hold long or short positions in, or otherwise be interested in the investments (including derivatives) of any company mentioned herein. This document may contain forward-looking statements, as well as predictions, projections and forecasts of the economy or economic trends of the markets, which are not necessarily indicative of the future. Any or all forward-looking statements, as well as those included in any other material discussed at the presentation, may turn out to be wrong.
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¹ As of March, 31 2024, subsidiaries of MetLife, Inc. that provide investment management services to MetLife’s general account, separate accounts and/or unaffiliated/third party investors include Metropolitan Life Insurance Company, MetLife Investment Management, LLC, MetLife Investment Management Limited, MetLife Investments Limited, MetLife Investments Asia Limited, MetLife Latin America Asesorias e Inversiones Limitada, MetLife Asset Management Corp. (Japan), MIM I LLC, MetLife Investment Management Europe Limited, Affirmative Investment Management Partners Limited.