How 5 private-credit players, from Apollo to Carlyle, are investing in sports, media, and entertainment as content costs soar and a writers’ strike paralyzes Hollywood

News Room
  • Hollywood is seeing an inflow of private-credit capital.
  • Asset managers big and small, from Carlyle and Apollo to Serengeti and Shamrock, are pushing into the space.
  • Here’s how 5 top players are investing credit in media, entertainment, and sports.

The entertainment industry’s love affair with private credit is one of the hottest storylines in Hollywood right now.

Credit lenders are saying “lights, camera, action” to the idea of deploying dollars into movies, TV, and live sports. Private-credit assets under management in media grew to nearly $80 billion in mid-2022 from some $31 billion in 2018, according to an analysis by the data firm Preqin for Insider.

Christopher Marinac, director of research at the financial-services firm Janney Montgomery Scott, pointed to several reasons why, in the months and years ahead, he believes private-credit lenders will step up their strategies in media, entertainment, and sports.

For one, exposure to media and entertainment franchises gives lenders access to the industry’s cultural cachet — which often includes public pronouncements about diversity, equity, and inclusion. For asset managers, it’s feasible that addressing their ESG imperatives through values around DEI could mean incurring “a lot less harm” than by pursuing strategies in electricity, energy, or environment sustainability, he said.

For another, borrowers need access to liquidity fast while the cost of new content surges and a writers’ strike foments instability in Hollywood, shutting down much production on film and TV. Despite private loans’ sometimes onerous terms, they come with the added bonus of letting borrowers maintain all of their equity, which is an often-attractive proposition for founders.

Private credit has become a catch-all term for lending and debt investments outside the public markets, and almost always involves an asset management business like Apollo or Blackstone instead of a traditional bank like Bank of America or Citigroup. The asset has rapidly expanded since post-global financial crisis regulations pared back banks’ lending practices.

But the space is certainly not devoid of risk. Analysts at the rating agency Moody’s warned in a report last week that high volumes of credit lent by non-bank institutions could be in jeopardy as borrowers struggle to make interest payments, citing the Fed’s series of rate hikes and an economy on an uncertain footing. “Macro stresses will spur higher defaults and possibly weaker recoveries” among borrowers, the analysts cautioned.

Insider previously reported that analysts were warning of the risks that could mount across private credit as rates rise.

Even so, those headwinds may not slow private lenders for long. Banks are facing their own deterrents from lending — like the liquidity crunches that torpedoed regional firms such as SVB and First Republic this year. They may grow even more risk-averse, which could curb their appetite for lending, with the Fed’s stress tests scheduled for late June, Marinac said.

Insider reviewed several large-cap banks’ 2023 regulatory disclosures and found that, while some of the largest banks lend heavily to real estate, retail, and financial-services companies, they’ve generally allocated far less exposure to firms in technology, media, and telecommunications.

Bank of America said it had about $15 billion in credit exposure to the media sector at the end of the first quarter of 2023. That’s compared with more than $102 billion in asset managers and funds and $73 billion in real estate. Meanwhile, JPMorgan Chase said in its 2022 10-K filing that it had nearly $80 billion in credit exposure to the TMT sector, but more than double that — almost $171 billion — in real estate, and more than $123 billion in the consumer and retail sector. 

Insider gathered details on asset managers’ lending strategies in Hollywood, media, and sports. Even as they battle inflation, a slowing economy, and a historic writers’ strike, here’s what execs at five firms — large and small, listed alphabetically — say they’re energized about. 

Read the full article here

Share this Article
Leave a comment