Many Shades of Leverage: Repo and Sale/Buyback Edition
What they are, and how two funds (BCRED and CCLFX) actually use them
Most investors look at a fund’s debt-to-equity ratio and move on. But in private credit, the type of borrowing matters as much as the amount.
And some of the most interesting financing structures are buried in footnotes that almost nobody reads (the one thing I want to sell you even more than a subscription is an appreciation for footnotes).
Before we get any further, I sorted and organized all content for your enjoyment:
Today: repurchase agreements and sale/buyback facilities. Don’t recoil and run away: they’re not as complicated as they sound. But they do fall squarely into the category of things you need to understand.
We will look into how two of the largest private credit funds in the market are using these tools right now (one of them uses both).
These are the two funds, both happen to use such facilities:
📺 Quick detour: I went on live TV to talk about what’s happening in private credit more broadly. If you missed it, it’s here:
https://video.foxbusiness.com/v/6391029463112
Disclosure: This article is provided for educational and informational purposes only and should not be construed as investment, legal, tax, or financial advice. The views expressed are solely those of the author. All analysis is based on publicly available SEC filings and third-party research cited herein; the author has no position in, and receives no compensation from, any fund, counterparty, or entity discussed. Fund structures, leverage facilities, and borrowing terms are presented as reported in the referenced filings and may have changed since the filing dates noted. All examples are illustrative in nature and not guarantees of future outcomes. Readers should conduct their own independent research and consult with qualified professionals before making any investment or financial decisions.
📌 A Quick Primer on Repo and Sale/Buybacks
At a high level, these do the same thing.
A fund “sells” an asset to a bank and, at the same time, agrees to buy it back later at a slightly higher price. That price difference is the financing cost. The fund gets cash; the bank gets collateral.
Economically, it’s a secured loan.
So what’s the difference?