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TD Bank U.S. is exploring tie-ups with private credit firms to allow it to compete for a larger share of the corporate and sponsor-backed lending market.
The 10th-largest commercial bank in the US by assets, TD is actively seeking to forge partnerships similar to those adopted by its peers, which aim to combine the corporate client network and origination pipeline of a bank with the financing capabilities of a direct lender, according to a person close to the matter. No firm plans have been agreed upon, the person added.
TD’s credit origination team primarily extends loans to PE-backed middle-market businesses that generate at least $20 million in EBITDA, but are not yet large enough to access the broadly syndicated loan market, the person said.
TD Bank declined to comment.
Once competitors, banks and direct lenders are now increasingly pooling their relationships, capital and credit expertise. Partnerships between the two sets of lenders have proliferated, taking a variety of forms and drawing in lenders of different sizes.
Banks, constrained by tighter capital rules, are less incentivized to hold certain types of debt on their balance sheets, leaving a gap for private credit to fill.
The arrangements allow banks to reap fees from sourcing and structuring deals while retaining relationships with clients. For private credit firms, these ventures offer access to a broader base of borrowers for which they can provide more flexible capital.
The two sides can also provide joint financing. In such cases, banks will make a loan using their own balance sheets and typically take the senior tranche in the borrower’s capital stack, giving them the first claim on repayment in a default scenario.
Commercial banking giant JPMorganChase has forged several partnerships with private credit firms—including Cliffwater, Future Standard and Shenkman Capital Management—under which the bank originates loans and co-invests alongside the lenders.
Other high-profile collaborations include Citigroup’s $25 billion direct lending partnership with Apollo Global Management and Wells Fargo’s $5 billion arrangement with Centerbridge Partners.
In the middle tier of the market, PNC and the TCW Group in May 2024 announced a partnership that will make loans to middle-market companies, providing them with senior secured cash flow and asset-based loans.
Webster Bank and Marathon Asset Management, two months later, unveiled a comparable tie-up targeting sponsor-backed midmarket companies.
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