- A sign of the times: Clayton Williams Energy this month announced it was borrowing $350M from Ares Management (NYSE:ARES) to replace an equivalent loan from a consortium of banks. For its part, Ares charges a higher rate than the banks, and received the rights to buy up to 18.5% of the company and appoint two to the Clayton board.
- Clayton had no choice, and for Ares it's "loan-to-own" - either it makes plenty on the loan (12.5% interest) or it potentially winds up with the company in a bankruptcy.
- Look for similar deals to be struck this spring, with shops with big credit units like Blackstone (NYSE:BX), Apollo (NYSE:APO), and Oaktree (NYSE:OAK) prime candidates to take the lead.
- Source: Reuters' Koh Gui Qing