Over the past couple of years, DigitalBridge has been cultivating a private credit business to support growth for companies in the digital infrastructure sector.
This week the investment firm announced the close of its inaugural fund, DigitalBridge Credit (DBC), which raised a total of $1.1 billion to deliver "investment solutions" to companies across verticals including fiber, towers, data centers and small cells.
Private credit refers to debt or loans that are extended by non-traditional lenders to companies that are not publicly traded. Unlike private equity (a hot topic in the fiber space), private credit doesn't involve any acquisition of ownership stake in a company.
DigitalBridge CEO Marc Ganzi said during the company’s third-quarter earnings that private credit is a “growing force in global capital markets.”
Since 2010, over $1.8 trillion in private credit capital has been formed to fill what Ganzi called “a growing demand for credit that traditional lenders hampered by tightening restrictions and regulations have not been able to keep up with.”
“Private credit is taking share, filling the gap left by traditional lenders to meet growing demand from borrowers that need liquidity and growth capital,” he added.
With DigitalBridge already specialized in digital infrastructure as the owner of fiber-provider Zayo and other data center, small cell and tower companies, Ganzi said the company is poised at the intersection of private credit and infrastructure.
“We're talking to LPs on a global basis, and they want to be exposed to digital infrastructure, and they want great exposure to private credit,” added Ganzi. “So why not give them both in the same product set, and this is where we've landed. This puts us in a real sweet spot in an already fast-growing market.”
Most of DigitalBridge's private credit lending will involve floating rate securities (investments with interest payments that might adjust periodically), with amounts in the $20 million to $300 million range.
The DBC fund has already contributed $100 million to fiber provider Surf Internet through a debt financing deal made early this year.
Ganzi also touted private credit for ensuring better risk-adjusted returns on the back of higher interest rates and “the reliability of credit products in an uncertain macro.”
“It's important to note digital infrastructure is an incredibly capital-intensive sector. So we're just getting started and servicing a really big and growing total addressable market,” he said. “It’s expected that 2023 will generate another $200 billion plus of capital formation, the fourth year in a row exceeding that level. As you can see, this is not just a fact, it's sustainable.”