Lead

Citigroup and BlackRock’s private‑credit arm, HPS Investment Partners, have teamed up to launch a €15 billion program that will originate and fund sub‑investment‑grade corporate debt across Europe, the Middle East and Africa. The partnership, announced in early May, is designed to let Citi maintain its client relationships and fee income while shifting credit risk onto HPS, which manages $381 billion in assets under management.

Background

Since the 2008 financial crisis, banks have faced tighter capital requirements that make holding risky loans on their books expensive. Private credit firms, which are not subject to the same regulatory constraints, have stepped in to fill the gap, offering lenders access to a broader pipeline of deal flow. BlackRock’s acquisition of HPS has amplified this trend, giving the private‑credit manager the capacity to absorb large volumes of credit risk. Citi, one of the world’s largest banks, has long sought ways to stay relevant in the lending market without loading its balance sheet with high‑risk assets.

What Happened

The program is structured so that Citi will originate deals and HPS will provide the majority of the capital. Credit risk will shift off Citi’s balance sheet onto HPS, allowing the bank to earn origination fees while keeping its risk-weighted assets low. The initiative has an initial five‑year term and focuses on sub‑investment‑grade debt. Target borrowers include corporate entities and sponsor‑backed companies across continental Europe and the United Kingdom, with plans to expand into the Middle East. The partnership is one of the largest bank‑private credit collaborations announced to date.

Market & Industry Implications

The deal underscores the growing competitiveness of the European private lending market. Sub‑investment‑grade corporate borrowers in the EMEA region now have another well‑capitalised lending option, which could lead to more competitive terms and potentially compress yields over time. For institutional investors allocating to private credit through managers like HPS, the partnership provides a diversified deal pipeline, leveraging Citi’s extensive client network and deal‑sourcing infrastructure. The collaboration also highlights how banks are increasingly partnering with private‑credit firms to navigate post‑crisis regulatory constraints while maintaining market presence.

What to Watch

  • Progress of the program’s expansion into the Middle East and Africa over the next 12 months.
  • Performance metrics of the first tranche of loans, including default rates and fee income for Citi.
  • Any regulatory updates that could affect the credit risk transfer structure between Citi and HPS.