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PNC and TCW Partner on Loans to Middle Market Companies

The PNC Financial Services Group and the TCW Group have formalized and expanded their partnership to develop a private credit platform focused on middle market lending.

The companies aim to have $2.5 billion in investor equity capital available in the platform’s first year, and expect investment activity to begin in the fall, they said in a Monday (May 6) press release.

“We are thrilled to partner with PNC to expand our direct lending capabilities and provide financing to a critical segment of U.S. companies, as well as offer a differentiated investment solution for clients,” Katie Koch, president and CEO of TCW, said in the release.

This partnership brings together global asset manager TCW’s experience originating, underwriting and managing direct lending portfolios and financial institution PNC’s national client relationships and middle market lending franchise, according to the release.

Together, they will focus on directly originated, senior secured cash-flow and asset-based loans to middle market companies, the release said. They will create a team to manage these investment activities.

“Combining the power and legacy of PNC’s broad lending capabilities with TCW’s private credit group will deliver significant benefit to companies seeking growth opportunities,” William S. Demchak, chairman and CEO of PNC, said in the release.

The middle market has struggled to get the attention of solutions providers, banks and credit card companies because middle-market businesses are often both too large for small business solutions and too small for enterprise-level capabilities, Paul Christensen, founder and CEO of global financial services and technology company Previse, told PYMNTS’ Karen Webster in an interview posted in April.

“The large banks and the card networks, they are waking up to the fact that the middle market is a massive market — and one that’s not particularly well-served by the finance industry with real pain points to solve,” Christensen said.

Visa reported in March that middle-market firms with revenues between $50 million to $1 billion annually perform most efficiently when they tap into external financing for planned growth initiatives and to cover expected cash flow gaps.

Rankings were governed by operating efficiencies and the plans executives made to use working capital solutions to maintain or improve operating efficiencies, measured in reduced days payable outstanding (DPO).