HMC Capital Acquires Payton Capital in $5 Billion Private Credit Push

Highlights:

• Strategic Acquisition: HMC Capital has acquired Melbourne-based Payton Capital for AU$127.5 million, marking its significant entry into the private credit sector.
• Leadership Appointment: Matt Lancaster, former head of Macquarie’s US principal finance business, has been named chairman of HMC’s new private credit division.
• Growth Ambitions: HMC aims to double its assets under management to AU$20 billion, with plans including a new energy transition division and expansion into digital infrastructure.

David Di Pilla’s HMC Capital (ASX: HMC) has initiated its foray into the private credit sector with the acquisition of Melbourne-based Payton Capital for AU$127.5 million. This strategic move marks a significant expansion for HMC, leveraging its extensive experience in managing large, complex transactions.

Strategic Expansion into Private Credit

David Di Pilla, former UBS dealmaker and current head of HMC Capital, emphasized the immense growth potential in private credit. "The opportunity in private credit is too significant to ignore. It aligns perfectly with our expertise in handling large, intricate deals," Di Pilla stated. HMC's track record of executing substantial transactions in Australia underpins this new venture.

The acquisition of Payton Capital, a fund manager with approximately AU$1.5 billion in commercial real estate credit, was executed through a mixed cash-scrip deal. To finance the acquisition, HMC plans to raise $100 million from institutional investors and an additional $30 million through a share purchase plan, offering shares at $6.50 each. Prior to the raising, HMC shares were trading at AU$6.92. Additionally, HMC sold a 2% stake in its HomeCo Daily Needs REIT for AU$50 million.

Leadership and Future Plans

Matt Lancaster, previously head of Macquarie’s US principal finance business, has been appointed chairman of HMC’s new private credit arm. Di Pilla and Lancaster have been working on the acquisition since Christmas. "I've known Matt for a long time – he's one of the best operators in the market," Di Pilla remarked, acknowledging the extensive effort put into finalizing the deal.

Founded initially as an accounting firm, Payton Capital transitioned to a private credit investment manager in 2012 and currently employs around 70 staff. HMC and Payton have already secured $500 million in credit from two investment banks, boosting Payton’s loan book to over AU$2 billion. Di Pilla projected that Payton's commercial real estate business would grow to AU$2.5 billion, with an additional AU$2.5 billion from new ventures into structured, infrastructure, and corporate credit.

Aggressive Growth Strategy

HMC's entry into private credit is part of a broader strategy to double its assets under management to AU$20 billion. This ambitious plan includes launching a new energy transition division, chaired by former Prime Minister Julia Gillard, and expanding into digital infrastructure through the acquisition of North American development platform StratCap for $US28.5 million (AU$43.6 million).

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