Abu Dhabi investment firm Lunate explores $1 billion stake in credit firm HPS

Lunate, the Abu Dhabi-based asset manager, is considering buying a minority stake in HPS Investment Partners as the private credit firm weighs an initial public offering or sale, according to people familiar with the matter.

Lunate is evaluating an investment of $1 billion or more into HPS, the people said, asking not to be identified as the information is private. HPS could also seek additional capital to manage as part of any transaction.

Lunate is the latest firm to show interest in HPS, which is pursuing a potential IPO that could value it at $10 billion or more. BlackRock Inc. is exploring a purchase of the credit firm as multiple potential suitors weigh preempting the IPO attempt, Bloomberg reported Wednesday. Private equity firm CVC Capital Partners has been interested in a potential combination with HPS and has held on-and-off talks, but no formal negotiations are currently underway, people familiar said earlier this week.

Deliberations are ongoing and no final decision has been made, according to the people. The scope and structure of Lunate's investment in the business could also change as talks proceed, the people said. A representative for Lunate declined to comment, and HPS didn't respond to requests for comment.

HPS is among the largest independent managers in the $1.7 trillion private-credit market and has come to epitomize the industry's surge over the past several years. It managed $98 billion of assets in private credit and $19 billion in public credit at the end of June. HPS was founded in 2007 by Scott Kapnick, Scot French and Mike Patterson, and in 2016, the firm bought itself out of JPMorgan Chase & Co. in a complicated deal that valued it at close to $1 billion.

HPS already sold a minority stake to Guardian Life Insurance Co. of America as part of a 2022 deal in which the insurer provided capital for the credit firm to manage. In August, Guardian said it would increase its passive stake and shift the management of about $30 billion of assets to HPS.

Lunate manages about $105 billion of assets and invests across the private markets including buyouts, venture capital, private credit and public equities, its website shows. Earlier this year, the firm acquired a 40 per cent stake in Adnoc's oil pipeline network from BlackRock and KKR & Co. It also teamed up with Saudi Arabia's Olayan Financing Company to buy a 49 per cent stake in ICD Brookfield Place, the largest office tower in Dubai's financial hub.