TD Bank Is Exploring Tie-Ups with Private Credit Firms to Expand Sponsor-Backed Lending Business
TD Bank, the tenth-largest commercial bank in the United States by assets, is exploring partnerships with private credit firms as it seeks to compete for a larger share of the corporate and sponsor-backed lending market. A person close to the matter has indicated that TD is actively seeking to forge arrangements similar to those adopted by its peers — combining a bank's corporate client network and loan origination pipeline with the more flexible financing capabilities of a direct lender. TD's credit origination team currently focuses on loans to private equity (PE)-backed middle-market businesses that generate at least $20 million in EBITDA (earnings before interest, taxes, depreciation and amortisation, a common measure of a company's operating profitability) but are not yet large enough to access the broadly syndicated loan (BSL) market — the public market for leveraged loans sold to institutional investors such as CLOs (collateralised loan obligations). For private credit firms, such arrangements offer access to a broader base of borrowers through the bank's origination network, enabling them to deploy capital into credits they might not otherwise source independently. For the bank, the partnership model allows it to write larger commitments and offer more tailored terms than its balance sheet alone would support. The bank-private credit partnership model has gained significant momentum across the market, with several major US banks having already formalised similar arrangements. TD's exploration of tie-ups reflects the ongoing competitive pressure from private credit on the traditional leveraged lending market, where banks have faced a tightening of deal flow as direct lenders capture an increasing share of sponsor-backed financings.
Why this matters
TD Bank's exploration of bank-private credit partnerships reflects the structural maturation of a trend that has reshaped leveraged finance over the past three years. As private credit (direct lending funds providing loans outside the public syndicated loan market) has expanded its share of sponsor-backed financings, banks have responded by seeking to become originators and intermediaries rather than pure balance-sheet lenders. Each new tie-up of this kind requires bespoke legal structuring — co-investment agreements, loan participation arrangements, or separately managed account structures — activating leveraged finance, fund finance, and regulatory teams simultaneously. The 'why now' is that BSL market conditions have stabilised, making the bank-private credit hybrid model increasingly attractive as a way to serve middle-market borrowers who sit in the gap between traditional bank lending and large-cap institutional loans. London-based leveraged finance teams at US and Magic Circle firms will watch this dynamic closely as it plays out in European markets.
On the Ground
A trainee on a bank-private credit tie-up of this type would assist with facility agreement schedule review, helping to map the economic terms of any co-lending or participation arrangement. They would also manage the CP (conditions precedent) checklist for drawdown mechanics and help coordinate legal opinion requests from local counsel across relevant jurisdictions.
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“What are the key legal and regulatory considerations a bank must address when entering into a co-lending or loan participation arrangement with a private credit fund?”
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