Private credit funds are essential partners for businesses in need of capital and promote a healthier financial system.
AB CarVal, a Minneapolis-based private credit fund, stepped up to support Cooper Hotels, a Memphis, Tennessee family-owned hotel operator with hotels across the country. AB CarVal provided Cooper Hotels with critical funding to weather the pandemic and position them for future growth.
Hear from AB CarVal and Cooper Hotels about how private credit funds support businesses of all sizes when there are shocks in the market.
Key Takeaways
- Private credit funds play a vital role in supporting businesses and ensuring a healthy financial system.
- Today, the $716 billion private credit market provides capital to businesses of all sizes in every industry.
- “Private credit is kind of like the economic Marines,” said AB CarVal Managing Director Paul Mullaney. “When there is a shock to a system, the first group of lenders that comes back is private credit.
Transcript:
[00.00-00.05]: Private capital was pretty much a new concept to us, and it was there when we needed it.
[00.07-00.15]: We started in 1961 with one hotel and grew over the years. Many of our employees, many of us, have been here for a long time.
[00.16-00.27]: Still family-owned and family-run. We were founded as a company who valued consistency and stability and continued relationships with customers, certainly, with vendors, and with employees.
[00.27-00.31]: That tradition’s been continued throughout the years, and that’s really worked for us.
[00.32-00.35]: When COVID hit, it was overnight.
[00.35-00.42]: The hospitality sector was hit very hard by the pandemic, and most hotels, in fact throughout the entire world, became unprofitable.
[00.43-00.53]: I mean, occupancy was almost zero. We were losing probably $2-3 million a month, and with no prospects of there being a tomorrow.
[00.53-01.06]: When there are shocks in the market, and concerns about uncertainty and how things play out, private capital provides a lot of stability because it’s there when the rest of the markets aren’t there.
[01.07-01.15]: We hit a wall with our mortgages, so we had to find a way to deal with that, to survive, and we became acquainted with AB CarVal.
[01.15-01.21]: The Cooper family, their number one priority was to keep their hotels open and to keep their employees employed.
[01.22-01.25]: So, for us, that was a huge opportunity to step in and provide financing.
[01.26-01.35]: When we approached the Cooper family and said, ‘Hey, we can provide capital at a cheaper cost to you, and then you can stabilize your portfolio with our capital,’ to give them a lifeline.
[01.36-01.46]: And at that point in time, CarVal and their private credit stepped in and said, ‘We believe in these guys. We see how they’ve been working hard to come out of COVID.’ They really became a white knight.
[01.47-01.59]: We are effectively investing not just in those companies but in those communities. We’re getting in the boat together with our borrowers and working closely with them to create success.
[02.00-02.11]: Private credit is kind of like the economic Marines. When there is a shock to the system, the first group of lenders that comes back is private credit.
[02.12-02.20]: We don’t shy away from that kind of uncertainty or the downturn, in fact, we move toward it.
[02.21-02.35]: The fact that they stepped in allowed us to continue to operate these hotels, to renovate them, we’ll be creating more jobs both inside the company and outside of the company and in our marketplaces, and we’ll be purchasing more product from more vendors and helping more customers.
[02.36-02.39]: It really allowed us to set the stage for future growth.
[02.40-02.48]: Cooper is a massive success story. We’re so happy that they made their way through the crisis, and it’s a perfect example of, ‘We win together.’
[02.50-end]: I mean, you can say that private credit really saved the day, and that’s really what happened.
