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The General Electric logo is seen in a Sears store in Schaumburg, Ill., September 8, 2014.Jim Young/Reuters

The Canada Pension Plan Investment Board (CPPIB) is paying $12-billion (U.S.) to buy a big chunk of the lucrative U.S. market for lending to private equity sponsors of mid-sized companies.

For the uninitiated in the world of private equity, PE firms typically buy companies using a mix of cash and debt – usually the split is 30/70. The PE "sponsor" can raise the debt portion through a bond issue, but if they can't or won't go that route, that's where the likes of Antares Capital come in. CPPIB pegs the value of the mid-market for these loans, to companies with annual revenue of between $10-million and $1-billion, at $96-billion a year in the U.S.

Antares is "a huge player in the space," said Ryan Flanders, head of private debt products with Preqin, a research provider for the alternative asset management industry in New York, adding that the market has "grown exponentially post-financial crisis."

Mr. Flanders says the traditional big-bank lenders in the U.S. largely exited the business after the financial crisis.

"A lot of these banks that were doing a lot of this leveraged lending are no longer able to do so given capital reserve requirements and regulations against leveraged lending," he said.

The market is now dominated by specialized alternative asset managers such as hedge funds specializing in arranging credit, and even PE firms themselves who have the capacity to lend in-house.

Apart from Antares Capital, other heavy hitters in the U.S. are Monroe Capital LLC, Golub Capital, KKR & Co. L.P., Bain Capital, American Capital, Ares Capital and Apollo Global Management LLC.

The Canadian market for lending to private equity sponsors is markedly different than the U.S.

"The market in Canada is much, much smaller than it is in the U.S. There are far fewer private equity firms in Canada and far less private equity capital," said Adam Breslin, partner with Toronto-based Penfund, an independent private equity firm with $500-million under management. Penfund also participates in specialty lending.

Unlike in the U.S., large financial institutions such as banks and insurers have a stranglehold on the domestic market. Mr. Breslin noted that the CPPIB is also active in the Canadian market.