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. 2 Crestline concentrates on the lower mid-market segment in North America . Debt facilitates better usage of cash and boosts higher corporate growths. The fund is then used to provide debt finance to businesses. Direct lending is an asset class that has historically generated attractive, risk-adjusted returns through a variety of business cycles. We arrange senior or subordinated debt in amounts ranging from €5 million to €100 million and we are particularly keen to support build-up strategies. Investec Bank plc ("Investec") is pleased to announce the first close of its inaugural debt fund, Investec Private Debt Fund I ("PDFI"), a discretionary direct lending fund with capital commitments of €165m. Borrowers in this market tend to be smaller (averaging $30 million in . We have committed over $6.4 billion of direct lending capital to our partners as of 12.31.21. Investors earn a return through a combination of fees, interest and other charges applied to the amount of capital the fund lends . The investors are usually the main beneficiaries of the Trust. ACE IV will continue . Private equity funds are closed-end funds that are considered an alternative investment class. Within the US and Europe, the most popular private debt strategy is direct lending. 1 HPS Investment Committees, where applicable, are typically comprised of the Governing Partners and may contain other portfolio managers or senior professionals associated with a given strategy. ACE IV will be the first Ares European direct lending fund to offer an unlevered sleeve, a structure that has brought a number of first time investors to the Ares platform. AllianceBernstein's private debt platform has raised more capital for its evergreen direct lending strategy. The Advantages of Direct Lending. SMAs refer to investment structures established by a single investor. This is borne out by the findings in our recent global capital markets report 'Navigating CovExit: searching for value in the debt markets', which point particularly to a growing interest in direct lending. Direct lending portfolios, if structured properly, have the potential to generate returns similar to or higher than those of other credit investments such as BSLs, but with less risk. Highlights. Your write-up can follow the standard structure: yes or no decision in the beginning, the credit stats and potential losses in different cases, and the qualitative factors that support your decision (e.g., resistance to recessions, recurring revenue percentage, customer and revenue . Couple of reasons. Investec PDFI ('the fund') is a close-ended Luxembourg-based special limited partnership focused on providing senior secured . "There is a bias toward first-lien assets and a . It may invest in a broad range of alternative lending securities—including but not limited to consumer loans, small business loans and specialty finance loans—that generate interest or other income streams that AIP believes offer access to credit risk premium. But we cannot discuss current direct lending in . 2 Includes/denotes shared resources across private credit. what are the benefits of direct lending? Structuring a direct lending fund for U.S. taxable investors is relatively straightforward. Loan Participation. by CVI are invested in direct lending strategies that deliver superior risk-adjusted returns on predominantly senior structures. Middle market businesses are far more likely to secure a sizable loan from a direct lender than from a traditional financing institution. Capital. The Fund's Net Asset Value (NAV) divided by the number of units outstanding determines the price of each unit of the Trust. Late last month, Ares also announced the final close of its fourth European direct lending fund, Ares Capital Europe IV, at a hard cap of €6.5bn, exceeding the fund's initial €4.5bn target . Structure: Varying degrees of customisation available: senior or subordinated, pay-in-kind (rolled-up interest), bridge financing, debt+equity packages, equity features (e.g. Some firms like people with buy-side experience, but almost all of the mega fund direct lending roles after c.2 years will be available for LevFin BB analysts without any disadvantage vs. buy-side analysts (they may even prefer LevFin candidates due to the wider range of experience and BB training they'll have received). Broadly defined, a private credit fund targets the ownership of higher yielding corpo-rate, physical (excluding real estate), or financial assets held within a private "lock-up" fund partnership structure. . These funds raise money from investors before lending that money to a wide range of companies. Two structures are common: Purchased Participation and Companion Loan. Audax Private Debt invests in established middle market companies through first lien, stretch senior, unitranche, second lien, subordinated debt, and equity co-investment solutions. Special situation funds accounted for 16.5% of the AUM, at US$131.5 billion. Direct lending deals differ from traditional bank deals in the following key ways: There is limited or no syndication. First lien. 3 . . RJF. Direct lending partnerships are a neat way for state-owned pools of capital to gain access to new asset classes. Over the long-term, direct lending has consistently outperformed other income-oriented . 22 April 2019. Full profiles for all private debt service providers across fund and transaction services, including client lists, history, coverage, and assets under advisement. capital commitments of the fund's investors, are most commonly structured using a borrowing base structure similar to other types of asset-backed loans. Most obvious is that in direct lending you're lending investor money in co-mingled funds or separately managed accounts which carry a traditional PE-type fee structure (i.e. Additionally, an allocation to direct lending enables investors to gain exposure to private-equity-sponsored deals A mezzanine issuance is issued at an original issue discount (OID) of 5%, with a fixed cash coupon of 10%, a PIK coupon of 5%, and equity warrants to purchase 3% of the company's equity upon exit at $0.03 per share. The North American market, however, bucked the global trend, with private . SBIC Funds Separate Managed Accounts Direct Lending Private Credit Funds Opportunistic Private Credit Funds: Public BDC Retail Funds: . The fund was more than double the size of its predecessor fund, Crescent Direct Lending Fund II, which closed in November 2018 with $1.6 billion in equity commitments. The NAV of a Fund is the market value of the . There is no one-size-fits-all solution to the demands of different investors, and to that end, a recent webinar hosted by Strafford CLE . We are a global alternative investment manager that has generated cycle-tested performance for investors since our inception in 1997. Eligible Jurisdiction and lender loan partnership with focus on medium- to long-term financing. Volumes are expected to remain robust in 2022 as Middle Market CLOs appeal to both managers and investors both as an area of diversification and as a structure that has shown resilience through the pandemic. Second lien. European direct lending funds had raised $26.6bn by the end of Q2 last year, easily surpassing the $20bn raised in the same period of . Fund Manager's Location. parts of the capital structure. WhiteHorse Capital is the direct lending arm of H.I.G. Email [email protected]. The awards for closed end funds were based on IRR data from Preqin. Additionally, an allocation to direct lending enables investors to gain exposure to private-equity-sponsored deals Credit exposure can be either corporate (repayment comes from cash flows generated by an operating company) or asset (repayment comes from Two structures are common: Private Fund and Direct. The fund, which has a target of €300 million, is the first ever, direct lending fund focused on institutional investors that targets investments in Central Europe. United States. Capital structure refers to the way a corporation is financed based on the proportion of debt, and type of debt and equity, on its balance sheet. The growth of direct lending has enabled mid-sized businesses and lenders to prosper from favorable terms, greater term flexibility, high yields and negotiable risk. Partnering with middle market leaders to fuel growth and build value. such as hedge fund managers launching more private-equity-type structures and private equity managers exploring the more liquid hedge fund . In 2019, CVI was the first Polish, as well as . Our knowledge of fund terms and structures is cutting-edge. Their diligence, speed, and certainty of delivery were all critical to completing the transaction.". are similar to those associated with direct investments in real estate: lack of liquidity, limited diversification, ad sensitivity to economic factors such as interest rate . Private Equity Law Report. but the structure of three deals last year are particularly interesting . After a volatile and challenging year, US direct lenders moved into 2021 with reputations enhanced and teams strongly positioned to fund new deals. There are three ways a direct lender may offer a loan to a borrower: 1. . The firm held a close on more than $1.2 billion on 12 April for its AB Private Credit Investors Middle Market Direct Lending Fund, according to documents filed with the Securities and Exchange . These unlisted private debt funds differ according to strategy, for example direct lending or fund of funds . This determines how, and in what order, capital is repaid in the event of bankruptcy. Many factors will dictate the best borrowing structure for a fund, the most important of which are the make-up of the fund's investor pool and where the fund is in its life cycle (raising The current lending environment for mortgage and other asset-backed loans is ripe for direct lending funds. In this first suggested structure, the non-U.S. and U.S. tax-exempt entities would invest in an offshore fund (typically organized in Cayman or another suitable offshore location). Direct lending partnerships are a neat way for state-owned pools of capital to gain access to new asset classes. Full profiles for all private debt service providers across fund and transaction services, including client lists, history, coverage, and assets under advisement. While a private debt fund is mainly used as an alternative to traditional bank lending, it also can provide investors with . Direct Lending. First lien structures (either senior secured or plain-vanilla unitranche) are the most popular with direct lending, representing 85% of transactions in 2017. Mitch's role includes advising on legal and regulatory aspects of fixed income investing transactions as well as legal support for the operations of Principal Global Investors, LLC. . Crestline Specialty Lending Fund I has received The Hedge Fund Journal's Alternative and Private Credit 2021 award for Best 2014 Vintage in the Direct Lending - Senior, US category. investors. Investors continue to focus on income-generating investment strategies, including U.S. direct lending to small and middle market companies. Flexibility is one aspect of direct lending strategies that should allow nonbank lenders to keep hold of their market share gains in the future.8 Loan Structures There are various loan types targeted by direct lending strategies, including the following: First lien loans (or senior secured loans) Unitranche loans (or one-stop loans) DIRECT SUPPORT. The private debt market has grown tenfold in the past decade with assets under management of funds primarily involved in direct lending surging to $412 billion at end-2020—spurred in part by investors' search for higher yield. Lending to a direct lending fund may have many similarities with a CLO structure . Second is the type of transactions. 1 This leveraged fund had a net IRR of 12.23% and MOIC of 1.48. . A credit-focused investment company in its sponsorship of a US$2 billion direct lending fund, both levered and unlevered. By David Brooke and Andrew Hedlund. 9.8. A leading capital source for middle market companies, Audax Private Debt provides financing to businesses with a history of cash flow stability, consistent revenue growth, and strong management teams. In a first lien agreement, the borrower agrees to pay off the loan before paying off all other debt classes. We provide debt financing to performing middle market companies in the U.S. and Canada. The mezzanine issuance face value is $100 million, and the company's equity will be worth $400 million in 5 years. but the structure of three deals last year are particularly interesting . We review the recent trends within private credit, provide an overview of various strategies, describe returns since 2004 and . As an alternative to syndicated loans to fund small- to mid-market deals, direct lending activity by asset managers has similarly skyrocketed. New York, NY 10019. In 2020, 82 direct lending funds closed globally, raising a total of $50 billion, down from 95 direct lending funds that closed in 2019, raising $74 billion, the record year for aggregate capital raised. Phone 515-247-5285. 40 West 57th Street. US borrowers continue to seek out nontraditional sources for their debt funding requirements. 2. The team evaluates all parts of the CLO capital structure, from investment grade notes to equity, across many different managers in the U.S. and Europe to seek the best risk adjusted returns for investors. HPS's direct lending platform has invested more than $55 billion in over 375 portfolio companies since the Strategy's inception in 2010, making it one of the largest and longest tenured direct . A Private Equity that is structured as a Unit Trust is a type of collective investment governed by a trust deed. Phone 515-247-5285. Since 2000, we've invested over $28 billion across our debt vehicles. A private debt fund specializes in the kind of lending activity that's handled by a variety of entities aside from banks. Mitch is Counsel with the Principal Financial Group legal department. Middle market businesses are far more likely to secure a sizable loan from a direct lender than from a traditional financing institution. . This webinar disc. Direct lending is an asset class that has historically generated attractive, risk-adjusted returns through a variety of business cycles. We are launching Fortress Lending Fund II ("FLFII"or the "Fund")to pursue this opportunity with a combination of new reconstruction loans, secondary purchases of existing bank loans and other opportunistic lending Targeting 12%-15% Gross IRR1 -Attractive risk/reward with heavy focus on capital preservation and current yield - quarterly Ares Management Corporation. Our firm has a broad investment mandate to provide senior, subordinated, and unitranche debt for refinancings, growth capital, acquisitions, buyouts, and balance sheet recapitalizations. Debt financing needs could grow in the coming years because middle-market companies face a significant maturity wall and private equity sponsors may drive deal activity with the . The growth of direct lending has enabled mid-sized businesses and lenders to prosper from favorable terms, greater term flexibility, high yields and negotiable risk. "Prudential Private Capital moved quickly to evaluate and propose a capital structure that best supported our strategic expansion project. We work collaboratively to build financing solutions shaped to meet the needs of our private equity clients, capital partners, and investors. +1 (212) 000-0000. The offshore fund would form a U.S. corporation ("U.S. Blocker") which would engage in the direct lending activity in the U.S., or would acquire a limited warrants) and others . Investing across the full capital structure of the U.S. middle market. These funds allow high . If syndication does occur in a direct lending deal, it is often limited to a targeted strategy of pre-identified lenders. A second lien agreement requires paying off a loan after a senior lien or a claim on a property. The position will be responsible for maintaining the books and . The Structure of Private Credit Private credit includes a wide array of fund structures and investment strategies, so defining A major insurer's registered investment advisor on its open-end U.S. syndicated . We provide privately originated, senior secured, floating rate loans to U.S. and European middle market companies. -. A direct lending fund is essentially a professionally managed fund in which a number of investors combine their capital. Despite growing interest in direct lending, the asset class continues to provide opportunities to generate alpha. Of the capital markets professionals surveyed, 87% . Fund IV closed with $2.4 billion of equity commitments and, in total, Cerberus Business Finance … Read more One contributor to low duration is the amortizing structure typical of alternative . Direct lending may generate attractive returns with less downside risk and mark-to-market volatility than more liquid credit strategies like broadly syndicated loans. Today, debt is an important component in corporate capital structures. have raised over $2 billion in a first close for the AG Direct Lending Fund III. Direct lending is the provision of credit directly to small and middle market companies (SMEs) for growth or acquisitions. Our team manages three funds, Five Arrows Credit Solutions (FACS), a junior debt fund which raised €415 million of commitments in 2014, and Five Arrows Direct Lending (FADL), which raised €655 million in 2018, and Five Arrows Debt Partners (FADP III), which raised €1.4 billion in 2021. what are the benefits of direct lending? Private Equity Fund VI ($3.5B) Direct Lending Solutions Fund ($2.6B) Private Equity Fund IV Continuation Fund ($1.7B) Mezzanine Fund V ($1.85B) . Direct contact details for their key decision-makers in private debt. Despite growing interest in direct lending, the asset class continues to provide opportunities to generate alpha. Individual loan guarantee by an Eligible Jurisdiction or entity of an Eligible Alternative lenders also originate Euro Private Placements (Euro PP), through loans or bond structures (mostly senior unsecured), which are popular with French insurers and pension funds. Venture Capital. Direct lending portfolios, if structured properly, have the potential to generate returns similar to or higher than those of other credit investments such as BSLs, but with less risk. PDI Staff Writer. Includes placement agents, law firms, fund administrators, auditors, financial advisors, and debt providers. closed on $118.7 billion of new fund commitments, the most of any year on record.2 In fact, global fundraising in private credit has grown more than 2.5 times the annual growth rate of private equity buyout funds.3 2. . The first challenge for most new entrants is raising money. Audax Private Equity. Seeking a fund accountant to support the Direct Lending business. Fund Accounting has a significant presence within the organization. Twin Brook drew $2.3 billion in all of 2017 and $850 million in 2016. To provide a first look at absolute and relative performance, we utilize the Burgiss database of 476 private credit funds with nearly $480 billion in committed capital, including a subset of 155 direct lending funds. Because they are private, their capital is not listed on a public exchange. in what ways do direct lendinG deals diFFer From traditional BanK deals? According to data collected by Preqin and analyzed by McKinsey, global private debt fundraising (where direct lending represents the largest amount of capital) fell by 6.7 percent to US$124.4 billion in 2020, as COVID-19 saw investors put commitments to new funds on hold. Of various strategies, describe returns since 2004 and debt funding requirements amounts. Supported our strategic expansion project % of the capital markets professionals surveyed 87. 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