AIG backs Varagon with $1.5bn

Global insurer AIG and Oak Hill Capital Management have backed the formation of Varagon Capital Partners, new mid-market lender, with AIG providing an initial $1.5 billion investment.

The global insurer American International Group (AIG) has provided an initial $1.5 billion commitment to newly formed Varagon Capital Partners, set up to specialise in mid-market lending, according to a statement on Wednesday.

Varagon is also backed by certain partners and affiliates of Oak Hill Capital Management and will be led by a board of directors consisting of industry veterans.

The group’s chief executive is Walter Owens (pictured), an experienced mid-market executive who has previously held positions at GE Capital, CIT Group and TD Bank. Denis Nayden, a managing partner at Oak Hill and former chairman and chief executive of GE Capital, will serve as chairman.

Varagon will offer AIG the opportunity to increase its exposure to the mid-market through the provision of financing to companies with $10 million to $75 million of EBITDA via first lien, second lien, mezzanine and unitranche loans.

Owens said in the statement: “Varagon’s versatile product suite creates a ‘one-stop’ financing solution for borrowers. Varagon’s investors have a broad appetite for attractive risk-adjusted returns, allowing Varagon to offer competitive financing solutions up and down the capital structure.”

The firm will target leveraged finance opportunities of up to $350 million and has a typical hold size of $20 million to $100 million. “Investors, with a desire to hold quality middle market loans to maturity, are a natural source of capital for Varagon’s borrowers,” the statement read.

Brian Schreiber, deputy chief investment officer of AIG and a member of Varagon’s board of directors, said: “We are excited about the opportunity to partner with Varagon. As a long-term investor, AIG is drawn to the strong fundamentals of the middle market opportunity. Varagon offers sophisticated investors clear, attractive, and flexible exposure to high quality, directly-originated assets with best-in-class risk management.”