Canadian debt fund concludes maiden fundraising

For small to mid-cap companies in North America, sourcing debt has grown ever more challenging in the post-Lehman era. The latest firm to spring up to address that issue, Greypoint Capital, has this week held a final close for its maiden fundraising.

The fund, which had a target of $200 million, closed this week on an undisclosed amount according to a statement. Founder Holly Allen launched the process last March, having conducted pre-marketing with a select group of investors with whom she had worked in the past.

Greypoint’s LP base comprises family offices, high net worth individuals, small pension funds and foundations, a source close to the process said.

The fund will provide senior debt facilities, stretch senior debt, second lien, mezzanine, acquisition facilities and other debt products, according to the statement. It will provide that financing to Canadian companies with enterprise values in the $100 million to $1.5 billion range with strong real estate or fixed asset holdings, or commercial real estate businesses.

Allen, the firm’s managing partner and founder, was formerly a partner in the consulting and deals unit of PricewaterhouseCoopers in Toronto. She ran the firm’s national debt advisory group, having earlier led the firm’s national real estate advisory team. Between 2003 and 2009 she led the $1 billion Brookfield Bridge Lending Fund, a vehicle used to provide debt financing to mid-market companies in Canada and the US.

Speaking to Private Debt Investor, Allen spoke about the opportunity for new providers of debt.

“There are very few competitors in the “alternative” debt space for debt placements over $25 million in the Canadian market. Canadian traditional lenders have remained strong and have focused on building assets. If companies need to move out of the bank market into the alternative markets, the sources of the lenders willing to lend against fixed asset, equipment and real estate, diminish quickly. Canada has always had a shallow pool of “fixed” asset-focused capital and since 2009 the pool has become smaller.

“Many US Lenders have left the market and the Term Loan B placement market has also dried up. That's where Greypoint Capital comes in. Traditional mezzanine is still too expensive and companies do not like giving away equity. Mezzanine tranches that look more like second lien are however getting placed in the 9 to 14 percent range.”