Cheyne hits €1bn hard-cap for second Strategic Value Credit fund

The fund will take a stronger approach on ESG than its predecessor, including pricing incentives, to help businesses recover sustainably.

Cheyne Strategic Value Credit has reached its hard-cap of €1 billion for its second fund.

The Cheyne European Strategic Value Credit Fund II reported strong support from existing and new investors enabling it to hold a final close just six months after its first close.

Cheyne SVC was formed in 2017 as an investment division within Cheyne Capital and employs a value-oriented, opportunistic approach to investing in corporate credit. Its first vehicle also closed at its hard-cap of €1 billion in June 2019.

The new fund will follow the same strategy as its predecessor, providing capital solutions for mid-market corporates facing liquidity and other complex financial challenges. It will work with management teams and shareholders to affect a turnaround of their business.

The fund has already made seven investments across five different countries. Portfolio companies so far include those operating in business process outsourcing, ground and cargo handling services, security solutions and food products.

It will also see an increase in Cheyne’s push for higher ESG standards across private credit with the team adopting an enhanced ESG framework for new investments. It will seek to influence ESG strategy and outcomes at the borrower level and is incorporating ESG-linked covenants such as pricing incentives worth 50 basis points or more for meeting ESG targets.

Kerry Hugh-Jones, co-managing partner at Cheyne SVC, said: “We’re stepping up a gear on ESG with this fund. This time we’re taking a more logical and procedural approach because as a significant debt holder in a company we can help drive the corporate strategy around ESG.”

Cheyne SVC sees opportunities for the fund in sell-downs of underperforming and non-core assets by European banks and providing rescue or liquidity bridge finance to stressed but viable businesses. The fund’s size was deliberately constrained to focus on smaller transactions sizes typically below those of larger distressed and opportunistic credit funds.

The fund intends to make a total of between 20 and 25 investments and has a three-year deployment period from its first close.

Anthony Robertson, managing partner and CIO of Cheyne SVC, added: “There is a huge need for alternative sources of capital to support European mid-market businesses facing financial challenges, particularly those which have been negatively impacted by the pandemic. Our team has a recognised track record in providing flexible capital solutions to facilitate a normalisation and recovery in operating performance.”