The debt arm of UK-headquartered alternatives manager CVC Group, which has made a number of hires in recent months, is to launch a listed debt fund as part of its ongoing plan to build scale and broaden access to the asset class.
The vehicle, CVC Credit Partners European Opportunities Limited, will be launched later this year via an initial public offering on the London Stock Exchange, CVCCP confirmed in a statement. The firm hopes to raise at least €300 million from the IPO. Goldman Sachs is acting as sponsor, global co-ordinator and bookrunner in relation to the listing, with Dexion Capital acting as lead placing agent.
Structurally, the vehicle will operate as a closed-ended investment company limited by shares (in both Euro and Sterling denominations) and registered in Jersey. It will invest all its capital in an existing CVCCP fund, essentially supplementing its firepower.
In opting for a listed vehicle for its latest fund, CVCCP has widened the pool of potential investors. Alongside the obvious liquidity provided by virtue of a main market listing on the LSE, the fund has a second liquidity mechanism whereby the manager will make quarterly tender offers to investors based on NAV performance.
Its board comprises three non-executive directors including David Wood, founding partner of CVC Cordatus Investment Management (the precursor to CVCCP), who retired from a frontline role at the firm last year. It is chaired by Richard Boléat, formerly a principal at Jersey-based financial services group Channel House.
At least 50 percent of the vehicle’s capital will be invested in senior secured obligations, the firm said. At least 70 percent of the fund’s assets will be domiciled in Western Europe. Exposure to a single borrower will be capped at 7.5 percent, with one exception permitted allowing the firm to double that figure. Exposure to CLOs will also be capped at 7.5 percent, while exposure to the firm’s sister buyout group CVC Capital Partners’ portfolio companies will be limited to 25 percent.
The firm also retains the leverage the investment vehicle by borrowing up to 100 percent of its net asset value.
“The placing gives investors access to the sub-investment grade European debt markets through an existing vehicle. [CVCCP] has a track record of investing in the debt of larger companies in the sub-investment grade markets … and believes that its stock picking approach focused on specific company and credit situations may outperform the broader European credit market and allow it to meet its dividend and return targets,” the firm said in the statement.
“[CVCCP] expects that the general market backdrop for the debt of such companies may continue to generate opportunities over the medium term driven by the positive supply/demand dynamics. [CVCCP] believes its flexible approach to sourcing opportunities in both the primary and secondary markets and its expertise of investing in the different credit instruments across the capital structure will provide a competitive advantage in a market where many market participants operate in single credit categories such as mezzanine,” it added.