Exclusive: TPG establishes European direct lending platform

The credit group of the US alternative investment firm has launched TPG Specialty Lending Europe and is bringing 25 investment staff on board to drive the initiative by the end of the year.  

TPG has launched its TPG Specialty Lending Europe (TSLE) platform, which will lend directly to European companies, PDI has learnt. The firm plans to grow the investment team to 25 people by year-end.

TPG currently has about 15 people on the European credit team and plans to build the group through a combination of new hires and internal transfers, a source close to TPG explained.

TPG declined to comment on fundraising targets.

The firm has already been active in direct lending in Europe, using money from some of its other funds and platforms. The first European direct lending deal was done in 2011. The TSLE platform is a more formal effort to push into the European direct lending market. The firm will source deals by working directly with companies as well as by going through private equity sponsors. It will invest across the spectrum of industries and focus on companies that stand out in their respective value chains, a source close to the situation told PDI.

Michael Griffin, a partner at TPG Specialty Lending, moved to Europe two years ago to evaluate the investment opportunity and the platform is now geared up to do more deals. Griffin joined the firm in 2011 from New York-based Golub Capital. The firm also hired Phillip Fretwell, formerly a managing director for Ares Management in London, as a partner in TPG Specialty Lending in November.

TPG’s credit business, which is called TPG Special Situations, includes special situations funds, distressed debt funds and the US-based TPG Specialty Lending, a BDC. While TPG’s debt funds have always been global and were not constrained on where they could lend, the existing funds are mainly exposed to the US, where most of TPG’s investment team is based.

The firm started its credit business in 2008 by hiring Alan Waxman and Joshua Easterly to lead it. Waxman was previously the co-head of Americas special situations at Goldman Sachs, while Easterly was a managing director in that group. Michael Fishman also came on board around that time from Wells Fargo, where he was a vice president and national director of loan originations for Wells Fargo Capital Finance. TPG had also hired several other investment experts from those banks at the time. As such, most of the firm’s debt investment personnel is based in New York or San Francisco, Goldman’s and Wells Fargo’s headquarters, respectively.

The latest TPG Opportunities Partners (TOP) III fund, which raised $3.2 billion last year, had more exposure to Europe than its predecessors, sources told PDI, though most of the activity was made up of NPL portfolio purchases from bank lenders. The firm is now looking to do more direct deals with mid-market companies in Europe though the Specialty Lending platform, PDI understands.  

Several large public pension funds invested in the third TOP fund. They include the California State Teachers Retirement System (CalSTRS), the New Mexico State Investment Council, the Oregon Public Employees Retirement System and the Washington State Investment Board, among others, according to PDI Research & Analytics.

The Fort Worth, Texas-headquartered firm, which handles private equity, real estate, hedge fund and other strategies, has $67 billion in assets under management and six offices in the US, as well as a presence in Toronto and Sao Paolo. It also has outposts in London, Luxembourg and Moscow as well as seven offices across Asia. It established its European private equity business in 1995.

Many US domiciled alternative investment firms have worked to establish European debt businesses in the past several years by hiring local experts, acquiring firms or some combination of the above. They include GSO Capital Partners, Oak Hill Advisors, KKR, Ares Management, Sankaty Advisors and Lone Star Funds, among others. GSO is close to closing its first European focused fund, the GSO European Senior Debt Fund, at €2.5 billion, while KKR is in the process of raising money for its first European direct lending fund.