KKR, which has touted the virtues of investing in larger businesses – often backed by a private equity firm – is broadening its focus in Europe to include non-sponsored SME lending.
The New York-based global asset manager behemoth entered into a €1 billion joint venture with NEOS Direct Lending, the two firms announced this week. KKR provided the majority of the capital, according to a source familiar with the situation. Schroders, a NEOS investor, also provided funding for the JV. In conjunction with the transaction, Schroders increased its stake in NEOS to 49 percent.
KKR declined to comment, while NEOS could not be reached at press time.
The JV will make loans ranging from €1 million to €10 million to businesses primarily in the Netherlands, though a portion of the portfolio – around 10-20 percent – will be invested in German companies. Many of the businesses will be family-owned.
Credit managers have watched their prospects in Germany rise in recent months, according to the most recent edition of GCA Altium’s Mid-Cap Monitor. Alternative lenders were involved in 48 percent of the transactions conducted in the first six months of the year. In addition, Germany has become a favourite of debt investment shops targeting the area for downside protection due to the relative strength of its economy, sources have told Private Debt Investor.
The KKR-NEOS JV comes after KKR entered into a similar partnership with Urban Exposure, a UK residential development financing company, with a £165 million ($209.7 million; €184.5 million) capital base. Urban Exposure provides bridge, senior and senior-stretch loans for residential development and lends on an array of property types including residential housing, mixed use, student housing and retirement homes. KKR also oversees its $847.6 million KKR Lending Partners Europe fund, a direct lending vehicle.