Credit manager LCM Partners has held a first close on its new LCM Credit Opportunities Fund.
The fund was launched in July this year with a cornerstone investor who committed €350 million and the option to increase by an additional €150 million. The investment is from one of the largest pension fund managers in Europe, Paul Burdell, chief executive of LCM, told Private Debt Investor.
LCM plans to hold a second close on the fund in January 2015 and a final close next summer, he said.
LCM Credit Opportunities Fund is the third fund from the firm and will invest in performing and non-performing loans, mainly consumer debt, which European banks are set to offload more of shortly, Burdell explained.
“Banks are going to be under more pressure to exit,” driven principally by regulation such as Basel III, he said. Together with a lack of the same oversight on private debt funds, “it’s going to drive the [private debt] market over the next three to four years,” he added.
Burdell doesn't believe that sourcing deals will be difficult for LCM, contrary to what some other managers in Europe appear to be experiencing, partly because of its loan servicing capabilities.
LCM-owned Link Financial, which purchases and services performing and non-performing loans, manages 2 million customers and €11 billion of receivables across its European platform. The company has eight offices in five countries including Spain, Italy, Germany and Ireland. Standard & Poor’s rates Link as “Strong” for special servicing and “above average” for primary servicing. Through its subsidiary Thesis Servicing, the group services 250,000 in UK student loans.
“Being highly regulated and highly rated, banks know that we can manage the loans of customers when they sell to us,” he said. This is something that certain banks will be very sensitive to, given recent difficulties such as customer complaints about payment protection and insurance mis-selling, he added.
LCM raised €420 million for similar credit opportunities funds in the past and has closed €1.3 billion in transactions over the last 15 years outside of its funds, Burdell said. The firm will seek to invest in customer-linked products such as credit cards loans, mortgages, leasing, auto-loans, small and medium-sized enterprise loans and small commercial mortgage loans.