Loan Note: Changemakers and other Decade highlights; CMBS delinquencies on the up

Changemakers, fundraising themes, award winners and the PDI 100 GP ranking – we look back on 10 years of private debt. Plus: Trepp charts a rise in CMBS delinquency rates; and British Business Bank supports a UK lender to small businesses. Here's today's brief for our valued subscribers only. 

They said it

“Despite stable leverage (debt/EBITDA) over the past five quarters, interest coverage ratios have deteriorated, on average, and defaults  have moved off of their rock-bottom levels”

Taken from the latest BlackRock Global Credit Weekly

First look

Dive into 10 years of insight
In case you’ve not yet had the chance to catch up, we thought we’d remind you of some of the highlights from this month’s Decade issue.

First mention goes to Changemakers (here and here), our selection of leading industry figures who, in their various ways, have helped to create the asset class we have today.

We also draw your attention to our Decade award winners. When we tallied up the victories from 10 years of our annual awards in a wide range of different categories, which firms came out on top? You can find out here.

Then there’s our analysis of private debt fundraising over the last decade, tracking all the relevant data points and trends as the asset class established itself in the investment mainstream.

We also revisit our PDI 100 of leading GP fundraisers to see how capital gathering has changed; and take a look at the 10 deals that helped define the era.

CMBS delinquency rates rise sharply in May: Trepp

Trepp, a data provider for commercial mortgage-based securities, reported that its Trepp Delinquency Rate rose 53 basis points in May 2023, bringing the rate, for US delinquencies in CMBS, to 3.62 percent. This is the highest rate since March 2022 on the back of the sharpest monthly increase since June 2020.

Year over year, the overall US CMBS delinquency rate is up 48 basis points.

The report specifies that the May increase was driven by a spike in delinquencies on office mortgages. That delinquency rate rose from 2.77 percent in April to 4.02 percent in May, or 125 basis points. Year over year, the increase is 239 basis points.

Since many businesses are looking to reduce their office footprint, they are letting leases expire or renewing while scaling down. This has meant record or near-record high levels of sublease activity. Indeed, at the end of May, internet giant Google said it was putting up 1.4 million square feet in southern California for sublease.

The delinquency rate for some classes of CMBS has declined. Specifically, in March, the rate for multifamily dwellings was 1.91 percent. In April it was 1.82. It has now dropped further to 1.46.

The rate on industrial properties ticked down over the last month, from 0.40 percent to 0.39 percent.

The highest delinquency rate is lodging (4.25 percent). But that percentage represents a considerable drop from a year ago. Year-on-year, since the pandemic-born reluctance to travel was still powerful in 2022 and has faded considerably since, the delinquency rate has fallen 158 basis points.

Next stops: Japan and Korea
A heads up that our Private Debt Investor events calendar, which has already encompassed Singapore and London this year, takes us to Seoul and Tokyo between 26-29 June for Japan Korea Week.

The fifth iteration of our annual visit to two of Asia’s most important investor hubs has already attracted more than 300 Japanese and Korean institutions and global private debt leaders.

Among the keynote speakers at the event are Tadasu Matsuo, managing director and head of global alternative investments at Japan Science and Technology Agency; Andrew Lockhart, managing partner at Metrics Credit Partners; and Todd Leland, president of Goldman Sachs International.

If you haven’t already, make sure to book your place now!


UK’s BBB and Cynergy agree ENABLE deal
The British Business Bank has agreed an initial £75 million (€88 million; $95 million) ENABLE guarantee with the UK’s Cynergy Bank.

The ENABLE guarantee scheme was launched in 2019 and involves the UK government taking on a portion of the lender’s risk on a portfolio of loans to smaller businesses, in return for a fee.

The Cynergy Bank guarantee will cover a portfolio of term loans secured within the commercial real estate sector (such as hotels and care homes) and has the potential to be increased to £150 million, resulting in up to £70 million of additional lending capacity to small businesses.

Cynergy Bank has been providing finance to business owners, property entrepreneurs and family businesses in the UK since its launch in 2018.

The bank is also an existing partner of the British Business Bank under both the Coronavirus Business Interruption Loan Scheme and Recovery Loan Scheme programmes, which were launched to help businesses that suffered revenue decline as a result of the covid-19 pandemic.

Pollen Street backs property lender
Property finance specialist MSP Capital has agreed a £100 million (€117 million; $126 million) development funding facility with private equity firm Pollen Street Capital.

The Poole, England-based fixed-rate lender says the senior-secured facility with the London-based asset manager is designed to strengthen its ability to reach projected growth targets in the development finance market.

The deal is the latest of several strategic moves MSP Capital has made in the past year to ready itself for further growth including the expansion of several directors’ roles and the introduction of new associate directors.

Becky Harris, director of strategic finance and operations at MSP Capital, said: “This facility is all about providing more flexibility and diversity of funding for us and our clients. It comes at a time when we are seeing more and more developers approach us for development finance.”

New Italy office for Golding
Golding Capital Partners, the Munich-based alternative investments firm, has opened an office in Milan. The office will be led by Laura Tardino, who has joined Golding as managing director and will aim to expand the firm’s sales activities in Southern Europe. Golding offers investment solutions in private credit, infrastructure, buyouts and impact investing to investors across Europe.

“Italy and Southern Europe generally are important markets for us to build on existing relationships and develop new ones. The new office and our own local sales force in Italy will enable us to be even closer to the network of investors to whom we have built relationships over the past years,” said Jeremy Golding, founder and managing partner.

Tardino has 25 years’ experience of capital investing. She was head of institutional business development in Italy from 2015 onwards at abrdn, where she was responsible for sales to pension funds, insurance companies, banks and foundations.

Prior to that, she worked in various positions at BNP Paribas Asset Management for 15 years, including as market strategist and head of the institutional desk. She also has several years’ experience of managing alternative investment funds with globally diversified allocations.

LP watch

Institution: San Diego City Employees’ Retirement System
Headquarters: San Diego, US
AUM: $10.5 billion
New allocation to private debt: 5%

The San Diego City Employees’ Retirement System voted to add a private debt allocation to its investment portfolio, according to a contact at the public pension fund.

The US public pension had previously not allocated to private debt at all, but now will allocate 5 percent of its investment portfolio towards private debt.

There were multiple factors cited in the consideration of the new allocation. These included the growth of the asset class as a whole and the fact it has become a centrepiece in most US pension investment portfolios. Moreover, the current high yields compared with public markets, alongside less volatility, were pertinent in the decision.

Platinum subscribers may click here for the investor’s full profile, including key contacts, allocation strategy and fund investments.

Today’s letter was prepared by Andy Thomson with John Bakie, Christopher Faille and Robin Blumenthal contributing