They said it
“We have already seen an increase in pitch activity in Europe looking to Q1 deals, and that is likely to continue rising through Q2 and into H2”
Taken from Lincoln International’s European M&A Outlook for 2023.
Our 2022 best in class revealed
It was a year that started strongly, as the M&A boom of 2021 continued to filter through to the private debt market in the early months of 2022. But things became more challenging as the year progressed and macroeconomics combined with geopolitics to generate stronger headwinds than the asset class had witnessed since the global financial crisis.
In this changing environment, private debt needed to be resilient and fleet of foot. As we sifted through nominations for our annual awards towards the end of last year, we realised that many firms had managed to flourish by displaying just such qualities. Following the customary drawing up of shortlists and voting by our readers, we are now in a position to reveal the winners in more than 50 different categories – see here. Many congratulations to those recognised, and to everyone who participated.
Nuveen completes Arcmont acquisition
Nuveen, the investment manager of TIAA, has completed its acquisition of a controlling interest in Arcmont Asset Management, the London-based private debt fund manager. The deal was initially announced in October last year.
The acquisition of Arcmont expands Nuveen’s private capital presence in Europe and complements its North American private debt and private equity investment specialist Churchill Asset Management. The combination of Arcmont and Churchill creates Nuveen Private Capital, now one of the largest global private debt managers with more than $66.5 billion in combined committed capital, bringing Nuveen’s firm-wide alternative credit assets under management to $178 billion.
Arcmont has raised more than $26 billion of capital and committed over $24 billion to more than 270 transactions across Europe since inception. The firm has approximately 100 employees spread across six offices in Europe.
“Over the last decade, Arcmont has become one of the leading private debt firms in Europe, providing financing solutions across a wide range of companies, industries and markets, and is one of the few lenders with the ability to execute larger transactions,” said William Huffman, head of Nuveen equity and fixed income and chairman of Nuveen Private Capital. “Arcmont and Churchill will work together in partnership, giving both firms geographic scale and the ability to offer a broader range of products and financing options to corporate borrowers.”
EMEA’s retail/restaurant sector under pressure
Rising interest rates are making operating conditions increasingly challenging for retailers and restaurants in the Europe, Middle East and Africa region, according to a new report from S&P Global Ratings (login required).
The high cost of living is squeezing disposable income and combining with high leverage in the sector to weaken credit quality. While indebted companies in general are under pressure, this is especially so for those with unhedged floating-rate debt.
Of those retail and restaurant companies exposed to higher interest rates, S&P found that – in the event of further rate rises – 16 percent of those rated BB- or lower faced significant risk of a negative rating action, 23 percent faced a moderate risk and 61 percent faced low risk.
Refinancing risk is muted for the time being, as most of the debt under scrutiny by S&P matures after 2025, but “a sharp deterioration in profitability and demand would leave highly leveraged issuers exposed”.
Ares buying BlueCove equity, option for control
Ares Management has agreed to buy a minority equity stake in BlueCove with an option to acquire control of the business in the coming years.
A London-based employee-owned asset management firm, BlueCove was founded in 2018 by Alex Khein and Hugh Willis with the specific purpose of developing what they describe as scientific investment processes. The underlying idea is that, although sophisticated model-driven strategies have been common in the equity and derivatives markets for a long time, as typified for example by Renaissance Technologies and DE Shaw, their application to the fixed-income world has lagged, and the lag creates opportunity.
The terms of the Ares/BlueCove transaction have not been disclosed. But the statement from Ares does specify that the transaction will close in the second or third quarter of 2023 subject to customary closing conditions including regulatory approvals.
Upon closing, Boris Okuliar, partner and co-head of liquid credit at Ares, will join BlueCove’s board of directors.
Willis, executive chairman and co-founder at BlueCove, added: “We have great respect for Ares as a business and our two firms share a similar entrepreneurial culture. We believe that this transaction has the potential to significantly accelerate our mission of bringing scientific fixed income investing to a global client base in the years to come.”
Reed Smith’s new partner, a distressed debt vet
Reed Smith, a global law firm nearly 150-years-old, has taken on Linton Bloomberg as a new hire for its restructuring and insolvency team in the London office.
Bloomberg previously worked at Weil Gotshal for 12 years and at Jones Day for four years before that. According to the Reed Smith statement, he has advised US and European investment banks, UK clearing banks, hedge funds and private equity firms on a wide range of insolvency and bankruptcy-related legal issues.
Bloomberg specialises in out-of-court and cross-border restructuring, pensions restructuring and insolvency litigation.
In 2017, at Weil, for example, Bloomberg played a part in winding down MFGUK, the UK subsidiary of MF Global. That was described at the time as “the largest European collapse of a credit institution since Lehman” and when the CVA was at last implemented the estate had been in administration for more than six years.
The global co-chair of the law firm’s financial industry group said that Bloomberg “has developed a reputation for his business acumen and impressive track record for guiding clients through complex restructuring arrangements and re-financing deals”.
Impact lender rebrands
Aptimus Capital Partners, a Spain and UK-based investment firm, is the new identity of predecessor firm Be-Spoke Capital.
Having provided financing solutions to the Spanish mid-market since 2017, Aptimus says it is currently exploring opportunities in Europe to deliver niche strategies incorporating impact and sustainable investment principles.
Aptimus focuses on markets and areas where there is a lack of alternative capital solutions and has developed a proprietary impact investing framework. The approach focuses on businesses that are aligned to core sustainable development goals and supported by strong investment fundamentals, secular trends and structural characteristics.
“In recent years, we have broadened our platform to encompass a broad spectrum of private credit, real asset and impact investing capabilities across Iberia and the UK,” said Iván Cristóbal, co-founder and executive chairman. “In particular, Spain has a rich environment for impact opportunities, and our flexible capital solutions are well positioned to facilitate growth.”
Institution: State Universities Retirement System of Illinois
Headquarters: Champaign, US
AUM: $22.4 billion
Allocation to alternatives: 22.68%
State Universities Retirement System of Illinois has published its private credit pacing plan for 2023, according to materials from the pension fund’s February board meeting.
Key highlights include:
- The public pension aims to commit $500 million to private debt funds in FY 2023.
- SURS wishes to diversify its fund commitments to European strategies, as its private credit allocations are North America-oriented. Moreover, the pension fund seeks to diversify across managers and vintage year.
- The pension aims to expand its focus onto yield-oriented and asset-based credit strategies.
- SURS outlines its emphasis on re-investing as opposed to distributing capital, to improve its multiple on invested capital.
- As a common goal across all asset classes, SURS aims to target 20 percent of its annual commitments to emerging and minority, women and disabled-owned funds.
SURS of Illinois committed to four private credit vehicles in 2022. These included $50 million to Fortress Lending Fund III, $25 million to NB Private Debt Fund IV, $150 million to Ares Pathfinder Core Fund and $100 million to Silver Point Specialty Credit Fund III.
The pension fund’s private credit portfolio is managed by Meketa, a Boston-based investment consultancy. Since FY 2020, Meketa has executed credit commitments amounting to nearly $1.2 billion on behalf of SURS.
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Today’s letter was prepared by Andy Thomson with John Bakie, Christopher Faille and Robin Blumenthal