Loan Note: Download our March issue; all annual awards winners revealed

Why Asia-Pacific LPs are warming to GPs in their own backyard. Plus, all our 2020 awards winners, the latest ESG-linked loans and two senior executives from Barings give their thoughts on the refinancing wave. Here's today's brief for our valued subscribers only.

They said it

“After discussions last evening with the board, Mr Machin tendered his resignation and it has been accepted.”

A statement from Canada Pension Plan Investment Board at the end of last week announcing the departure of Mark Machin as chief executive and his replacement by John Graham, the organisation’s former global head of credit investments. To find out more about the new boss, click here.

First look

Two steps forward in Asia-Pacific
In two respects, private debt could be on the verge of major advances in Asia-Pacific. For one thing, many of those pioneering Asian LPs that have decided to make significant commitments to the asset class over the past few years are concluding that, in the form of the global health crisis, it has passed its first big test. Unsurprisingly there are caveats, but the dominant view appears to be that private debt has not disappointed – which could pave the way for larger commitments in future.

Second, having made their initial forays by supporting well-established North American and European managers, LPs based in the region are now – encouraged by the relatively strong performance of Asian economies through the crisis – turning their attention to home markets. In their own backyard, they find younger managers with plenty still to prove but with what these GPs would claim is a strong opportunity set.

You can read more about these trends in our latest cover story, which is part of our March 2021 issue. This edition also includes a focus on niche strategies such as music royalties and inventory financing for food producers, as well as an examination of the asset class one year on from the initial outbreak of coronavirus in many countries around the world.

And the winners are…
Today we also reveal the winners in almost 50 categories in our 2020 annual awards. It was another year in which all previous records were broken in terms of votes cast and in which we saw a blend of established names and newcomers making their mark. Our Annual Review has all the details along with reflections on all the key themes that defined an extraordinary 12 months.

The latest in ESG loans 
In Loan Note, we have been charting the emergence of innovative ESG-linked loans. Today, we report a couple more examples. Investment manager GLP has closed its first sustainability-linked loan which, at $658 million, is the largest SLL in Asia-Pacific real estate (ex-Japan).

ING acted as lead sustainability structurer and coordinator for the deal, which was backed by 10 banks and structured as a three-year revolving credit facility under which GLP commits to improving its ESG performance. Any improvements result in interest rate reductions.

The second example is a capital structure refinancing at packaging firm Klockner Pentaplast by fund manager Strategic Value Partners. The €1.9 billion package includes an ESG-linked term loan ratchet marketed to US investors, integrating performance on key ESG issues with set targets for 2025.

Who gets to ride the refinancing wave?
We often hear there is a refinancing wave coming in private debt, but what does it mean and who does it affect? In a 10-minute podcast with Barings’ Eric Lloyd and Jonathan Bock, we find out.

As well as examining refinancing, the discussion also explores whether private debt has passed its first big test in the form of the global pandemic and whether there is a danger that some managers will be tempted into mission creep.

Essentials

Alvarez & Marsal launches portfolio advisory unit
Consultancy Alvarez & Marsal has launched a global portfolio advisory business with Amo Chahal joining as managing director from Deloitte to develop the practice. He will be joined by an initial team of five senior professionals including Nahuel Callieri and Ankur Patodi. The appointment follows a number of recent senior hires by A&M from Deloitte in the restructuring area including Christian Ebner, James Dervin, Michael Magnay and Floris Hovingh.

Sun sets on Solar, rises on SLR 
Solar Capital Partners, a US commercial finance platform operating across cashflow and specialty finance senior secured financing solutions for US mid-market companies, has changed its name to SLR Capital Partners.

The new name, which utilises a common brand across the firm’s affiliates and specialty finance investment teams, marks SLR’s “transition from its origins as a cashflow lender 15 years ago to a multi-strategy diversified finance platform”, according to a statement. Two business development companies managed by SLR have changed their names from Solar Capital to SLR Investment Corp and from Solar Senior Capital to SLR Senior Investment Corp.

LP watch

Institution: Santa Barbara County Employees’ Retirement System
Headquarters: Santa Barbara, US
AUM: $3.58 billion
Allocation to alternatives: 25.19%

Santa Barbara County Employees’ Retirement System has approved a $20 million commitment to First Eagle Direct Lending Fund V, as mentioned during the pension’s February 2021 retirement board meeting.

According to retirement board documents, the fund focuses on providing senior secured loans to sponsor-backed companies in mid- and lower-mid-markets in the US. It is expected to hold its first close in March 2021.

The pension’s recent private debt commitments have been to senior debt funds targeting investments in North America. SBCERS currently allocates 25.19 percent of its full investment portfolio to alternatives.

Institution: Minnesota State Board of Investment
Headquarters: St Paul, US
AUM: $82.14 billion
Allocation to alternatives: 15.8%

Minnesota State Board of Investment has approved a $200 million commitment to Brookfield Real Estate Finance Fund VI, as mentioned at its February 2021 investment board meeting.

Minnesota SBI also approved Albourne Partners as its private market consultant.

Minnesota SBI allocates 1 percent of its full investment portfolio to private debt. Its recent commitments to private debt have been to distressed debt and mezzanine debt vehicles primarily focused on the corporate sector.


Today’s letter was prepared by Andy Thomson with John Bakie and Robin Blumenthal.

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