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Loan Note: ELFA draws up sector-focused ESG guidelines; first US public CLO for BlueBay

The European Leveraged Finance Association sets out ESG guidelines for several sectors. Plus: CPP reveals its latest results and why you should be joining us in Singapore. Here's today's brief for our valued subscribers only.

They said it

“There is one factor that could help ease many of the inflationary pressures facing the global economy: winning the battle against covid… I believe that should be far more powerful in combating inflation than anything central banks can do”

Taken from a market commentary by Kristina Hooper, chief global market strategist at Invesco.

First look

ELFA toughens up ESG loan standards
The European Leveraged Finance Association has updated its ESG factsheets with tougher criteria for loans in certain sectors.

The factsheets contain sector-specific guidance for the most important areas of ESG disclosure for the autos, building materials and services sectors including ESG key performance indicator tables. ELFA said its engagement with the investor community revealed further KPI disclosure from borrowers is needed. Metrics include energy consumption, greenhouse gas emissions and board diversity.

In autos, disclosures include transitions to the phase-out of internal combustion engines, expected to begin in many jurisdictions in 2035, use of new technology, impact of sites on biodiversity and more.

For building materials, among the key KPIs lenders should be tracking are greenhouse gas emissions, exposure to hazardous chemicals, sustainable sourcing and recycling of materials.

Among services companies, ELFA is looking for greater disclosure of employee health and safety, labour standards, training and satisfaction.

In addition to the sector-specific factsheets, ELFA has also published updated versions of its existing factsheets that incorporate the latest feedback from the industry.

Sabrina Fox, chief executive of ELFA, said: “Through our workshop discussions, we found that whilst there has been positive progress by companies in ESG data disclosure, investors sought concrete KPIs and standardisation within ESG reporting, which we have aimed to address by introducing ESG KPI tables within the ESG Fact Sheets. Governance and transparency remain essential focus areas for investors.”

Time to sign up for APAC 
In Monday’s Loan Note, we alerted you to the latest stellar LPs appointed as speakers for our PDI Germany Forum. It would be neglectful for us not to mention, therefore, an equally compelling list of committed participants for our PDI APAC Forum, which is being held in Singapore (with a ‘virtual’ option) on 13 April 2022.

At the time of writing, there were around 25 confirmed speakers, representing some of the leading LP, GP and advisory organisations in the region. No space to mention them all here, but they include the likes of: Sabrina Du, investment manager, AXA China Region Insurance Company; Dong-hun Jang, former chief investment officer at South Korea’s Public Officials Benefit Association; and Bruce Tomlinson, head of alternative strategies at Sunsuper.

We have some fascinating sessions lined up, including a look at the global private debt outlook in the wake of covid-19, the current situation in China’s real estate sector and the performing credit opportunity in India. There should be some great insights into how APAC is positioned as the world heads into a more volatile economic environment in the period ahead.

Essentials

Net assets rise at CPP
CPP Investments, which manages the Canada Pension Plan Investment Fund, posted a five-year net return of 11.7 percent and a 10-year net return of 11.6 percent at the end of Q3 last year as net assets rose to $550.4 billion from $541.5 billion at the end of the previous quarter. In the third quarter itself, the fund posted a 2.4 percent return.

Third-quarter credit deals included: acquiring the royalties of pharmaceutical agent Tafamidis from Blackstone portfolio company Tafamidis Holdings for up to $221 million; providing additional capital for portfolio company Amitra Capital for its agreement with Novo Banco to acquire an interest in a portfolio of Portuguese non-performing mortgage loans with an outstanding balance of more than €231 million; and committing $220 million through a senior secured financing facility for the development of utility-scale solar projects in the US in partnership with HPS Investment Partners.

At the end of 2021, credit accounted for 16 percent of the CPP Investments portfolio, making it the third-largest component of the portfolio behind private equity (30 percent) and public equity (28 percent).

Third European, first US public CLO for BlueBay
RBC Asset Management‘s specialist fixed income manager, BlueBay Asset Management, has priced its third European collateralised loan obligation, BBAM European CLO III DAC, and its inaugural public US CLO, BBAM US CLO I.

The European CLO will issue €408.15 million in notes arranged and placed with a syndicate of international institutional investors, by Citigroup Global Markets. The transaction is expected to close on 25 March 2022.

The US CLO will issue $401.4 million in notes, also arranged and placed with a syndicate of international institutional investors, by Barclays Capital. The transaction is expected to close on 29 March 2022.

Both transactions comprise a diversified pool of broadly syndicated leveraged loans.

Two step up at Briarcliffe
Briarcliffe Credit Partners, the New York-based placement agent focused on private credit, has appointed its senior private markets leader Kyle Abel as head of GP advisory while Robert Molina has been promoted to head of origination.

Abel brings two decades’ experience in private markets, most recently as US head of project management at First Avenue. He also held fundraising positions at BerchWood Partners, Eaton Partners, Denham Capital Management and Wayzata Investment Partners.

Molina, who previously served as a managing director of GP advisory, has been promoted to head of origination, where he will take the lead in identifying differentiated private credit offerings. Molina has more than 20 years’ experience in financial services across alternative investments and investment banking.

LP watch

Institution: Illinois Municipal Retirement Fund
Headquarters: Oak Brook, US
AUM: $56.8 billion
Allocation to alternatives: 12.8%

Illinois Municipal Retirement Fund has approved a $50 million commitment to Clearlake Capital Group‘s third opportunities fund, according to a press release from the pension.

The pension committed $50 million to Clearlake Opportunities Partners III. This follows prior investment into the predecessor funds, with the pension committing $75 million to Fund II.

In a press release following the pension’s February investment committee meeting, the pension announced that it will increase its target for investing into minority investment managers in the private equity market moving forward. This will increase to 25 percent by 1 March 2022 from a previous target of 22 percent.

The $56.8 billion US public pension’s recent private equity commitments have tended to target North American venture/growth equity vehicles.


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