They said it

“Although the leveraged loan market remained fairly resilient in the first quarter, the second quarter started to present more of a challenge for the asset class, especially for lower rated borrowers”

KKR’s Chris Sheldon, Kristopher Novell, Tal Reback highlight problems facing B- rated borrowers.

First look

Gen II appoints inaugural head of credit
Gen II Fund Services announced that it has hired Michael Abatemarco as head of credit. He will be tasked with overseeing two of the company’s business lines: credit middle office services and credit fund administration. The senior role is a new one, a spokesperson confirmed to affiliate title Private Funds CFO.

In a statement, Gen II chief executive Steven Millner connected Abatemarco’s hire to broader growth in the space, calling it “in keeping with our commitment to continue serving the ever-expanding private credit market”.

Abatemarco has a management background at companies that offer fund manager outsourcing services. He previously worked at BNY Mellon as director, head of bank loans and private placement. Abatemarco also worked at Goldman Sachs Asset Management, where he supported clients involved in credit.

Abatemarco’s hire is the latest senior personnel move at Gen II. In June, the service provider announced that Millner, a co-founder who was formerly a managing principal, became its inaugural CEO. Steven Alecia, a co-founder and formerly its chief client officer, became its first-ever president.

At the same time, Gen II made a pair of outside hires: Matthew Luongo as chief administrative officer and Michael Pollack as head of client delivery and innovation.

Last month, the service provider announced that it hired Anne-Claire Berg as chief people and impact officer, a newly created senior position.

Waterfall targets Asia with Hong Kong office
US-based alternatives manager Waterfall Asset Management has established a beachhead in the Asia-Pacific region as part of its expansion plans.

The firm has opened an office in Hong Kong and hired Alistair Ho as managing director and head of Asia-Pacific to lead it operations in the region. The Hong Kong office will focus on identifying opportunities to provide private debt to non-bank financial institutions, mid-market corporates and real estate-related borrowers.

Waterfall’s co-founders and managing partners, Jack Ross and Tom Capasse, said: “There is a tremendous opportunity for private debt offerings and opportunistic financing across the region, particularly with its growing middle market and regulatory changes.”

Ho joins Waterfall from Natixis Investment Managers International Hong Kong and has also held senior positions for Ostrum Asset Management, Mizuho Securities Asia, Credit Suisse and Citigroup.

He will report to Patrick Lo, partner and head of international, who said: “Alistair brings nearly two decades of experience leading and investing in structured finance transactions in the APAC-region and we are excited to welcome him to the firm. His expertise and relationships will be of immediate value for our firm and his passion for investing and working with colleagues and counterparties on crafting bespoke solutions to complex financial needs make him an outstanding fit with our firm’s culture and mission.”

The new office expands Waterfall’s geographic presence to four countries, with other bases in New York, London and Dublin.

Essentials

Issuance down, but ratings not (yet) under pressure
Issuance of European speculative-grade loans and bonds was down 73 percent in the first half of this year as investors acted cautiously in the face of rising inflation and fears over recession, according to the European Leveraged Finance Q2 2022 report from S&P Global Ratings.

Total issuance fell to just €43.2 billion in the six-month period, compared with €160 billion in the first half of 2021.

However, speculative-grade corporate ratings are holding up and default rates low thanks to strong performance last year and continuing consumer demand. But rising input costs and financing costs may have a negative effect on ratings in the second half of this year, according to S&P, especially in the case of a severe rather than mild recession.

Debt secondaries in small decline
Debt secondaries saw a fall of 1.3 percent in activity in the first half of this year on a year-on-year basis, from $1.06 billion to $1.05 billion, according to the latest data from Setter Capital, the Toronto-based secondary adviser.

This made debt something of an exception to the trend, which saw secondaries rising or remaining flat in most categories. Overall, the secondary market saw an increase in activity in H1 2022 to $57.8 billion, compared with $54.9 billion in the first half of last year.

There were some sharply contrasting levels of activity, with funds of funds seeing a rise of 76.5 percent and energy falling 20 percent.

LP watch

Institution: Rhode Island State Treasury 
Headquarters: Providence, US
AUM: $10.6 billion
Allocation to alternatives: 25.9%

Rhode Island State Treasury committed $30 million to Shamrock Capital Content Fund III, according to its 22 June investment meeting.

Rhode Island State Treasury administers and manages investments on behalf of the Employees’ Retirement System of Rhode Island (ERSRI).

Founded in 1978, Shamrock Capital Advisors is a Los Angeles-based investment firm that targets the media, entertainment and communications sectors across the US.

Rhode Island State Treasury has a 14 percent allocation to private equity, which comprises $1.5 billion in capital. Rhode Island State Treasury currently has a target allocation of 12 percent to the asset class.

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