Loan Note: Insurers seek access to private debt; new secondary platform launched

Insurers seek ways into private debt. Plus: the launch of a new online secondary platform and the latest from the hiring and fundraising fronts. Here's today's brief for our valued subscribers only.

They said it

“When working with the financial services industry, it is common to find that many people struggle with opening up on topics relating to mental health.”

Jen Christie, founder of Rise Well, a wellbeing and happiness consultancy, which has launched a new initiative providing mental health support to members of the European Leveraged Finance Association (see press release here).

First look

Finger print touch screen woman

Insurers search for a way in

At PDI Debt Week last week, one of the topics of conversation was how best to provide access for the UK’s defined contribution pension schemes to alternative asset classes such as private debt. The challenges are multiple.

For example: the needs of younger and older savers within schemes differ markedly, with the former more focused on returns and the latter on liquidity; fund structures that aim to cater for DC pensions’ specific requirements are few and far between (a rare example is this one from MV Credit); while fees may be seen as prohibitively high.

For all this, it is recognised that based on traditional allocation mixes, these pensions are considerably off course in their return ambitions. This makes private debt, with its strong yield, return and downside protection characteristics, an increasingly attractive proposition. Somewhere along the line, it seems, compromises will need to be made on both sides.

The issue of insurance access to private debt is also addressed in a new report from M&G Investments. It calls for a diversified and flexible approach, “allowing private debt managers to access value from across the entire investable universe as it presents itself”.

New online secondary platform launched

A new online platform has been launched for the resale of mid-market leveraged loans. Lampert Debt Xchange claims to “assist institutional private debt portfolio managers in managing the risks, liquidity and composition of their debt portfolios”.

Lampert Capital Advisors, the manager of the platform, says it will assist with planned sell-downs as well as the sales of stressed credits and legacy assets. It also says it can help address portfolio diversification issues.

The private debt secondary market has been growing fast, although still lagging behind the secondary markets in other alternative asset classes such as private equity and real estate.

Essentials

Leveraged finance hire at Stifel

Stifel Financial Corp, the US investment bank, has hired Ed Ribaudo as a managing director and head of leveraged finance capital markets. In his new role, Ribaudo is responsible for leading the firm’s leveraged finance capital markets and syndicate functions and is based in Stifel’s New York office.

Ribaudo joins from Houlihan Lokey, where he co-founded and built the firm’s syndicated leveraged finance platform, enabling it to provide underwritten commitments on broadly syndicated leveraged loans.

Africa’s BluePeak notches first close

BluePeak Private Capital, an alternative investment firm mainly focused on Africa, has raised more than $100 million for the initial closing of its flagship private credit and mezzanine fund, BluePeak Private Capital Fund. The fund is targeting a final close of $200 million, with a hard-cap of $250 million.

The fund’s initial closing is backed by the likes of CDC Group, the UK’s development finance institution and impact investor; the European Investment Bank; DFC, the US development finance corporation; FMO, the Dutch development bank and Caisse des Dépôts et Consignations Tunisia.

The vehicle will provide bespoke financing solutions to small and mid-market companies in Africa that generate revenues of between $10 million and $80 million and operate in growth sectors.

New fund agreed for Italian UTP sector

Luigi Luzzatti, an Italian association of co-operative banks, has signed a memorandum of understanding with Italian investment manager Prelios Group to set up a new closed-ended reserved alternative investment fund for distressed credits classified as unlikely to pay.

The fund, whose main contributors will be Luzzatti’s shareholder banks, will invest in UTP credits due from companies largely in the SME/corporate segment. It will implement credit recovery strategies designed to put the debtor companies back on a performing basis, through proactive management of their positions focused on corporate restructuring.

LP watch

Institution: Texas Municipal Retirement System
Headquarters: Austin, US
AUM: $34.5 billion
Allocation to alternatives: 31.55%

Texas Municipal Retirement System has disclosed up to $500 million in commitments across two private debt vehicles, according to materials from a September 2021 board meeting. Commitments of $250 million each to Pemberton Strategic Credit Opportunities Fund II and GoldenTree Distressed Fund IV have been confirmed.

Pemberton Asset Management launched its second series fund in January 2020, seeking €2 billion in capital commitments. As of September 2021, the fund has raised close to 75 percent of that target. GoldenTree Distressed Fund IV launched in July 2021, following its predecessor which closed in April 2019 having raised $1.7 billion in investor capital.

The $34.5 billion US public pension has a 20 percent target allocation to private debt that currently stands at 18.03 percent.

TMRS’ recent private debt commitments have tended to focus on corporate and real estate debt vehicles, targeting distressed and mezzanine returns in North America and Europe.


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

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