Loan Note: Oaktree’s back, BBI backs Columbia Lake, the new syndication opportunity

Syndications are a new source of dealflow (unless you're a distressed fund). Plus: British Business Investments gets behind venture debt and Oaktree heads back into the market.

They said it

“Overall, we have seen banks retrench back into their home markets. This will create an even bigger opportunity for direct lending firms to fill the gap.” 

Taken from a Q&A with Stephan Caron, head of European middle-market private debt at BlackRock

First Look

Lenders wanted…to fill the syndication gap

Worried about where the next deal is coming from? Maybe you don’t need to look any further than the syndication market. Sources say banks wary of the large positions they agreed to take in some deals pre-covid are now looking for firms to distribute risk to. These opportunities, we hear, are less competitive than the deals being pushed through ‘bad banks’ at significant discounts to par. For the syndicated deals, banks are wanting reliable long-term partners – these do not include distressed investors of the ‘loan to own’ variety, we are plainly told.

A lift from A to B

It seems almost counterintuitive, amid unfolding economic woes, to be getting behind growth stories. But that’s exactly what British Business Investments, the commercial arm of the British Business Bank, has done with a £40 million punt on Columbia Lake Partners’ second venture debt fund. And here’s why, in the words of Columbia managing partner Craig Netterfield: “The coronavirus crisis means a lot of companies need liquidity to help them get from their series A round to series B, or from B to C. A lot of firms need capital to get them through the next 12 to 18 months.”

The fund that’s charging nothing (upfront)

Among the crop of dislocation funds rushing to market, we are hearing of one as-yet-unidentified vehicle with a zero base fee. In other words, for this fund, it really is all about the performance.

It could be added that it’s at least partly about a good sales pitch. As one source drily noted: “From a marketing perspective, zero percent gets attention, so I can see why they’ve done it.”

Data snapshot

BDCs and the spectre of default. In our June cover story, Robin Blumenthal examined how hard the business development company market has been hit in the last few months. The S&P graph below shows how the prospects of default have risen.

Essentials

Oaktree back on the fundraising trail

Oaktree Capital Management, one of private debt’s biggest fundraisers, is back in the market with its latest opportunities fund. Minnesota State Board of Investment has decided to back it. Find out more here.

Browse our latest issue

The battle faced by BDCs, the need for more transparency on climate change, why lending in China may be safer than you think, and the latest changes in loan documentation… all this and more in the June issue of Private Debt Investor. Download here.

Dig deeper

Institution: Virginia Retirement System
Headquarters: Richmond, US
AUM: $76.9bn
Allocation to alternatives: 28.8%

Virginia Retirement System approved $750 million-worth of private debt commitments at its June investment advisory committee meeting, a contact at the pension informed PDI.

The commitments included $300 million apiece to SSG Secured Lending Opportunities III and Farallon Special Situations Master Fund, as well as $150 million to Taurus Mining Finance Fund II.

The $76.90 billion US public pension allocates to private debt and distressed debt from its 13.80 percent credit strategies portfolio.

Find information on more than 4,000 institutions in PDI‘s database.


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


Subscribe now and get Loan Note delivered to your inbox each day
To find out how, email our team: subscriptions@peimedia.com