Loan Note: Uncertainly clouds default outlook; US market marches on

A new report suggests uncertainty over the direction of European corporate defaults. Plus: we publish our US Report 2021 and bring you the latest key industry hires. Here's today's brief for our valued subscribers only.

They said it

“It remains true that very often I’ll go into a meeting or a room and I’m the only woman there.”

Isabel Dische, an asset management partner and co-head of the institutional investor team at law firm Ropes & Gray, in a video from affiliate Private Equity International (registration required) exploring how mentoring schemes can help increase the number of women at senior levels in the private funds industry.

First look

European default rate racked by uncertainty
There is considerable doubt over what’s likely to happen to default rates in Europe during the coming months, according to a new report from S&P Global.

The report said it expected the speculative grade corporate default rate to fall to 3.25 percent by June next year compared with 4.7 percent in June 2021, buoyed by climbing GDP projections for the eurozone for this year and next. In what it described as an “optimistic scenario”, S&P suggested the rate could fall as low as 2 percent.

However, the “pessimistic scenario” would see rates rise to 5.5 percent, prompted by such dangers as virus mutations, unexpected policy missteps and tightening financing conditions.

“A sharp rise in interest rates alongside any further lockdowns that disrupt the economic recovery would be especially difficult on… weaker-rated issuers as they try to recover from the disruption experienced in 2020,” said Nick Kraemer, head of S&P Global Ratings Performance Analytics.

Danger of US overheating?
More than 12 months on from the pandemic-induced slump in sentiment, the US private debt market is in rude health. Our US Report looks at why private debt remains more popular than ever for investors in North America and whether the market is in danger of over-heating after recovering beyond pre-pandemic levels.

The report includes an exploration of what North America can do to catch up with Europe on ESG issues as well as a roundtable investigating, including many other things, the potential impact of inflation on the asset class and prospects for the collateralised loan obligation and business development company markets. The roundtable features participants from AB Private Credit Investors, Alter Domus, Antares CapitalBaringsChurchill Asset Management and King & Spalding.

Essentials

Axis Arbor hires senior exec for debt advisory
London-based debt advisory firm Axis Arbor has appointed David Parker as a managing partner to work alongside existing managing partner and founder Gurjit Bedi. Parker joins from Marlborough Partners with over 20 years’ experience in debt advisory and capital markets. In a statement, Axis Arbor says it has completed 22 financings during this year so far, totalling more than €5.5 billion of deal volume.

Fidelity Investments grows direct lending business 
Fidelity Investments‘ direct lending business has announced it has hired Jeff Scott as managing director of originations and Therese Icuss as managing director of portfolio management and underwriting. Both Scott and Icuss will be based in Chicago and report to David Gaito, Fidelity Investments’ head of direct lending.

Golding expands into Switzerland
Munich-based fund of funds manager Golding Capital Partners has launched a Swiss office in Zurich headed by Beat Frühauf, former head of THEAM Quant Funds Switzerland, which is part of BNP Paribas Schweiz. Frühauf has been advising Swiss investors for more than two decades. Golding focuses on private equity, private debt and infrastructure in Europe.

LP watch

Institution: Tennessee Consolidated Retirement System
Headquarters: Nashville, US
AUM: $62.45 billion
Allocation to alternatives: 26.2%

Tennessee Consolidated Retirement System approved a $250 million commitment to Oaktree Real Estate Debt Fund III at its August 2021 investment committee meeting, a contact at the pension informed Private Debt Investor.

TCRS’s recent private debt commitments have been primarily to global vehicles focused on the corporate sector. The pension currently allocates 7.6 percent of its investment portfolio to private debt.


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

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