Loan Note: Video with Allianz’s Emmanuel Deblanc; European deals show sharp increase

Emmanuel Deblanc of Allianz Global Investors considers the implications of inflation for private debt in our latest video on the topic. Plus: why the European deal market is breaking records and the latest from the hiring front. Here's today's brief for our valued subscribers only.

They said it

“Hui wants to keep Evergrande’s most valuable assets unless he can sell them for a good price, which is not going to happen as everyone knows he is under stress.” 

A source “close to Chinese financial regulators” quoted in the Financial Times, referring to Hui Ka Yan, chair of Evergrande, the beleaguered property developer. Fitch today became the first rating agency to declare Evergrande’s overseas bonds in default after the firm failed to make an interest payment.

First look

The view on inflation: watch our latest video
In the latest video in our series looking at the potential impact of a more inflationary environment on private debt, we caught up with Emmanuel Deblanc, head of private markets at Allianz Global Investors.

With the delta and omicron variants having brought with them higher rates of covid transmission, Deblanc noted tongue in cheek that black swans are not quite the rare event they used to be. In his view, however, private markets have something of an advantage in an unpredictable environment in terms of being able to bilaterally negotiate deal structures and introduce an element of flexibility.

This latest video follows an earlier one with Nick Brooks, head of economic and investment research at Intermediate Capital Group, in which he predicted that fear of inflation may become a self-fulfilling prophecy and lead to it being more of a permanent phenomenon than it otherwise may have been.

Private Debt Investor has a raft of coverage of the inflation topic, which can be accessed here.

Deal rush driven by anxiety around 2022
One of the surprising aspects of the private debt market during the pandemic was how well new deals held up. While fundraising noticeably slowed as investors took time to assess the implications for their portfolios, a glut of private equity transactions meant lenders to sponsored deals had plenty to keep themselves busy.

As can be seen from our chart below regarding Deloitte’s Alternative Lender Deal Tracker, momentum in the European deal market has not slowed since last year – in fact it has accelerated. It prompts Deloitte to excitably refer to the “smashing” of previous records.

But while many will take comfort from a buoyant market, the survey also provides a sobering reminder that this “pedal to the metal” mentality may be arising from fear of what lies ahead in the form rising of inflation and looming base rate hikes. Best, in other words, to get the money in the ground now. Next year may herald something of a chill for those on the currently hectic deal-doing frontline.

Data snapshot

Record breaking. Europe saw private debt deal records smashed in Q3 2021 with more than 200 deals recorded by the Deloitte Alternative Lender Deal Tracker. The huge number of deals seen in the third quarter has helped push 2021’s deal total ahead of the previous annual record seen in 2019. With another quarter to add to the total, 2021 is set to be a landmark year for private lending.

Essentials

SVPGlobal adds hires from New Mountain and Goldman Sachs
Strategic Value Partners has hired Jonathan Waggoner as a managing director and co-head of its investment operating team and John Shaffer to its advisory council, according to a release.

Waggoner joins the firm from New Mountain Capital, where he was managing director in its operating group. He previously held positions at Rue La La, an off-price retailer, Bain Capital and McKinsey & Company.

Shaffer joins the firm from Goldman Sachs, where he was co-head of Americas credit sales, working among 90 professionals in leveraged loans, distressed, high yield, investment grade and municipals credit. Prior to that, he headed Americas credit sales at Merrill Lynch.

Greenwich, Connecticut-based SVPGlobal focuses on distressed debt, special situations and private equity investments with $18 billion in assets under management.

New emerging market debt team for Mackay Shields 
MacKay Shields, a wholly owned asset management subsidiary of New York Investment Management Holdings, has announced its intent to establish a new emerging market debt capability with the hiring of five investment professionals to be based in London.

Philip Fielding and Valentina Chen will join MacKay as co-heads of emerging market debt on the global credit team, reporting to Eric Gold, senior portfolio manager and head of global credit. Henry Stipp will also join the team as a portfolio manager and Gordana Ilic and Christopher Garcia as analysts.

The new hires bring a combination of sovereign, local currency and emerging market corporate bond experience, serving institutional investors across European markets.

Finitive expands team
Private credit marketplace Finitive has hired fintech veterans Steve Yampolsky as head of engineering and Chris Benjamin as principal software architect.

Yampolsky, a specialist in automated workflows, comes from BNY Mellon, where he created data integration architectures and new business intelligence products, among other things. Benjamin is a veteran software developer who most recently was principal software architect at CRE Simple.

The latest hires follow the addition of Jon Burlinson as chief information officer and Joshua Masia as chief product officer. Burlinson was previously CTO of CRE Simple, where he designed what Finitive called a “revolutionary” debt management SaaS platform for commercial real estate.

Masia was previously vice-president, head of data & analytics, at iCapital Network, where he played a key role in pioneering that company’s end-to-end electronic trading platform for alternative investments.

LP Watch

Institution: California Public Employees’ Retirement System
Headquarters: Sacramento, US
AUM: $490.18bn
Allocation to alternatives: 21.6%

California Public Employees’ Retirement System committed $750 million to Ares Senior Direct Lending Fund, according to the pension’s November 2021 board meeting document.

CalPERS devotes 21.6 percent of its full investment portfolio to alternative assets. The pension’s recent commitments have been to mezzanine, distressed and senior debt vehicles targeting investments in North America and Europe.


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