They said it

“The worst mistake we can make would be to fail, which is not an option. We have to restore price stability”

Federal Reserve chair Jay Powell quoted in the Financial Times following the Fed’s raising of the benchmark policy rate by 0.75 percentage points. He highlighted the difficulty of bringing down inflation while avoiding significant economic damage.

First look

Calling all database users!
Private Debt Investor subscribers might have noticed something different about our database this week. That’s because we’ve given it a shiny new upgrade to make the database easier to use and more informative than ever before. Besides a more user-friendly and speedier interface, new features include law firm profiles and pages designed specifically for service providers such as placement agents and investment consultants. If you haven’t already checked it out, give the new-look database a try here.

When visiting the database, we would ask you to make sure your profile data is up to date and, if not, to connect with the research team (researchandanalytics@peimedia.com) – many thanks.

Issuance low, but refinancing ‘manageable’
Non-financial speculative grade refinancing risk appears to be manageable through to next year in both North America and Europe, according to a new study from S&P Global Ratings (see here, login required).

Although speculative grade issuers are more susceptible to refinancing risk than higher-rate issuers, less than 20 percent have debt scheduled to mature over the next 18 months.

In North America, maturities appear “particularly manageable” given that they are more than 60 percent lower than the average annual issuance volume of the past decade. In EMEA, maturities are 33 percent below issuance volume – a more challenging situation than North America but one that “will not necessarily create refinancing problems”.

Concerns have been raised by the low level of issuance this year, with leveraged finance issuance up to May this year down nearly 58 percent in the US and 68 percent in Europe. These stark drops followed record issuance last year.

However, S&P thinks refinancing is likely to be contained even if the low level of issuance continues. Issuance in the US in the year-to-date totals $224 billion, compared with a maturing debt total over the next 18 months of $228 billion.

Essentials

Sustainable loan first for Cinven
Private equity firm Cinven has agreed its first sustainability-linked loan, comprising a €4 billion three-year facility with a consortium of banks. The facility aims to improve the ESG performance of Cinven’s portfolio companies across a number of areas, including climate change, gender diversity and ESG governance. Lloyds Bank is the ESG coordinator of the loan, which Cinven says is fully aligned with Loan Market Association SLL principles.

Cinven signed up to the United Nations-backed Principles for Responsible Investment in 2009, became a founding member of the Institutional Limited Partners Association’s Diversity in Action initiative in December 2020, joined the Initiative Climat International in March 2021 and the ESG Data Convergence Project in December 2021.

Infra specialist joins ILX
Guillaume Le Bris will join Amsterdam-based fund manager ILX Management as a senior investment manager responsible for the infrastructure and energy sectors in August this year. He is moving from the European Bank for Reconstruction and Development in London where he is currently associate director and senior banker in the Sustainable Infrastructure Group.

Le Bris has extensive experience in emerging market development finance and has worked at the French Development Agency and, since 2014, at the EBRD. He has led a wide variety of infrastructure and energy projects in North and sub-Saharan Africa, Central and Eastern Europe, and Latin America. He will report to Elvira Eurlings, chief investment officer of ILX.

ILX targets sustainable development and climate-related projects across global emerging markets. Recently, the Netherlands’ largest pension provider, APG, committed to invest $750 million in the firm’s ILX Fund I.

California move for Validity
Litigation funder Validity Finance has moved into California, hiring former Covington & Burling litigator Mark Chen as a portfolio investment counsel in Los Angeles. In his new role, Chen will help assess Validity’s funding opportunities with law firms and businesses in Southern California and the West Coast.

Validity has also added two prominent California trial lawyers as senior advisers: Thomas Nolan in Los Angeles and J Thomas Hannan in San Francisco. The firm has also appointed litigation valuation expert Gene Phillips as a special adviser. LA-based Phillips will assist Validity in quantitative analysis, damages valuation and strategic relationship-building. He is chief executive officer of PF2 Securities, which provides research and expert witnesses in large-scale financial disputes.

Validity now has offices in New York, Houston, Washington, DC and Los Angeles.

LP watch

Institution: District of Columbia Retirement Board 
Headquarters: Washington, DC, US
AUM: $11.01 billion
Allocation to alternatives: 15.1%

District of Columbia Retirement Board has confirmed a $100 million commitment to Fortress Lending Fund III according to minutes from the pension’s May 2022 board meeting.

This is a first-time commitment between DCRB and Fortress Investment Group.

DCRB currently allocates 0.4 percent to private debt, while its target stands at 3 percent. Its previous fund commitments range between $25 million and $100 million, predominately focused in Western Europe.

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