Capital Four, the Copenhagen-based fund manager, has raised more than €500 million for its third direct lending fund – Private Debt III Senior Lending – which has a final target of €1 billion.
The fund will provide first lien, senior secured bilateral loans with maintenance covenants to performing mid-market companies in the Nordic, DACH and Benelux regions.
Capital Four claims the fund has attracted institutional support because of its low risk profile and because it offers diversification for direct lending portfolios into the Nordic region. It also points out that the Nordics offer good relative economic prospects and supportive governments.
Mads Skaaning, head of fixed income at PKA, a Danish pension which has committed to the fund, said: “Capital Four can due to their local presence, specialised credit focus and heritage provide us with direct lending exposure to a growing Nordic market, which until now has been less expressed in our private debt allocation.”
Martin Norregard, a director at Capital Four, told Private Debt Investor the firm has been talking to investors interested in the Nordic markets since last year. Now it has reached a first close, the fundraising will continue for a maximum of two years or until the hard cap of €1.5 billion is reached. The firm has not yet used a placement agent but is considering doing so.
The latest fund is the third direct lending fund raised by Capital Four, with the first one having raised €150 million and the second €340 million. It has a target return of 6-8 percent gross of fees, a three-year investment period and five-year harvesting period. The firm said its prior direct lending fund took two years to deploy its capital.
Norregard said the firm is also planning to raise a fourth private debt fund with a flexible, opportunistic approach targeting a net return of 10 percent, once the latest direct lending fund has been raised. This strategy targets unitranche, second lien and mezzanine.
Founded in 2007, Capital Four manages more than €13 billion in assets under management across illiquid and liquid investment strategies within direct lending, syndicated loans, multi-asset credit, structured credit and high yield.