Northleaf acquires Antares stake, raises $1.4bn for debt fund

After making a numerous hires on its credit side this fall, Northleaf Capital has burst onto the private debt scene with announcements Wednesday that it bought a minority stake in Antares Capital and garnered north of $1 billion for a debut private credit fund.

Toronto-based Northleaf now holds a 16 percent stake in former GE Capital lender Antares that it bought from the Canada Pension Plan Investment Board (CPPIB), which will still own a majority stake in the Chicago-based mid-market lender.

GE Capital sold Antares to CPPIB last August in a deal that, as part of the industrial behemoth’s plan to dismantle its finance arm, included $3.9 billion of equity and the backing of $13.9 billion of senior secured loans. Those loans included a $10.7 billion asset-backed facility secured against loans originated by Antares and included in the sale.

A representative for CPPIB could not be reached for further comment.

Alongside the equity purchase, Antares and Northleaf announced a “broader strategic relationship”, through which the firms will develop separately managed accounts focused on Canadian asset managers, institutional investors and private equity clients.

Northleaf also said Wednesday it raised $1.4 billion for its Northleaf Private Credit I fund from a “core group” of Canadian pension plans. The investment vehicle will invest up and down the capital structure; loans will consist of senior, unitranche, second lien, mezzanine and subordinated debt to mainly private equity-backed companies in North America, the UK, Western Europe and Australia.

The purchase price, which Northleaf managing partner Stuart Waugh declined to comment on, came out of its Private Credit I fund, he said, meaning the total amount raised includes the Antares price tag and the fresh capital Northleaf obtained to make credit investments.

The Northleaf-Antares marriage came out of a decade-long relationship between CPPIB and Northleaf, Waugh said. CPPIB has a managed account with Northleaf. The discussions on the partnership “would not have begun if we didn’t have a relationship with CPPIB for 10 years”, Waugh said. Northleaf will also be able to participate in Antares’ origination platform, he added.

John Martin, managing partner and co-CEO of Antares, said it was early spring when CPPIB reached out to Antares – which wanted to grow its asset management side – about a partnership. Antares is focused on engaging interested pension fund investors “to set up separate accounts for those that have an appetite in their allocation model for private credit where they haven't had it”, he said.

Martin said Northleaf raised the capital for the purchase of the Antares minority stake largely independent of the partnership. As early as Wednesday morning, the firm had already begun introductions to several potential pension fund investors for Antares, and meetings will likely begin in the new year, he added.

Both developments have been in the works for some time.

In August, Private Debt Investor exclusively reported Antares had been looking to partner with other institutions. At the time, Tim Lyne, a senior managing director at the firm, was in the process of wrapping up discussions with one such partner, though he couldn’t reveal the firm’s name. Lyne had told PDI that Antares brought a prominent mid-market lending firm, while the firm would benefit from having a partner on the deal side.

The partnership will give Northleaf access to a massive investment platform. Antares closed 183 senior loan transactions through the first nine months of the year, it said, which amounted to more $11.6 billion in commitments.

Northleaf’s personnel decisions this fall also preceded an impending move into the private credit space. It made hires among its Chicago, London and Toronto offices. The firm brought on David Ross, the former global head of sourcing at Bain Capital Credit, in early September who is the head of credit and based in London.

Waugh told PDI Northleaf’s move into private credit was a natural evolution of its private markets practices, which also include private equity and infrastructure investment.

“The advancement into private credit was a continuation of the 15-year development of our global market strategy,” Waugh said, adding that moving into “credit was the opportunity to take the next step and serve our institutional investors”.

On the infrastructure side, the firm locked down C$1.5 billion in 2015 for its Northleaf Infrastructure OECD Fund, according to data from PDI sister title Infrastructure Investor. The firm now has $7 billion in assets under management.

CPPIB’s private credit platform lost Mark Jenkins in September after he departed to fill a new role created at Carlyle, head of global credit. He led the acquisition of Antares last year. Another member of senior management, Adam Vigna who was head of principal credit investments, departed the CPPIB last month.