Partners Group has raised its first-ever dedicated investment vehicle to provide debt financing to mid-market companies, seeking to take advantage of the lack of credit in the markets, it said in a statement.
The firm has been investing in private debt since 1999, but has never had a separate fund dedicated to the strategy. The €375 million Partners Group Private Markets Credit Strategies 2012 has been raised to meet increased demand for private debt.
Partners will target mid-market companies with an enterprise value between €250 million to €2 billion. To avoid conflicts of interest, the fund will have no exposure to the firm’s own private equity activities, a spokesperson told Private Equity International. Partners Group’s credit fund will operate globally including core European countries
According to Partners Group, the overall supply of private debt continues to decrease as banks and other debt providers are exiting the market because of capital constraints. Expiring investment periods for European CLO vehicles and regulatory changes also mean there will be less private debt available. At the same time, demand for debt is rising because of the upcoming need for refinancing and continued investments by private equity funds.
René Biner, partner and head private finance at Partners Group, said in a statement: “We are witnessing a transition in global credit markets and private providers of credit can benefit significantly from the lack of alternative capital. We believe the crisis will continue to keep markets busy in the years ahead.
“While the private debt supply-demand imbalance creates opportunities that are attractive in their own right, they are even more appealing relative to the public-government debt markets in today’s low interest rates environment.”
In its recent second half year report the firm stated that “in Europe… lending markets are still dysfunctional and the high yield market remains largely shut … we foresee leverage levels staying at or close to current levels during the next six months as banks’ syndication confidence remains volatile along with macroeconomic uncertainty and the ongoing bank deleveraging trend,” the firm added.
The credit fund has a term of four years and an additional wind down period of one year and is expected to be 50 percent deployed by the end of 2012. Partners Group’s credit team contains 70 professionals that focus on the private markets credit transactions.
Partners is one of several firms that have built up their coffers to fill the void left by traditional lenders in the market, especially in Europe. Ares recently raised its second European debt fund. Additionally, AXA Private Equity and ICG have raised capital around the strategy.