Partners Group sees opportunities down the capital structure

The firm is seeing fewer second-lien opportunities and more latitude to provide PIK loans and preferred equity financing.

Partners Group has seen increasing opportunities springing up lower down the capital structure in recent months. The firm’s outlook for the second half of 2017 indicates part of this reason is banks re-entering the space, particularly in the US.

The firm previously told PDI, at the beginning of the year, it saw opportunities to provide second-lien financing. Due to banks providing an increasing level of financing – particularly in the US – and the European high-yield bond market being robust, these opportunities have not been as fruitful as it initially thought.

“We’re less optimistic than we were six months ago on the larger end of the market, particularly in the US,” Christian Ebert, managing director at Partners Group, told PDI. Instead, the firm has seen opportunity arise in PIK financing and preferred equity.

In terms of sectors, Ebert noted the firm is looking to healthcare companies, business service companies and other firms providing low-cost necessities such as food producers.

Such borrowers would be able to show stable revenues even in times of macroeconomic difficulties. “Recession resilience is absolutely key,” Ebert said.