Permira levers direct lending fund up to €1.1bn

The fund raised just shy of €800 million from investors for direct lending across the capital structure to mid-market European borrowers.

Permira Debt Managers (PDM) has reached a final close of “circa €800 million” on its direct lending fund Permira Credit Solutions II. Combined with leverage on one segregated pool within the fund, total deployable capital is approximately €1.1 billion. 

The final fundraising total is close to €790 million, PDI understands. 

The vehicle is roughly evenly split between senior and master funds, PDM chief executive James Greenwood told PDI

As the name suggests, the senior fund only commits to senior debt investments, while the master fund can allocate to both senior and subordinated credit. It also carries an extra €300 million in firepower in the form of a line of credit from a bank lender. This leverage will only apply to senior debt investments, PDI understands. 

Greenwood said the leverage and option to invest in higher-yielding but riskier assets boosts the return for investors with greater risk appetite. 

PDM is targeting all-in pricing of between 7 and 10 percent on its senior debt investments. While returns on the master fund are expected to be higher than the unlevered piece, it does not include a minimum allocation for junior debt and, so far, the fund portfolio only has senior debt, Greenwood added. 

Investors included insurers, pension funds and family offices from Europe, North America, Asia and the Middle East. European investors made up a significant proportion, said Greenwood. 

Thomas Kyriakoudis, chief investment officer with PDM, added that investors are interested in the private debt asset class, but the fundraising environment remains competitive.

“What we’ve found is that there are a lot of [new managers] raising money, but being part of the wider Permira network was a big differentiator for us with investors. If you don’t differentiate yourself somehow with investors, then you can struggle [to raise capital],” he said.

PDM is targeting lending to mid-market companies in Europe that have felt the retreat of banks from the credit space. The vehicle is currently 25 percent invested via nine transactions. The investment period is three years from final close, which was executed last night, Greenwood said. 

With €275 million out the door in the first half, he anticipates that between €450 million to €500 million will be invested by the end of the year. PDM anticipates that dealflow will continue to be strong. 

The firm has executed bilateral and club deals as well as participated in more broadly syndicated facilities. The flexible mandate allows it to join deals for the right credit. It is not tied to one type of lending, said Greenwood. 

Private equity-sponsored borrowers as well as sponsorless companies are on its radar and the fund has already done deals for both, he added. 

The firm is sector-agnostic in its lending and makes loans ranging from five to seven years. It sources deals through Permira’s wider European network as well as outside debt advisers. 

The firm’s first direct lending fund used €200 million in equity from PDM’s private equity parent, Permira, PDI understands.

Last month, the firm hired David Hirschmann as head of private credit. Hirschmann joined from Babson Capital where he was a managing director in the direct lending team. 

First Avenue acted as private placement agent for the fund. 

PDM has provided 75 companies with €2.3 billion in capital since its formation in 2007.