News Analysis: Starting from scratch

Having made four investments since September and with an ongoing fundraising process to manage, it’s been a busy first 18 months of existence for private debt fund manager Metric Capital Partners, writes Oliver Smiddy.

Identifying a market opportunity is one thing. Acting on it, and steering a newly-created firm through its first year of inception is quite another.

That first year has been a busy one for Metric Capital Partners. The private debt fund manager, launched by former UBS and Towerbrook executive John Sinik last year, has hit a first close for its maiden fund, agreed five deals, and is poised to sign one more before year end.

The fact its executives have barely stood still since doors opened last year illustrates just what a fast-paced market this is becoming, and the challenges of starting a firm from scratch.

“The macro dislocation in Europe is creating an opportunity to inject flexible capital into healthy mid-sized companies, in a way which can deliver outsized returns despite the strong downside protection approach we apply to every transaction,” explained Metric partner and co-founder Giovanni Miele.

That dislocation saw MCP back LM Funerals in March when Duke Street Capital acquired the UK-based business – the buyout firm’s first deal since switching to a deal-by-deal funding model.

In September, MCP completed two further investments, in childcare provider Kedleston UK and in hotel group TVHG. Both deals involved bespoke credit instruments structured to provide the security of debt, with return characteristics more commonly associated with equity. They highlight the firm’s tailored approach to investing, that also involves active ownership.

“Although our investments tend to be through credit instruments: we are very focused on creating upside potential through equity exposure which is typically stapled to our investments,” Miele explained. “We also put a lot of focus on the development and governance of our portfolio companies as we typically have board representation on each of our investments.

“Management teams and shareholders we partner with typically see us as a valid alternative to the traditional private equity model – as we provide not only flexible capital, but also experience and expertise in a way that better optimizes everyone’s objectives,” Miele explained.

The firm also completed two further investments, in subsidiaries of Irish healthcare group Centric Health, in December.

In tandem with dealmaking, MCP’s team has also been busy raising its inaugural fund. The fund has a target of €300 million and held a first close in March on about €100 million, sources said. Miele declined to comment on the fundraising.

The firm’s “approach to fundamental credit analysis and due diligence” was cited by one investor in the new fund as key reasons behind its decision to commit capital. The Metric team also has extensive relationships throughout the sponsor and intermediary communities, the LP said.

That perhaps is the key ingredient. Sinik, for example, was previously a managing director at Towerbrook Capital Partners between 2008 and 2011. He previously worked as global head of leveraged finance at UBS. The Metric team is drawn from across the private equity and intermediary communities. Peter Cornell, former managing director and head of investor relations at buyout firm Terra Firma Capital Partners, and before that chief executive of law firm Clifford Chance, joined Metric as a partner and head of investor relations.

John Connolly, former global chairman and UK chief executive of accountancy group Deloitte, is chairman of the firm. Ex-UBS and Barclays Capital executive Giovanni Miele joined as a partner and head of origination. Two principals, David Scheurl (formerly of Deutsche Bank and MatlinPatterson) and Ilkka Rantanen (ex-UBS and Amanda Capital), round out the team.