PDI Awards 2015: The Americas

Golub Capital

Highly commended: GSO Capital Partners; Ares Capital Corporation

The US mid-market lender had a strong year across the board, in terms of fundraising, origination, expansion and new hires. The firm originated $14 billion in new loans in 2015, holding about $8.4 billion of that – its largest volume yet. Golub also bagged its largest deal thus far last year. The firm usually prefers to work with returning sponsor clients, though having a larger asset base has also allowed the lender to work with increasingly larger sponsors.

During 2015, Golub also hired a dedicated non-sponsored deal originator. Brian Davis joined in August from TPG and opened a new office in Charlotte, North Carolina.

Other hires included Chip Cushman from Antares Capital and Joseph Wilson from Citigroup. Wilson joined as head of sales and trading and is tasked with expanding the firm’s relationships with buyers of leveraged loans and sourcing secondary market opportunities.

Having closed its ninth lending fund at $970 million in July, the firm launched Fund 10 immediately after following strong deployment. The Texas Municipal Retirement System invested $300 million in a direct lending separate account with Golub in December, part of the pension fund’s first foray into direct lending.

Golub Capital

Highly commended: Ares Capital Corporation, TPG Specialty Lending

About 70 percent of the $8.4 billion in loans that Golub held on book in 2015 went into unitranche deals. The firm has a strong unitranche franchise, arranging deals and then syndicating slices of the debt to other lenders.

Last year, the firm led its largest such deal yet: a $515 million refinancing package for Data Device Corporation (DDC). The company is a manufacturer of electronics and components for the military and aerospace defence industries controlled by Behrman Capital, and the loan was an add-on to Golub’s original $330 million senior credit facility that refinanced DDC in July 2014. Andy Steuerman, Golub’s head of mid-market lending, notes that a deal of this size and scope would normally only be led and syndicated by a bank, but the facility proves alternative lenders can execute such transactions.

In December, Golub participated in one of the largest deals in the market: Pamplona Capital’s $2.7 billion leveraged buyout of healthcare analytics provider MedAssets.

Although Golub didn’t lead the $1.73 billion financing, the deal was the largest in which Golub took an arranging role. The other lenders were Barclays, Morgan Stanley and Macquarie.

GSO Capital Partners

Highly commended: Highbridge Principal Strategies; Crescent Capital Group

GSO’s mezzanine group had its busiest year yet in terms of junior capital deployment. The Blackstone-owned firm put $1.2 billion to work with a pick-up in the second half of 2015.

“The diversity of dealflow in 2015 really highlighted the breadth of what we do,” says Lou Salvatore, a senior managing director at GSO who oversees the mezzanine strategies. The transactions spanned the gamut of industries and sectors. The firm sourced deals from sponsors in the US and Europe, bought them from banks at discounts and did direct deals through banks and corporations.

GSO was also able to move further into Europe, as the mezz funds had the ability to invest alongside the €2 billion European debt fund that GSO raised in 2015. European facilities tended to be structured as unitranche, while in the US it extended a combination of mezzanine, second lien, unitranche and unsecured loans.

Although the returns on the mezzanine funds posted a 1.7 percent loss in 2015 due to market turmoil, the firm has achieved 18 percent net returns in the strategy since inception. The second GSO Capital Opportunities fund, which closed on $4 billion in 2012, has shown a 15 percent net internal rate of return since inception.

Monroe Capital

Highly commended: NXT Capital, NewStar Financial

The Chicago-based firm won PDI’s inaugural lower mid-market lender of the year award after putting $1.6 billion to work last year, outpacing its 2014 volume of $1.2 billion. The money financed 41 directly originated transactions and 25 club deals, with an average loan size of around $40 million.

The firm led by president and chief executive Ted Koenig also made several senior hires in 2015, opened new offices and expanded its industry coverage. It hired Mark Sturrock in October to lead origination from a new office in Toronto. Sturrock, who joined from ABL lender Salus Capital, is an industry generalist. Monroe also tapped former-Salus investment professionals Andy Moser and Marc Price for its Boston office to lead a new retail and consumer products industry vertical. Monroe is in the process of recruiting more staff to build its retail practice and in other areas.

Monroe now has nine offices throughout North America with 16 direct origination professionals. The firm’s second Monroe Private Credit Fund has already beaten its $600 million target after launching in late 2014 and should close at the $750 million hard-cap this quarter.

Golub Capital BDC

Highly commended: Goldman Sachs BDC; TPG Specialty Lending

The mid-market lender’s $1.6 billion BDC reported its 14th consecutive rise in net asset value (NAV), at a time when many of its competitors have been posting declines. The vehicle also touted other healthy financials in its full-year earnings report when many others have been beaten down by energy mark-downs, credit losses and declining stock values.

Analysts often give Golub’s BDC high marks for its shareholder-friendly fees and terms. “GBDC is a best-in-class BDC with a strong credit platform and a focus on the top of the capital stack, providing a fully covered 8.3 percent dividend with stable NAV performance,” said a report from Wells Fargo BDC analyst Jonathan Bock.
NAV per share rose to $15.89 at the end of December, from $15.80 as of 30 September.

“We believe we are well-positioned to continue to do well in 2016.Our strong credit results allow us toplay offence when others are playing defence. Our certainty of execution is more valuable to our clients today, particularly on larger middle market deals, and we are seeing improving terms on new business,” says David Golub, chief executive of the BDC.

Oaktree Capital Management

Highly commended: Oak Hill Advisors; Fortress Investment Group

Although performance in some of Oaktree’s US distressed funds declined over the past two years, Oaktree is still the go-to brand name when it comes to distressed. And better opportunities are on the way, Oaktree’s management pointed out on recent earnings calls highlighting equity market volatility, the high-yield sell-off and continued declines in energy.

Howard Marks, Oaktree’s chairman, said he can already see the energy concerns spilling over into other industries such as retail and media. Even though he doesn’t think 2016 will be a full-fledged recession, some of these market headwinds will make for better investment options for Oaktree’s strategy.

And the firm is already well prepared to pounce on these opportunities, having collected $10.5 billion for its 10th US distressed pool, the Oaktree Opportunities Fund X and Xb, which also helped it to claim PDI’s fundraising of the year award in the Americas this time round.

Oaktree has also been setting up distressed investing initiatives in Europe. The firm launched fundraising for its Oaktree European Principal Fund IV last year. The performance on the previous fund has held up well, with Oaktree reporting a 15.6 percent net IRR since inception for the third European Principal fund.


Highly commended: The Carlyle Group, Onex Corporation

In a year when CLO issuance was down, CIFC was one of few managers to maintain issuance at roughly the same volume as 2014. The firm closed its fifth CLO at $510.5 million in November. The transaction was arranged by Credit Suisse and supported by 14 institutional investors, five of which were first-time CIFC clients.

Since 2012, CIFC has been a regular issuer of CLOs, raising about $10 billion of assets under management across 18 transactions.

None of CIFC’s new CLOs in 2015 were risk retention compliant. Though the firm’s ability to get that many non-compliant deals done in a year before the deadline is actually a testament to the market’s confidence in CIFC’s platform, co-president Oliver Wriedt told PDI.

The firm also launched its second CLO co-investment fund last year, as well as a CLO secondary strategy.

Wriedt said that the volatility in the second half of the year bound to push secondary spreads wider, making this a more attractive strategy.

Allianz Global Investors

Highly commended: AMP Capital; Hastings Funds Management

The German insurer’s infrastructure debt arm made its first US debt deal this year, investing $700 million in a comprehensive debt restructuring for the Indiana Toll Road. The team also invested $60 million in the Kentucky Information Highway, a state-wide, fibre-optic broadband network, last year.

“Our involvement in the transaction was well-received by the public and proved that long-term institutional investors can add value in more complex infrastructure assets,” says Deborah Zurkow, head of infra debt at Allianz.

Deals in the US have been followed by dealmakers with Paul David, a director with AllianzGI’s infrastructure debt team in London, relocating to the New York office, where he was joined by assistant vice-president Alex Ball.

Allianz’s team say they have seen a strong pipeline of US transactions. “We are confident that our ability to grow our footprint in America reflects the asset class’s potential at a global level,” Zurkow said.

The firm has also been growing its debt business globally. Over the last two and a half years, Allianz invested over $5 billion into 20 transactions across 10 countries.


Highly commended: Starwood Property Trust; Mesa West Capital

Blackstone Real Estate Debt Strategies (BREDS) passed several milestones this year. Origination volume hit a record $13.4 billion between its private funds and BXMT, a mortgage REIT.

The firm also hired a top banking rainmaker as its first chief investment officer. Jonathan Pollack, the former head of commercial real estate debt at Deutsche Bank, joined in June and reports to Michael Nash, who oversees the real estate debt business globally.

Another highlight was the acquisition of an $8.7 billion loan portfolio from GE, with the funds taking in about $4.2 billion of Australian and Mexican loans and the REIT keeping the remaining package of US loans.

Some of Blackstone’s largest deals in 2015, included a $590 million construction loan secured by a retail project in Miami; a $450 million construction loan on a Manhattan condominium project; a $400 million office refinance in Manhattan; the origination of a $330 million condominium conversion at One Rincon Hill in San Francisco; and a $320 million refinancing of the Woolworth Building in Manhattan.

The firm also began raising $4 billion for its BREDS III fund in the autumn and had already collected $1.3 billion for a first close by the end of the year.

Lightower – Highbridge/Partners Group

Highly commended: American Seafoods – Ares Capital Corporation; Data Device Corporation – Golub Capital

At a time when mezzanine has been shunned by many private debt players in the US, Highbridge and Partners Group joined forces on a $500 million mezzanine loan backing the merger of Lightower and Fibertech Networks, two fibre-optic network services providers.

The companies entered into an agreement to merge in April with an all-cash transaction valued at $1.9 billion, which included equity and debt. Lightower’s existing equity backers, Berkshire Partners, Pamlico Capital and ABRY Partners, all added additional capital to support the deal.

Partners Group came to the deal from several directions. Scott Essex, the firm’s New York-based co-head of private debt has expertise in the telecom sector, having worked for Lexent, another telecom company that was acquired by Lightower in 2010. Partners Group also runs a private equity fund of funds and was an LP in Court Square, which bought out Fibertech for $500 million in 2010. Partners has also worked with Berkshire on other deals in 2015.

Highbridge Principal Strategies, meanwhile, runs one of the biggest mezzanine businesses around. The firm closed its HPS Mezzanine Partners Fund II on $5 billion in 2013 and is now raising its third with a $5.5 billion target.

Oaktree Capital Management

Highly commended: GSO Capital Partners, Fortress Investment Group

The Los Angeles-headquartered firm, which set out to raise its 10th distressed fund in 2014, amassed as much as $10.5 billion for its Oaktree Opportunities X and Xb funds. In its fourth quarter earnings report, Oaktree management said they were keeping the funds open to even more LP commitments as market turmoil in the second half of the year drove further investor interest in distressed strategies.

The firm has been raising two pools of capital, the first a $3 billion vehicle to be deployed immediately, while the second is a $7 billion “reserve pool” to be deployed further into the credit cycle as more distressed opportunities come to fruition. The firm is waiving management fees on committed capital.

The funds have scored mandate wins from a slew of large US public pension funds, including the Massachusetts Pension Reserves Investment Management Board, the Teacher Retirement System of Texas, the Virginia Retirement System, the Kentucky Teachers’ Retirement System, the Washington State Investment Board and the Oregon Public Employees’ Retirement System, among others.

Pennsylvania Public School Employees Retirement System

Highly commended: New Jersey Division of Investments, Orange County Employees’ Retirement System

Investors getting into private debt are often faced with the question of where to plug these strategies into their portfolio. The Pennsylvania Public School Employees Retirement System (PSERS) pension fund has taken a sophisticated dual-track approach.

The LP has been building up a 2 percent allocation within its private equity portfolio for distressed-for-control strategies, while also investing about 6 percent in more traditional direct lending and credit/trading funds within its high-yield fixed-income bucket. The pension invested about $1.2 billion in the high-yield category in 2015 and $450 million in private equity distressed. The pension is at its target on the high-yield front and slightly above it within private equity.

Since inception, the private equity sleeve has delivered a net IRR of 13.7 percent, while the high-yield portion has returned about 9.5 percent.

“The returns are holding up really well. These portfolios are doing what we expected them to do,” says James Grossman, chief investment officer at PSERS. In line with building this portfolio, the $51 billion pension fund also hired its first private debt portfolio manager. James del Gaudio joined in April from the New York City Comptroller’s office.

Wells Fargo

Highly commended: Goldman Sachs, SunTrust

The US bank firmly beat its rivals to win this crown and looking at the range of services for its alternative lender clients it’s little surprise. Supports include lining up credit lines, helping structure and raise money for CLOs and partnering on asset-based loans or revolving credit facilities.

Many of the bank’s clients say the firm excels on all these aspects and is well integrated across its platform, where it’s easy to liaise between the divisions and people that offer these services.

In 2015, Wells Fargo opened 26 lending facilities for 21 clients totalling more than $5 billion in volume. CLO structuring volume included 19 transactions worth $10 billion last year. Mary Katherine Dubose and Chris Pink co-lead the asset-backed finance platform. Jason Powers and Kevin Sunday, who report to Dubose and Pink, lead corporate finance. Dubose, Powers and Sunday are based in Charlotte, North Carolina, while Pink is based in New York.


Highly commended: Latham & Watkins, Proskauer

The law firm has rebounded strongly from the downdraft of 2007-08 and has been building up relationships with alternative lenders on several fronts. Dechert is a go-to advisor for many lenders on CLO structuring, commercial real estate loans, structured finance, asset-based loans, business development companies (BDCs) and lending joint ventures.

In 2015, Dechert worked with a number of the large alternative lenders, including Golub Capital, Apollo Global Management and NXT Capital, on CLOs.

The firm’s global footprint also leads many lenders to tap Dechert for work on complex cross-border transactions, said Richard Jones, who chairs Dechert’s finance and real estate practice.

With many new and old alternative lenders setting up BDCs, the firm has also been helping many clients with those filings. Thomas Friedman, a partner in the firm’s Boston office, has also worked with both newer and established BDCs on structuring lending joint ventures.

Looking ahead, Jones said he finds himself spending a lot of time with alternative lenders thinking about how to build risk retention compliant structures within CLOs, as the December deadline for compliance approaches.

Credit Suisse

Highly commended: First Avenue, Park Hill Group

The Swiss bank’s Private Fund Group (PFG) has been well-entrenched in raising money for private equity funds for many years, though the firm is said to now be making more waves in the private debt space too. Campbell MacColl oversees the effort in New York. The group is said to be staffing up and adding resources on the private debt front.

The firm’s speciality has been in raising money for distressed and special situations funds, which makes for an especially lucrative business heading into 2016. Many debt managers are raising large distressed and special sits funds, and say the market turmoil of late is leading to more opportunities for these types of strategies, rather than traditional direct lending. The PFG group raises money from investors globally, including public and private pension funds, endowments, foundations, banks, insurance companies and family offices.