PDI Annual Awards 2016: Global winners

1. Pemberton
2. GSO Capital Partners
3. Oaktree Capital Management

Pemberton closed its European strategy in 2016 having raised approximately €1.2 billion. The firm also held a first close for a UK-focused strategy on an undisclosed amount. Symon Drake-Brockman, founder and managing partner at Pemberton, tells PDI the firm raised a total of €1.6 billion in 2016.

“I think we were able to significantly broaden our footprint into the European marketplace with LPs,” he says, adding that Pemberton’s office network and relationship with European banks makes the firm’s sourcing of loans “equal to none”.

Relationships with banks also helps the firm go after non-sponsored deals, making up approximately 40 percent of its portfolio. “Having a relationship with key banks is crucial,” Drake-Brockman says. “As a direct lender you’re never going to be able to have the same coverage footprint as the banks.”

Drake-Brockman also points to the firm’s investment in resources across Europe, allowing it to offer LPs investments exposure to all parts of the region. “We were able to provide them exposure on a pan-European basis in line with the size of the economies,” he says. “They want to feel like if they go with a pan-European player it’s genuinely pan-European.”

For 2017, the firm is planning two new funds. It’s already started marketing one of these, Drake-Brockman says, noting that it will begin marketing the other shortly. Pemberton is also anticipating it will close its UK-focused strategy in the summer. The firm is targeting raising £500 million ($626 million; €589 million) for the product.

1. CORDET Capital
2. Northleaf Capital
3. Adams Street Partners

Founded in 2013, CORDET Capital initially managed a private debt portfolio in a separately-managed account and had a first close of its maiden private debt fund in 2016 having raised €200 million.

The London-based firm attributes the success of its offering to its know-how in lending to smaller companies compared with some of its competitors. “In order to be successful in the market today you have to have differentiation,” Jakob Lindquist, co-managing partner at CORDET, tells PDI. “Our strategy is based on local access, local origination and local credit and investment expertise. You’ve got to have a very, very distinct differentiation in your strategy with the right focus, underpinned by the right team and the right processes.”

Lending to smaller mid-market companies also generates better returns in the senior-secured loan space, Magnus Lindquist, fellow co-managing partner at CORDET, notes. He says the fund’s portfolio is made up of both sponsored and unsponsored companies, broadly split 50-50 between the two.

CORDET has now invested more than the €200 million it raised for its first close, Magnus adds. The capital has been deployed across nine investments. CORDET is aiming to complete fundraising for the product during the spring, he says, and is targeting €400 million with a hard-cap of €600 million. “We think it’s more important to close quickly than be too long in the market.”

1. Qlik Technologies – Ares Capital Corporation
2. Polynt/Reichhold – GSO Capital Partners
3. Gotha Cosmetics – HIG Whitehorse

Ares Capital Corporation led the underwriting of a $1.1 billion loan to Thoma Bravo facilitating the private equity firm’s buyout of Qlik Technologies.

Ares was in a good position to offer Thoma Bravo the financing, given the firms had worked together before, Kipp deVeer, partner and head of the Ares credit group, tells PDI. He also notes Ares’ scale allowed it to take the lead on a loan of this size. The loan was also underwritten by other private debt managers, including TPG and Golub, allowing Ares to de-risk its investment.

“The Qlik transaction definitely highlighted the extent to which direct lenders can offer significant financings on major transactions to much larger, higher-quality borrowers,” he adds. “The fairway has widened substantially for direct lending, particularly for skilled and scaled platforms like ours. We have developed all the capabilities that we need in order for our clients and partners to have a lot of confidence in us leading transactions of this size and complexity.”

The firm was enticed by the attractiveness of Qlik and Thoma Bravo’s track-record in similar situations. Qlik was a company with a bloated cost base and Thoma Bravo has a reputation for cutting costs without altering the underlying fundamentals of companies, deVeer adds.

1. Spotify – TPG/Dragoneer Investment Group
2. Knights – Permira Debt Managers
3. Apex Fund Services – HPS

In providing capital to Spotify, the Sweden-based music streaming service, TPG together with Dragoneer Investment Group and Goldman Sachs, allowed the firm to increase its growth activity.

The convertible debt facility provided the Swedish firm with approximately $1 billion in financing. Dragoneer and TPG together provided approximately $750 million of the capital. For TPG this was split between its growth business and its Special Situations Fund.

At the time of the deal it was reported that the lenders would be able to convert their debt to equity should the music-streaming provider go public. This would also involve a 20 percent discount on the public price of the issued shares.

“Spotify is the leader in one of the fastest moving consumer technology sectors, streaming music,” a spokesman for TPG tells PDI. “This deal enabled the company to quickly access capital in a dynamic fundraising environment that has allowed it to capitalise on acquisition and growth opportunities.”

The firm also notes the credit facility has allowed Spotify to expand its operations and continue its growth. “Spotify has since entered new markets, acquired new technology and introduced new features, all demonstrating its continued success,” the spokesman adds.

1. Spire Partners
2. GSO Capital Partners
3. Credit Suisse Asset Management

Spire Partners’ Aurium CLO II closed in June 2016, having raised approximately €360 million. The offering gained popularity based on the good returns of London-based Spire’s first CLO fund and the demand for yield in a low-interest rate environment.

The fund’s predecessor held up well during the volatility in the first quarter of 2016. “The performance of our first fund led to some interest in our second fund,” Oliver Drummond Smith, partner at Spire, says. Aurium CLO II also managed to attract investors due to its smaller size.

Being smaller and nimbler has allowed Spire to weather storms and replace positions with greater ease. “It’s easier to manage a £15 million position than a £100 million position,” Drummond Smith says. He adds that being smaller, and aiming for less deals on an annual basis, allows Spire to keep its price discipline. “We want to do one deal every nine to 12 months, which means we will maintain that discipline,” he says.

The firm also says the fund has an attractive risk/return profile relative to competitors. Drummond Smith notes the fund ranks in the top quartile for both weight-average spread and weighted-average rating factors among its peers.

In 2017, Drummond Smith anticipates demand for CLOs will remain, but investors may struggle to find places to put their money to work. “It’s certainly a higher-yielding product and in a low-interest rate environment high yield is attractive,” he says.
Despite this, it’s unlikely 2017 will see new CLOs coming to market en masse, regardless of more players entering the sector. “There’s a relative dearth of collateral that’s preventing new CLOs coming to market,” Drummond Smith says. The result, however, may be more pent-up demand from investors.

1. Credit Suisse portfolio – TSSP
2. Molycorp – Oaktree Capital Management
3. C&J Energy – GSO Capital Partners

TSSP picked up roughly $1.2 billion in distressed debt following the acquisition of a portfolio from Credit Suisse. The deal reflected the latter’s desire to exit the distressed sector, exposure to which dropped 80 percent as a result.

The deal also reflected the relationship between the two firms. “Credit Suisse and TSSP have a long history of partnering together,” a spokesman for TSSP tells PDI. “When Credit Suisse announced a desire to reshape its business and sell-off a collection of non-core assets, TSSP was able to provide a holistic solution with considerable value to Credit Suisse on a complex and diverse portfolio.”

TSSP believes the transaction also shows its capability to work out complex situations and pull off difficult deals. “This transaction leverages our global team’s ability to provide speed, certainty and value in complex situations,” the firm says. “The portfolio we are acquiring has deep, long-term potential and fits well with our patient and flexible capital.”

The firm closed the deal for the distressed portfolio in Q2 2016.