Miami-headquartered HIG Capital is a global investment firm managing strategies on both sides of the Atlantic. It is under the HIG WhiteHorse Capital banner that the firm operates its European private debt practice, lending to mid-market companies and providing unitranche, senior and subordinated debt products ranging between €10 million and €75 million in size.
What is the biggest challenge in European direct lending this year?
Europe is facing continued political and economic uncertainty in 2017, which will lead to increased fragmentation in the lending market. Demand for local, bespoke capital solutions is set to rise and those with a sufficient footprint in Europe and capabilities across the full credit spectrum are set to capitalise on this.
How do you plan to shape the European direct lending strategy at HIG over the next 12 months?
We’ve made real progress in building and formalising the team since we established the WhiteHorse business in Europe in 2010. Most recently Kenneth Borton joined the firm as a managing director in our London office, which further bolsters our domestic UK effort. We’re very focused on having the appropriate resources for this dedicated effort and have recruited experienced professionals in all of our offices. The London hub has European nationals of every country and language capability – it’s not a transplant office, it’s very much the core nucleus from which to support our global teams.
In terms of our strategy, we are sector agnostic and have invested across most of them, although we have some that we prefer over others (for example, we are less keen on very capital-intensive sectors). Having said that, while we look at hundreds of deals every year, we are very selective in what we choose to pursue. I see our role to be as much an advisor as it is as an investor given that many of our deals involve first-time users of our capital. In these instances, it’s more of an education process – long lead times, extensive due diligence and institutionalising the reporting for the first time are part of it. You’re doing a lot of things that primary LBO transactions require. But that’s also the opportunity – once you’ve helped someone through that process they view you as their most important partner.
Europe is opening up to direct lending. What countries look interesting to you?
We tend not to have country focuses, rather the benefits of an international team mean that we have eyes and ears monitoring opportunities across borders. Italy is a market at the moment with considerable possibilities because the country is searching for a holistic solution for the banking system. France requires local insights, and we have seen the UK return to deal mode after the Brexit decision. Europe, overall, is very active, in some ways more so than the US.
Do you have any concerns over Brexit?
Brexit is just one more in the litany of issues affecting Europe today, although Trump is probably a bigger factor of concern in the eyes of most of the world. However, we’re not as impacted by market trends as others and while uncertainty can be unnerving for some, it also provides a source of opportunity. Geopolitical volatility and fiscal stimulus uncertainty lead to a need for more locally-tailored capital which is where we can play a role across our European office network.