PSP launches private debt arm in New York

Banking veteran David Scudellari has joined the Canadian pension investment manager to lead its new direct lending arm. He plans to staff the office with 10 more people and PSP will also eventually house other alternative investment professionals in the new NYC office.  

PSP Investments has opened its first US office in New York and is launching the expansion with a new private debt investment arm. PSP, which oversees the investments of Montreal-headquartered Public Sector Pension Investment Board, has hired David Scudellari, who previously held senior roles at Barclays and Goldman Sachs, to lead its new private debt arm.

The lender will originate its own transactions directly with sponsors, rather than outsourcing the strategy to an asset manager. Private debt is a new asset class for PSP and the board has scheduled a meeting where it will decide how much capital with which to back the strategy. Scudellari told PDI he expects the investment to range between $3 billion-$5 billion of PSP’s $85.6 billion in assets.

Scudellari is initially joined by senior director for principal debt and credit investments, Ziv Ehrenfeld, who is a former colleague from Barclays. Ehrenfeld was previously a member of the leveraged finance group at the bank, focusing on the natural resources sector. He joined Barclays after five years in the power and utilities equity capital markets group at Lehman Brothers.

PSP has also hired Jeff Rowbottom, the former head of capital markets at KKR, as a senior advisor for private debt. Rowbottom left KKR in April and has been leading US expansion US for Israeli venture capital firm Pontifax since. Rowbottom also previously held senior titles at Barclays and Goldman Sachs.

Scudellari told PDI he expects to hire 10 more people for the private debt initiative between now and March. Two managing directors, two vice president or senior associate level staff, a risk officer, someone to oversee legal / compliance issues and two to four junior associates or analysts.

PSP intends to build up its new credit business by participating in club deals with other lenders, rather than leading transactions. “We will leverage off our partners and find a few good, world-class platforms where we can bulk them up and bring benefits to clients,” Scudellari said.

The pension plan will be able to offer sizeable capital in these transactions as well as his own large rolodex of sponsors, Scudellari explained.

Ticket sizes will be from $50 million-$150 million for a wide range of borrowers with EBITDA of between $20 million-$1 billion. Scudellari will focus on first lien loans, aiming to make senior secured assets comprise two thirds of the overall book, alongside a mix of second lien, mezzanine, unsecured, bridge loans and preferred equity. Depending on the capital structure, interests rates will hit between 7-12 percent, he said.

“We’re not interested in being the typical fill-in on a term loan B, cov-lite type structure. We want to do something a little bit more interesting and be a meaningful part of a club financing,” Scudellari explained. “We like good, well-structured transactions, where the downside is protected and where we’re doing more bespoke type financing,” he added.

He also said the new venture will be very selective when it comes to industries. Scudellari doesn’t like deep cyclicals, like steel, pulp, vapor or anything that has heavy commodity exposure. At the moment, he said he likes areas such as software, business services and light manufacturing.

Prior to joining PSP, Scudellari held the head of finance and risk products for Canada role at Barclays between 2011 and this April. He has held other senior roles at the UK-headquartered bank and worked at Goldman Sachs for 23 years between 1983 and 2006. At PSP, he now serves as senior vice president and head of principal debt and credit investments.

Scudellari said PSP plans to eventually house private equity investment professionals in the New York office, with infrastructure and real estate staff to potentially follow.

PSP Investments is one of Canada's largest pension investment managers with C$112 billion in assets as of 31 March. Its team of 600 professionals manages a diverse portfolio, including public equities, private equity, bonds and other fixed-income securities, real estate, infrastructure and natural resources.