Sagard raises $555m in initial fund closing

Sagard has raised $555 million at the first close of its Sagard Senior Lending Partners fund, including $315 million of fund commitments and an additional $240 million of capital in a separately managed account with a strategic partner.

SSLP, which launched in March last year, is nearing its $600 million target. It has a hard cap of $750 million.

The fund’s mission is “to build a leading non-sponsor debt franchise, generate compelling risk-adjusted returns, and help entrepreneurs to build and grow their businesses”, Sagard, a Toronto-based multi-strategy alternative asset manager with more than $13 billion under management, said in a statement. It focuses on the Canadian and US mid-market, and targets borrowers with $10 million to $50 million of EBITDA.

The initial closing includes participation from an investment fund managed by IG Investment Management, Great-West Lifeco, Investment Management Corporation of Ontario and Portland Investment Counsel, among others. The fund already has invested in three mid-market companies, committing a total of about $100 million.

“Economic headwinds make traditional equity and growth capital options more difficult to achieve,” Dev Gopalan, partner and portfolio manager at Sagard, said.

In an interview with Private Debt Investor, Gopalan said the fund is targeting unlevered returns in the high single digits, while a levered version targets net levered returns in the low double digits. He said target borrowers are companies that are family-owned, entrepreneur led, or small-cap public companies.

The fund is targeting “whoever is looking for a solution that doesn’t fit the banks’ playbook” of lending only two turns, rather than the three that many of these companies are seeking to use for refinancing or growth capital, Gopalan said. The fund will have lower loan to values, lower leverage, and higher interest coverage than direct lending to sponsor-backed companies.

“Rather than companies taking preferred equity or selling to a private equity firm, we can provide capital to maintain ownership and grow,” Gopalan told PDI. Although SSLP is a generalist fund, he said the focus would be on healthcare, financial services, and technology. It will avoid any sectors with commodity inputs and outputs.

“The family- and founder-led business community continues to be underserved in Canada and the US and offers attractive relative value,” Adam Vigna, chief investment officer at Sagard, said.

The fundraising is part of Sagard’s drive to be “a one-stop partner to middle market entrepreneurs and business leaders”, Paul Desmarais III, Sagard chairman and chief executive officer, said in the announcement. He added that the firm’s growth across the credit spectrum “is particularly important” at a time where the firm has observed that alternative funding sources such as banks are capital constrained.