Barcelona-based Trea Direct Lending is this week announcing a first close for its second fund targeting sponsorless direct lending in the Spanish market.
The fund is a follow-up to the firm’s first sponsorless direct lending fund, which posted a final close on €70 million in April last year.
So far, the firm has only reached out to Spanish investors and is backed by FOND-ICO, the Spanish government-backed fund of funds, as well as family offices and institutional investors including pension funds and insurance companies.
However, Trea will from now on be approaching non-Spanish European investors for the first time as it aims to raise €150 million at final close. Ignacio Diez, Trea founding and managing partner, said he was anticipating strong demand from insurance companies in particular as the fund has a very low Solvency II capital requirement, around 7-8 percent.
Diez says that while the unitranche and leveraged loan ends of the market are very competitive, the sponsorless SME market is highly inefficient. Trea invests only in senior secured loans and with conservative leverage of 2-4 times EBITDA. The firm’s first fund, which had a target gross IRR between 8 to 9 percent, is currently delivering 10 percent according to Diez.
Diez said that with just five banks accounting for 80 percent of Spain’s business financing, entrepreneurs increasingly recognise the need to diversify into alternative sources of financing for the likes of acquisitions, capex, international expansion and refinancings.