private debtspotlight - preqin · 2017-11-20 · private debtspotlight. volume 2, issue 7 november...

PRIVATE DEBT

SPOTLIGHTVOLUME 2, ISSUE 7 ■ NOVEMBER 2017

alternative assets. intelligent data.

All data in this newsletter can be downloaded to Excel for free

SIGN UP

Sign up to Spotlight, our free monthly newsletter, providing insights into performance, investors, deals and

fundraising, powered by Preqin data: Alt Credit Intelligence European and US Fund Services Awards: Best Data and Information Provider | Africa Global Funds Awards 2016: Best Research and Data Provider | The Queen’s

Award for Enterprise: International Trade | HedgeWeek Global Awards: Best Global Hedge Fund Research Provider | CAIA Corporate Recognition Award

www.preqin.com/contact [email protected]|

IN THIS ISSUE

FEATURE Emerging Distressed Debt Markets: Where Next?

2

FEATUREPrivate Debt Quarterly Update, Q3 2017■ Deals■ Fund Performance

5

INDUSTRY NEWS 8

THE FACTS■ Mezzanine in the US■ Private Debt in

Germany

912

CONFERENCES 14

EMERGING DISTRESSED DEBT MARKETS: WHERE NEXT?

$4.8bnis being targeted by Asia-focused distressed debt funds in market. We evaluate the global growth of the distressed debt market, with exclusive commentary on recent developments in India from Edelweiss Alternative Asset Advisors.

Find out more on page 2

PRIVATE DEBT QUARTERLY UPDATE, Q3 2017

Deals95% of transactions tracked by Preqin’s new Private Debt Deals database occurred in North America and Europe in Q3 2017.

Fund PerformanceDirect lending strategies have the highest horizon IRRs across the one- and three-year periods to December 2016, while mezzanine funds returned 87bps more in the five years to December 2016.

Find out more on page 5

RECENTLY RELEASED: 2017 PREQIN ALTERNATIVE ASSETS PERFORMANCE MONITOR


Order Your Copy Download Sample Pages

https://www.preqin.com/go.aspx?lid=24038

www.preqin.com/contact

mailto:[email protected]

www.preqin.com/signup

https://www.linkedin.com/company/147822?trk=cws-btn-overview-0-0

https://twitter.com/intent/follow?original_referer=https%3A%2F%2Fabout.twitter.com%2Fresources%2Fbuttons&ref_src=twsrc%5Etfw&region=follow_link&screen_name=Preqin&tw_p=followbutton

www.google.com/+Preqin

https://www.preqin.com/docs/samples/2017-Preqin-Alternative-Assets-Performance-Monitor-Sample-Pages.pdf?rnd=1

https://www.preqin.com/docs/orderforms/2017-Preqin-Alternative-Assets-Performance-Monitor.pdf?rnd=1

www.preqin.com/about


© Preqin Ltd. 2017 / www.preqin.com2 Private Debt Spotlight | November 2017

EMERGING DISTRESSED DEBT MARKETS: WHERE NEXT?We take an in-depth look at emerging distressed debt markets, featuring Preqin data and exclusive insight from Venkat Ramaswamy, co-founder of Edelweiss Alternative Asset Advisors.

Indian banks are grappling with $120bn of gross NPLs (non-performing loans) and $25bn of restructured advances. This is further skewed towards government-owned public sector banks which own 90% of the total $120bn of gross NPA. Moreover, large borrowers (aggregate fund-based and non-fund based exposure of $770k and more) constitute nearly 90% of the system NPAs (non-performing assets).

With improving macroeconomic dynamics and industry uptick, these assets are expected to see turnaround. Both the Reserve Bank of India (RBI) and the Indian Government have been taking steps to revive stressed assets. Various mechanisms and resolution strategies like Corporate Debt Restructuring (CDR), Strategic Debt Restructuring (SDR), Scheme for Sustainable Structuring of Stressed Assets (S4A) and most recently the Insolvency and Bankruptcy Code (IBC) have been implemented to help turnaround the stressed borrowers. This large opportunity coupled with favourable economic fundamentals and the government’s intent to revive the situation have made stressed assets an attractive investment opportunity for both global and local players.

EDELWEISS ON INDIAN REGULATORY CHANGES:

Following the crash of the North American energy sector in 2014, fund

managers were successful in raising several distressed debt funds to capitalize on the struggling market. From 2010 to 2013, in the lead-up to the energy crash, just one energy-focused distressed debt fund closed each year, as seen in Fig. 1; however, from October 2014 to June 2016, six funds secured over $8.7bn in capital.

The largest of these funds was GSO Energy Select Opportunities Fund; having entered the market in January 2015, it reached a final close on $2.9bn in September of the same year. Substantial commitments from several large public pension funds led the way, including Teachers Retirement System

of Texas (which committed $500mn), California Public Employees’ Retirement System (CalPERS, $250mn) and Florida State Board of Administration ($100mn).

The energy sector’s sudden downturn illustrates how managers looking to capitalize on a distressed market place can see upticks in fundraising efforts and put investor capital to work. We can therefore analyze current political and economic trends to pinpoint when the next distressed market segment may occur.

THE NEXT FRONTIERSAs seen in Fig. 2, distressed debt fundraising has historically been dominated by North America- and Europe-

focused funds: since 2007, North America-focused distressed debt has outpaced all other regions with 166 funds raising over $236bn in capital, followed by $48bn secured by 53 funds focused on Europe. Twenty-six Asia-focused funds have raised roughly $7.7bn since 2007, with 2015-2016 recording the most activity.

The next targets of distressed debt investors are most likely to be India and China. The Indian Government instituted the Insolvency and Bankruptcy Code in 2016, which expedites the bankruptcy process by mandating a maximum time limit for resolution for domestic entities (270 days), and is expected to make the process of acquiring distressed assets

0

5

10

15

20

25

30

35

40

45

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

YTD

North America Europe Asia Latin America Multi-Regional

Source: Preqin Private Debt Online

Aggr

egat

e Ca

pita

l Rai

sed

($bn

)

Year of Final Close

Fig. 2: Annual Distressed Debt Fundraising by Geographic Focus, 2007 - 2017 YTD (As at October 2017)

0

1,000

2,000

3,000

4,000

5,000

6,000

0

1

2

3

4

5

6

1997

2002

2003

2004

2005

2007

2008

2010

2011

2012

2013

2014

2015

2016

No. of Funds Closed Aggregate Capital Raised ($mn)


No.

of F

unds

Clo

sed

Year of Final Close

Fig. 1: Annual North America-Focused Distressed Debt Energy Fundraising, 1997 - 2016

Aggregate Capital Raised ($mn)

https://www.preqin.com/user/pd/funds/pd_funds_fundprofile.aspx?fundid=52492&src9

https://www.preqin.com/user/pd/funds/pd_funds_fundprofile.aspx?fundid=52492&src9

https://www.preqin.com/user/pd/investors/pd_investors_investorprofile.aspx?firmid=2554&src=9




https://www.preqin.com/user/pd/investors/pd_investors_investorprofile.aspx?firmid=2892&src9

https://www.preqin.com/user/pd/investors/pd_investors_investorprofile.aspx?firmid=2892&src9



Fig. 3: India- and China-Focused Distressed Debt Funds Closed, 2007 - 2017 YTD (As at October 2017)

Fund Firm Vintage Fund Size ($mn)

Final Close Date Geographic Focus

Sunflower Fund China Merchants Capital 2015 1,094 May-15 China

IFC-Apollo Distressed Debt Fund Apollo Global Management 2016 1,000 Apr-16 Emerging Markets, India

OCM Asia Principal Opportunities Fund Oaktree Capital Management 2006 577 Mar-07 Asia, China, Japan, South Korea

Shoreline China Value III Shoreline Capital 2015 500 May-15 China

Shoreline China Value II Shoreline Capital 2011 303 Nov-12 China

Edelweiss Distressed Assets Fund Edelweiss Alternative Asset Advisors 2016 300 Oct-16 India

DAC China Special Opportunity and Situation Fund DAC Financial Management 2007 285 Apr-07 Asia, China

Shoreline China Value I Shoreline Capital 2008 178 Jun-08 China

EW India Special Assets Fund Edelweiss Alternative Asset Advisors 2011 77 Aug-13 India

Arcil Asset Reconstruction Fund I Arcil 2007 65 Dec-07 India

Edelweiss-Stressed & Troubled Assets Revival Fund I Edelweiss Alternative Asset Advisors 2013 35 Oct-14 India

Edelweiss Asset Re-Construction Fund Edelweiss Alternative Asset Advisors 2011 17 Nov-11 India

Arcil NPA Fund Arcil 2010 - Apr-11 India


from banks in India more efficient for fund managers. In China, years of economic growth have led to high levels of bad corporate debt and, as the rate of growth has slowed, the government has begun to ease the process for foreign firms to help reduce privately held debt.

Over the past 10 years, relatively few distressed debt funds have closed with a focus on India or China: 13 funds have raised just over $4.4bn (Fig. 3). For comparison, there are currently six Asia-focused distressed debt funds in market seeking $4.8bn, all of which will have exposure to India or China.

VALUE OF LOCAL EXPERTISEOnly seven of the Asia-focused funds closed over this period were looking for opportunities in India, and all but one was raised by an India-based fund manager. The most active of these is Edelweiss Alternative Asset Advisors (EAAA), which manages India-focused funds across strategies and sectors. EAAA has raised four India-focused distressed debt funds in the past decade, securing $428mn in capital. Through its Separately Managed Accounts (SMAs) which co-invest along with Edelweiss India Stressed Assets Fund II (EISAF II), EAAA’s stressed asset fund that is currently raising is expected to be $1.4-1.6bn by mid-2018, with an existing commitment of around $1bn.

The largest India-focused fund closed in the last 10 years was raised by Apollo Global Management, the only global manager to raise a distressed debt fund targeting India over this period. The fund was launched in partnership with International Finance Corporation (IFC) which contributed $500mn as part of a joint venture. The vehicle will look to stabilize vulnerable borrowers in emerging markets, primarily focusing on India.

While Apollo Global Management is based in the US, IFC maintains field offices throughout the world, including one in India, as part of its mission to expand

regional representation and its presence in local markets.

This fund was not Apollo Global Management’s first foray into Indian markets: in May 2014, the fund manager closed AION Capital Partners as a joint venture with ICICI Venture Funds Management. The $825mn special situations fund targeted distressed assets, bankruptcy and non-performing loans, among other situations, and focused entirely on India.

Fewer China-focused distressed debt funds reached a final close from 2007-2017 YTD

The distressed asset space in India offers the most attractive investing opportunity in India even if the number of deals are few and far between. Some of the unique challenges are:

■ Valuation expectation gap: this is primarily because public sector banks, which account for around 90% of bad loans, are reluctant to take a haircut. This results in a valuation mismatch.

■ Multiple decision makers: typically in India, multiple banks do large lending; hence, at the time of resolution, multiple banks need to agree on a resolution. This becomes difficult as each bank has its own processes and priorities. Overall, it significantly delays the resolution process.

■ An evolving regulatory and legal landscape: the regulations and legal framework around stressed assets have been evolving and undergoing transformation to be more effective. India has recently implemented the Insolvency and Bankruptcy (IBC) code, which tilts the power in favour of the creditors. Early results have been quite encouraging with requisite political, judicial and regulatory interventions to take care of the implementation issues.

EDELWEISS ON THE UNIQUE CHALLENGES IN THE INDIAN MARKET:

https://www.preqin.com/user/pd/fundmanagers/pd_fundmanagers_fundmanagerprofile.aspx?firmid=33077&src=9


https://www.preqin.com/user/pd/funds/pd_funds_fundprofile.aspx?fundid=64761&src=9









Distressed asset investing offers a great set of opportunities, but it also presents its own set of challenges in terms of local understanding and presence. Local partners are boots on the ground that can provide:

■ Extensive network coverage to originate potential transactions; ■ Relationships with banks, which in turn provide ability to buy bank loans; ■ Access to an operating turnaround team, especially for stress asset situations.

As these deals are struck bilaterally instead of through an auction process, players like Edelweiss provide a strong platform with a stressed asset fund and a large legal and investment banking team, complemented further by an operational turnaround team; these factors allow for more effective operation in the industry. International players like CDPQ, Bain and JC Flowers among others have partnered with local players to access India’s distressed asset opportunity set.

EDELWEISS ON THE IMPORTANCE OF BOOTS ON THE GROUND:

4.5

3.5

2.8 2.7

2

2.7

2.21.8

1.5

3.4 3.5

2.5

0

1

2

3

4

5

Dec

-06

Dec

-07

Dec

-08

Dec

-09

Dec

-10

Dec

-11

Dec

-12

Dec

-13

Dec

-14

Dec

-15

Dec

-16

Oct

-17


Dry

Pow

der (

$bn)

Fig. 5: Asia-Focused Distressed Debt Dry Powder, 2006 - 2017

■ Banking: approximately 6% of Indian GDP, or 12% of total advances of the Indian banking industry, are constituted by stressed advances of $145bn.

■ Commodities: policy hurdles, overcapacity due to commodity super-cycle and over-optimistic growth expectations have led to over-leveraged balance sheets and a stressed asset scenario.

■ Industrials: industrial stressed assets constitute around 75% of total stressed assets. This is largely concentrated in sectors like infrastructure, metals & mining and textiles, which are cyclical in nature and are approximately 75% of industrial stress. Edelweiss has invested in sectors like power, steel and ports, as well as the manufacturing of paper and cement.

EDELWEISS ON INDUSTRY-SPECIFIC INVESTING:

Fig. 4: Asia-Focused Distressed Debt Funds in Market(as at October 2017)

Fund Vintage Firm Target Size ($mn)

Shoreline Capital CNY Fund 2017 Shoreline Capital 1,475

Piramal India Resurgent Fund 2016 Piramal Capital 1,000

Guggenheim Distressed Debt Fund 2017

Guggenheim Investment

Management750

ShoreVest Capital Partners Fund 2017 ShoreVest Capital

Partners 750

Avenue Asia Special Situations Fund V 2017 Avenue Capital

Group 500

PAG China Special Situations Fund 2016 PAG Asia Capital 350


than funds focused on India; of the five funds targeting distressed assets in China, three were managed by Shoreline Capital, raising an aggregate $981mn in capital. Shoreline Capital was founded in 2004 with a focus on finding and creating value in investment opportunities that arise from distress in China’s markets. The firm is currently raising its third fund, Shoreline Capital CNY Fund, which will be its largest to date if its $1.5bn target is reached.

GOING FORWARDThere are six Asia-focused distressed debt funds currently in market, targeting an aggregate $4.8bn (Fig. 4), including the

aforementioned Shoreline Capital CNY Fund, all of which focus on India or China. Piramal Capital is targeting $1bn for Piramal India Resurgent Fund which, as the second largest Asia-focused distressed debt fund on the road, aims to provide rescue capital in India and to invest in potential turnaround companies.

Since 2016, fund managers have deployed $1bn in dry powder for Asia-focused distressed debt funds. This is the highest amount of capital deployed since 2007, and comes after two consecutive years of increasing dry powder levels, as seen in Fig. 5.

Managers looking to capitalize on distressed opportunities have been known to build up assets on a relatively predictable cycle ahead of market turns. The recent increase in Asia-focused private capital fundraising indicates that managers and investors alike foresee opportunities in targeted regions, and arriving slightly early can often prove an advantage. “Boots on the ground” expertise is an invaluable asset to managers entering non-traditional or unfamiliar markets but, in the end, a confluence of factors will determine the success or failure of distressed debt investing on a large scale in new frontiers.





https://www.preqin.com/user/pd/funds/pd_funds_fundprofile.aspx?fundid=59101


Private Debt Spotlight | November 20175 Preqin Ltd. 2017 / www.preqin.com

Using the recent addition of private debt deals to Preqin’s platform, we detail sample deals completed during Q3 2017, and provide a breakdown of private lending transactions by industry and geography.

Q3 UPDATE: DEALS

North America remains the most active region in the private lending

industry: 66% of private debt deals tracked by Preqin in Q3 2017 were based in the region (Fig. 1). European transactions account for 29% of total deals in Q3, followed by Asia & Rest of World-based deals (4%). Historically, North America and Europe have been the most active regions in private lending, largely due to their political structure and regulatory environment, and also the slowdown of traditional lending.

The largest proportion (25%) of transactions in Q3 2017 took place in the industrials sector, followed by consumer discretionary and IT, which each account for 17% of all private debt transactions in the period (Fig. 2). Sample deals in Q3 in these industries include Bumble Bee Foods and Interface Security Systems LLC, which both received growth capital of $850mn and $290mn respectively (Fig. 3).

As nearly 80% of tracked private debt deals are private equity sponsored, the private debt deals market correlates to that of buyout deals. The remaining 20% of deals occur as non-sponsored transactions, issuing debt directly to borrowers that are not supported by private equity managers, and therefore can present a different risk profile entirely when compared to a sponsored firm.

66%

29%

4%

North America

Europe

Asia & Rest of World


Fig. 1: Private Debt Deals Completed in Q3 2017 by Location

25%

17%

17%

16%

13%

7%5% Industrials

IT

Consumer Discretionary

Healthcare

Other

Business Services

Food & Agriculture


Fig. 2: Private Debt Deals Completed in Q3 2017 by Primary Industry

Fig. 3: Sample Private Debt Deals Completed in Q3 2017

Portfolio Company Investment Type

Debt Size (mn) Debt Financing Provider(s) Primary

IndustryCapital

Structure

CPA Global Limited Buyout 1,538 USD Goldman Sachs Merchant Banking Division, Jefferies, Nomura International

Business Services

Mezzanine, Senior Debt

Bumble Bee Foods Growth Capital 850 USD Brookfield Capital Partners, Wells Fargo Capital Finance Food Senior Debt

Edgewood Partners Buyout 425 USD Antares Capital Business Services Senior Debt

Interface Security Systems LLC Growth Capital 290 USD Capital One IT Security Senior Debt

First Watch Restaurants, Inc. Buyout 225 USD Golub Capital Restaurants Unitranche

DTLR / Sneaker Villa Merger 200 USD Golub Capital Retail Senior Debt

Cafe Rio, Inc. Buyout 146 USD Golub Capital Restaurants Unitranche

CarePayment Technologies, Inc. Growth Capital 90 USD Comvest Partners Financial Services Senior Debt

Cerus Corporation Growth Capital 40 USD Oxford Finance Biomedical Senior Debt

Fox Rent A Car Inc Recapitalization 25 USD Kemper Corporation, NewSpring Capital, Star Mountain Capital Transportation Mezzanine



Private Debt Spotlight | November 20176 Preqin Ltd. 2017 / www.preqin.com

Q3 UPDATE: FUND PERFORMANCE

Direct lending strategies have the highest horizon IRRs across the one-

and three-year periods to December 2016, while mezzanine funds returned 87bps more in the five years to December 2016 (Fig. 1). The outsized returns of direct lending compared to the private debt asset class as a whole have clearly helped fuel the uptick in fundraising, as investors hope to capture similar performance in the future. The prospect of mid to low double-digit returns while maintaining a higher position in the capital structure than both mezzanine and distressed debt providers remains attractive moving into the end of 2017.

Among the private debt funds of vintage 2007 and onwards, funds of vintage 2008 have the highest median net IRR (+13.3%). However, funds of vintage 2009 have the highest top quartile boundary (+17.9%), which is 140bps higher than that of 2008 vintage funds (+16.5%, Fig. 2).

Private debt dry powder levels have remained near all-time highs in recent years: as at September 2017 there is $214bn in available capital – only $1bn less than the record high of $215bn in December 2015. Fig. 3 illustrates the relationships of called-up to committed capital, distributed to paid-in capital and

residual value to paid-in capital, adding context to the picture of capital flows across the industry. The ratio of distributed to paid-in capital drops sharply after 2010 vintage funds (84.3%) through to the most recent vintages. Inversely, the proportion of residual value to paid-in capital flips from 49.2% for 2010 vintage funds to levels in excess of 100% starting for vintage 2015 funds. The relationship between residual value and distributions is essentially a function of fund maturity and vintage, with earlier distributions seen in private debt funds versus other alternative strategies.

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

1 Year toDec-16

3 Years toDec-16

5 Years toDec-16

Direct Lending

Mezzanine

Distressed Debt

All Private Debt


Ann

ualiz

ed R

etur

n

Fig. 1: Private Debt: Horizon IRRs by Fund Type

0%

5%

10%

15%

20%

25%

30%

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

Top Quartile NetIRR Boundary

Median Net IRR

Bottom QuartileNet IRR Boundary


Net

IRR

sinc

e In

cept

ion

Vintage Year

Fig. 2: Private Debt: Median Net IRRs and Quartile Boundaries by Vintage Year

0%

20%

40%

60%

80%

100%

120%

140%

160%

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

Distributed toPaid-in Capital

Residual Value toPaid-in Capital

Called-up toCommitted Capital


Vintage Year

Fig. 3: Private Debt: Median Called-up, Distributed and Residual Value Ratios by Vintage Year

RESEARCH CENTER PREMIUM

All of the free research reports, newsletters, statistics and tools Preqin offers can be found in one place: Preqin’s Research Center Premium. This free service provides access to analysis of the latest trends in alternative assets, as well as benchmarking tools, useful presentation slide decks from recent conferences and much more.

For more information, or to sign up, please visit:

www.preqin.com/rcp

In an extract from Preqin’s recently released Private Debt Quarterly Update, Q3 2017, we present the latest performance figures for private debt funds.

https://www.preqin.com/docs/quarterly/pd/Preqin-Quarterly-Private-Debt-Update-Q3-2017.pdf

www.preqin.com/rcp

PREQIN GLOBAL DATA COVERAGE

+PLUS

Comprehensive coverage of:

+ Placement Agents + Dry Powder+ Fund Administrators + Compensation+ Law Firms + Plus much more...+ Debt Providers

THE PREQIN DIFFERENCE+ Over 390 research, support and development staff + Global presence - New York, London, Singapore, San Francisco, Hong Kong, Manila and Guangzhou+ Depth and quality of data from direct contact methods+ Unlimited data downloads+ The most trusted name in alternative assets

*Private equity includes buyout, growth, venture capital, turnaround, private equity fund of funds, private equity secondaries, direct secondaries, balanced, hybrid, hybrid fund of funds, PIPE, co-investment and co-investment multi-manager funds.


PRIVATE EQUITY* HEDGE FUNDS REAL ESTATE INFRASTRUCTURE PRIVATE DEBT NATURAL

RESOURCES

INVESTORCOVERAGE

6,848Active

Private Equity LPs

5,256Active

Hedge Fund Investors

6,062Active

Real Estate LPs

3,215Active

InfrastructureLPs

3,048Active

Private Debt Investors

2,966Active

Natural Resources Investors

FUNDCOVERAGE

18,213Private Equity

Funds

24,751Hedge Funds

6,756PE Real Estate

Funds

1,238Infrastructure

Funds

2,407Private Debt

Funds

1,823Natural Resources

Funds

FIRMCOVERAGE

12,279Private Equity Firms

9,109Hedge Fund

Firms

4,399PE Real Estate

Firms

534Infrastructure

Firms

1,550Private Debt

Firms

1,013Natural Resources

Firms

PERFORMANCECOVERAGE

5,960Private Equity

Funds

17,507Hedge Funds

1,736PE Real

Estate Funds

247Infrastructure

Funds

820Private Debt

Funds

516Natural Resources

Funds

FUNDRAISINGCOVERAGE

2,087Private Equity

Funds

15,668Hedge Funds

1,173PE Real

Estate Funds

176Infrastructure

Funds

367Private Debt

Funds

369Natural Resources

Funds

Alternatives Investment Consultants Coverage:

588Consultants Tracked

Funds Terms Coverage: Analysis Based on Data for Around

16,888Funds

Best Contacts: Carefully Selected from our Database of over

428,355Contacts

2015 Annual CAIA Corporate�e�o�ni� on Award Winner

As at 1st November 2017

ALTERNATIVES COVERAGE

FIRMS FUNDS FUNDS OPEN TO INVESTMENT

INVESTORSMONITORED

FUNDS WITH PERFORMANCE DEALS & EXITS

28,874 51,215 18,946 14,946 26,798 297,257

DEALS & EXITSCOVERAGE

BUYOUT VENTURE CAPITAL REAL ESTATE INFRASTRUCTURE PRIVATE DEBT

80,351Buyout Deals and Exits

145,592Venture Capital Deals

and Exits

45,169Real Estate Deals

26,145Infrastructure Deals

7,066Private Debt Deals

www.preqin.com/about

INDUSTRY NEWS


INDUSTRY NEWS

Do you have any news you would like to share with the readers of Spotlight? Perhaps you’re about to launch a new fund, have implemented a new investment strategy, or are considering investments beyond your usual geographic focus?

Send your updates to [email protected] and we will endeavour to publish them in the next issue.

SHARE YOUR NEWS

€2.9bnFinal size (without leverage) of

BlueBay’s Senior Loan Fund, the largest fund closed in Q3 2017.

$11bnwas raised by the five largest

private debt funds closed in Q3 2017, nearly half of the total

($23bn).

$5.3bnAggregate capital raised in Q3 2017 by Asia & Rest of World-focused funds, up from $200mn in Q2 2017.

24%of private debt funds in

market (as at October 2017) are focused on Asia & Rest of

World.

Hollencrest, the California-based wealth management firm with $1.9bn in AUM, disclosed to Preqin that it plans to make one or two private debt investments over the next 12 months of $5-10mn in size.

TAL, an Australia-based insurance company, is likely to invest with new Australia-based private debt managers in the next 12 months.

The Sacramento County Employees’ Retirement System, with $8.4bn in AUM, plans to invest in middle-market direct lending strategies in the next 12 months. The public pension fund is an active investor in private debt and maintains a 4% target allocation to the asset class.

BICEVIDA, a Chilean insurance company, with $4.5bn in AUM, will invest with both new and existing private debt managers in the next year, with a preference for experienced managers.

INVESTOR MANDATES PRIVATE DEBT DEAL ACTIVITY

Twenty-eight private debt funds have seen final closures from early July through October 2017, securing more than $23bn in aggregate capital. The largest of these funds is Senior Loan Fund from BlueBay Asset Management, coming in at a final close size of €2.9bn unlevered, and over €3bn levered. The Europe-focused vehicle will provide credit to upper-mid-market European businesses through a variety of solutions.

The largest Asia-focused fund to have closed recently is CITIC PE Multi-Strategy Fund; with a mezzanine component from the Hong Kong-based CITIC Capital, it held a final close in August 2017 on just shy of $2bn, and has a vintage year of 2016.

There have been 201 private debt deals completed or announced since July 2017, with an average debt size of $94mn, according to Preqin’s Private Debt Online. These deals span a wide variety of countries, purposes, currencies and financing partners. Seventy-five of these transactions were classified as growth capital, followed by 65 deals in the buyout category.

Sixty-six percent of deals completed since mid-2017 have been North America focused; 21% were focused on Europe, and the remainder comprises deals located in Greater China, Australia and Africa.

The buyout of CPA Global Limited by Los Angeles-based firm Leonard Green & Partners was announced in August 2017; the deal is in excess of £2.4bn with a proposed £1.2bn loan from Goldman Sachs Merchant Banking Division via its GS Mezzanine Partners VII.

RECENTLY CLOSED FUNDS







www.preqin.com/privatedebt




https://www.preqin.com/user/pd/deals/DealsBuyout_portProfile.aspx?FirmID=35337&src=9












THE FACTS


MEZZANINE IN THE USWith fundraising experiencing a slump in 2017 following a record 2016, we take a detailed look at the mezzanine fund market in the US, including fundraising, fund managers and investor commitments.

Fig. 3: 10 Largest US-Focused Mezzanine Funds Closed in 2017 YTD (As at September 2017)

Fund Firm Target Size ($mn) Final Size ($mn) Final Close Date Vintage

GoldPoint Mezzanine Partners IV GoldPoint Partners 1,200 1,300 Apr-17 2016

PA Direct Credit Opportunities Fund II Portfolio Advisors 750 740 Mar-17 2014

GCG Investors IV Greyrock Capital Group 250 275 Mar-17 2017

Tecum Capital Partners II Tecum Capital Partners 175 225 May-17 2017

Central Valley Fund III CVF Capital Partners 180 180 Mar-17 2017

WestRiver Mezzanine Loans - Loan Pool V WestRiver Capital 105 105 Mar-17 2017

Gryphon Mezzanine Partners Gryphon Investors 100 103 Aug-17 2017

Gap Debt Fund FirePower Capital Corporation - 100 May-17 2017

Balance Point Capital Partners II Balance Point Capital 75 81 Jan-17 2017

Tecum Capital Partners Separate Account Tecum Capital Partners - 50 May-17 2017


24 23

14

18

26

18

30

21

26

31

10

6.4

23.6

3.0

6.98.5 8.1

15.3

5.1

15.2

27.7

3.1

0

5

10

15

20

25

30

35

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017YTD

No. of Funds Closed Aggregate Capital Raised ($bn)


Year of Final Close

Fig. 1: US-Focused Mezzanine Fundraising, 2007 - 2017 YTD (As at September 2017)

76

29 32

5

22

12

40.8

20.9

6.70.5

18.5

1.00

10

20

30

40

50

60

70

80

DirectLending

DistressedDebt

Mezzanine Fund ofFunds

SpecialSituations

VentureDebt

No. of Funds Raising Aggregate Capital Targeted ($bn)


Fund Type

Fig. 2: US-Focused Private Debt Funds in Market (As at September 2017)

Fig. 4: 10 Largest US-Focused Mezzanine Funds in Market (As at September 2017)

Fund Firm Target Size ($mn) Fund Status Vintage

Falcon Strategic Partners V Falcon Investment Advisors 1,250 First Close 2015

Merit Mezzanine Fund VI Merit Capital Partners 600 First Close 2016

Yukon Capital Partners III Yukon Partners 500 Raising 2017

Arrowhead Mezzanine Fund III Arrowhead Mezzanine 400 Raising 2017

Ironwood Mezzanine Fund IV Ironwood Capital 400 Raising 2017

Anagenesis Capital Partners Fund Anagenesis Capital Partners 300 Raising 2017

Balance Point Capital Partners III Balance Point Capital 300 Raising 2017

Centerfield Capital Partners IV Centerfield Capital Partners 300 Raising 2017

Harbert Credit Solutions Fund IV Harbert Management Corporation 300 First Close 2017

VSS Structured Capital III Veronis Suhler Stevenson 300 Fourth Close 2015


THE FACTS


PRIVATE DEBT ONLINE

Preqin’s Private Debt Online is the leading source of data and intelligence on the growing private debt industry. This comprehensive resource tracks all aspects of the asset class, including fund managers, fund performance, fundraising, institutional investors, deals and more. Constantly updated by our team of dedicated researchers, Private Debt Online represents the most complete source of industry intelligence available today, with global coverage and all fund managers and investors profiled.

: [email protected]: www.preqin.com/privatedebt

Fig. 5: Sample Investor Commitments to US-Focused Mezzanine Funds in 2017 YTD (As at September 2017)

Fund Firm Fund Size ($mn) Investor Commitment

Size ($mn)Investor Location

ABRY Senior Equity V ABRY Partners 1,050 Illinois Municipal Retirement Fund 25 US

GoldPoint Mezzanine Partners IV GoldPoint Partners 1,200 Hyundai Marine & Fire Insurance 30 South Korea

GS Mezzanine Partners VII Goldman Sachs Merchant Banking Division - Korea Post Savings 100 South Korea

PA Direct Credit Opportunities Fund II Portfolio Advisors 750 Missouri Local Government

Employees Retirement System 100 US

Freedom 3 Investments III Freedom 3 Capital 200 Kemper - US


61%55% 55% 53%

25% 23%16% 15%

9%

0%

10%

20%

30%

40%

50%

60%

70%

Indu

stria

ls

Busi

ness

Serv

ices

Hea

lthca

re

Cons

umer

Dis

cret

iona

ry

Food

&A

gric

ultu

re

Ener

gy &

Util

ities

Tele

com

s, M

edia

& C

omm

unic

atio

n

Info

rmat

ion

Tech

nolo

gy

Mat

eria

ls


Prop

ortio

n of

Firm

s

Fig. 8: US-Based Mezzanine Fund Managers’ Industry Preferences for Underlying Investments

Fig. 7: 10 Largest US-Based Mezzanine Fund Managers by Estimated Dry Powder

Firm Estimated Dry Powder ($bn)

Total Funds Raised in Last 10

Years ($bn)

Goldman Sachs Merchant Banking Division 6.2 21.7

HPS Investment Partners 5.9 13.1

GSO Capital Partners 5.9 12.7

Crescent Capital Group 3.6 10.9

Prudential Capital Group 1.7 3.9

Audax Mezzanine 1.1 2.2

GoldPoint Partners 1.0 3.1

CRG 0.7 2.1

Oaktree Capital Management 0.5 2.4

OrbiMed Advisors 0.5 1.5


Fig. 6: Number of Firms Actively Managing Mezzanine Funds by Location

Headquarters No. of Firms

US 207

Canada 13

UK 25

France 17

Italy 7

Germany 5

Austria 5

Finland 4

Russia 4

Switzerland 4

India 5

Japan 5

Hong Kong 4

South Africa 4


Industry Preference





Register for demo access to find out how Preqin’s Private Debt Online can help your business:


Source new investors for funds

Identify new investment opportunities

Conduct competitor and market analysis

Track firms with capital available to invest

Develop new business



THE FACTS


PRIVATE DEBT IN GERMANYWe take a look at the private debt industry in Germany, as well as in the wider region of Europe, including investors, fundraising and deals.

Fig. 4: Sample Germany-Based First-Time Private Debt Funds

Fund Firm Type Target Size ($mn)

Final Size ($mn)

Fund Status Vintage

Bright Capital SME Debt Fund I Bright Capital Direct Lending - 119 Closed 2017

Direct Lending Basket I HSBC Trinkaus & Burkhardt Private Debt Fund of Funds 408 811 Closed 2014

Novum Capital I Novum Capital Special Situations 83 75 Closed 2016

Rantum Private Debt Fund I Rantum Capital Mezzanine 111 131 Closed 2015

YIELCO Special Situations YIELCO Investments Private Debt Fund of Funds 300 - First Close 2016


1 2 3 4 5Fig. 1: Five Largest Germany-Based Investors by Current Allocation to Private Debt

GOLDING CAPITAL PARTNERS

Type: Fund of Funds Manager

Location: MunichAllocation: $2.9bn

PRIME CAPITALType: Asset Manager

Location: FrankfurtAllocation: $1.5bn

TALANX ASSET MANAGEMENT

Type: Asset ManagerLocation: CologneAllocation: $1.5bn

E.ONType: Corporate

InvestorLocation: Düsseldorf

Allocation: $1.5bn

YIELCO INVESTMENTSType: Fund of Funds

ManagerLocation: Munich

Allocation: $1.2bn


1 2 3 4 5Fig. 2: Five Largest Germany-Based Private Debt Fund Managers by Total Capital Raised in the Last 10 Years

HSBC TRINKAUS & BURKHARDT

Location: DüsseldorfStrategy: Direct LendingTotal Raised: $1,350mn

IKB ASSET MANAGEMENT

Location: DüsseldorfStrategies: Direct Lending,

MezzanineTotal Raised: $873mn

GOLDING CAPITAL PARTNERS

Location: MunichStrategies: Direct Lending, Mezzanine, Distressed Debt

Total Raised: $807mn

ORLANDO MANAGEMENT

Location: MunichStrategies: Direct Lending,

Special SituationsTotal Raised: $651mn

PERUSALocation: Munich

Strategies: Distressed Debt, Special Situations

Total Raised: $522mn


Fig. 3: Sample Recent Germany-Based Private Debt Deals

G E R M A N Y

PORTFOLIO COMPANY: MauserLOCATION: BrühlINVESTMENT TYPE: Add-onDEAL DATE: February 2017DEAL SIZE: $2,300mnEQUITY SPONSORS: Bway Corporation, Stone

Canyon IndustriesDEBT PROVIDERS: Bank of America Merrill

Lynch, BMO Capital Markets, Citigroup Global Markets Inc., Goldman Sachs

INDUSTRY: Industrial

PORTFOLIO COMPANY: SynteractHCRLOCATION: MunichINVESTMENT TYPE: BuyoutDEAL DATE: May 2016DEAL SIZE: $1,500mnEQUITY SPONSOR: Amulet Capital PartnersDEBT PROVIDERS: Capital One Services, LLC, THL

Credit AdvisorsINDUSTRY: Medical Technologies

PORTFOLIO COMPANY: KrausmaffeiLOCATION: MunichINVESTMENT TYPE: BuyoutDEAL DATE: January 2016DEAL SIZE: $1,002mnEQUITY SPONSORS: AGIC Capital, ChemChina,

Guoxin International Development

DEBT PROVIDER: UniCredit GroupINDUSTRY: Manufacturing

PORTFOLIO COMPANY: ConCardis GmbHLOCATION: EschbornINVESTMENT TYPE: BuyoutDEAL DATE: January 2017DEAL SIZE: $744mnEQUITY SPONSORS: Advent International, Bain

CapitalDEBT PROVIDERS: Goldman Sachs, HSBC Bank,

Morgan StanleyINDUSTRY: Software

THE FACTS


PRIVATE DEBT ONLINE

Preqin’s Private Debt Online is the leading source of data and intelligence on the growing private debt industry. This comprehensive resource tracks all aspects of the asset class, including fund managers, fund performance, fundraising, institutional investors, deals and more. Constantly updated by our team of dedicated researchers, Private Debt Online represents the most complete source of industry intelligence available today, with global coverage and all fund managers and investors profiled.

: [email protected]: www.preqin.com/privatedebt

13%

12%

20%

24%

10%

10%

11%

2%

11%

13%

9%

5%

4%

5%

4%

5%

60%

60%

55%

63%

1%

1%

1%

0% 20% 40% 60% 80% 100%

Global

North America

Europe

Germany

Separate Private Debt Allocation General Alternatives AllocationPart of Multiple Allocations Part of Fixed Income AllocationPart of Private Equity Allocation Part of Opportunistic Allocation


Proportion of Investors

Fig. 9: Source of Private Debt Allocation by Investor Location

2

1

2

4

3 3

0.8

0.30.7 0.8

1.1

0.5

0

1

2

3

4

5

2011 2012 2013 2014 2015 2016 2017 YTD



Year of Final Close

Fig. 5: Annual Germany-Based Private Debt Fundraising, 2011 - 2017 YTD (As at September 2017)

17

45 5

10.4

8.2

1.5

4.4

0

2

4

6

8

10

12

14

16

18

Direct Lending Distressed Debt Mezzanine Special Situations



Fig. 7: Europe-Focused Private Debt Fundraising in 2017 YTD by Fund Type (As at September 2017)

46

10

4

14

8

2

19.7

11.7

2.24.6 3.9

0.10

5

10

15

20

25

30

35

40

45

50

DirectLending

DistressedDebt

Fund ofFunds

Mezzanine SpecialSituations

VentureDebt



Fig. 8: Europe-Focused Private Debt Funds in Market by Fund Type (As at September 2017)

1821

35

40 41 41

28

8.6 7.7

12.6

20.9

25.9

16.8 16.3

0

5

10

15

20

25

30

35

40

45

2011 2012 2013 2014 2015 2016 2017 YTD



Year of Final Close

Fig. 6: Annual Europe-Based Private Debt Fundraising, 2011 - 2017 YTD (As at September 2017)

Fund Type Fund Type




CONFERENCES


CONFERENCES

NOVEMBER 2017

Conference Dates Location Organizer Preqin Speaker Discount Code

Elite Summit Fall 2017 6 - 8 November 2017 Montreux marcus evans Summits - -

Endowment & Foundation Forum 6 - 7 November 2017 Boston, MA Opal Financial Group - -

LPGP Connect Private Debt Berlin 7 November 2017 Berlin LPGP Connect Ryan Flanders -

AIM Summit 2017 8 - 9 November 2017 Dubai AIM Summit LLC Amy Bensted -

Global Asset & Investment Opportunities Forum 8 - 9 November 2017 Shanghai The China Investor Ee Fai Kam -

ILPA Summit 8 - 9 November 2017 New York, NY ILPA - -

DECEMBER 2017

Conference Dates Location Organizer Preqin Speaker Discount Code

Private Wealth Management Summit 2017 3 - 5 December 2017 Las Vegas, NV marcus evans

Summits - -

Marketplace Lending & Alternative Financing Summit 3 - 5 December 2017 Dana Point, CA Opal Financial Group - -

CLO Summit 3 - 5 December 2017 Dana Point, CA Opal Financial Group - -

Alternative Investing Summit 3 - 5 December 2017 Dana Point, CA Opal Financial Group - -

Astoria Investor Forum 2017 7 - 8 December 2017 Tokyo Astoria Consulting Group Ee Fai Kam $200 Discount -

PREQIN2017

ACCESS FREE CONFERENCE SLIDE DECKS AND PRESENTATIONS

Preqin attends and speaks at many different alternative assets conferences throughout the year, covering topics from infrastructure fundraising trends to alternative UCITS.

All of the conference presentations given by Preqin speakers, which feature charts and league tables from Preqin’s online products, can be viewed and downloaded from Preqin’s Research Center Premium, for free.

For more information, and to register for Preqin’s Research Center Premium, please visit:

www.preqin.com/rcp

www.preqin.com/rcp

www.preqin.com/rcp

private debtspotlight - preqin · 2017-11-20 · private debtspotlight. volume 2, issue 7 november...

Documents