Opportunity and Value in Private Credit

在中间市场普遍存在的私人债务机会方面始终仍然存在，但许多机构投资者发现很难进入中部市场。亚博赞助欧冠

“You can’t flip a switch and succeed,” says Andrew Edgell, Senior Managing Director & Global Head of Credit Investments, at CPP Investments, one of the world’s largest pension funds. “You need the proper infrastructure to get it right. That said, we see tremendous opportunity in the mid-market space – where deal sizes are slightly smaller and the business is a lot more human resource intensive.”

CPP Investments taps into the potential of mid-market exposure in private credit through private debt credit manager Antares Capital, a market leader for more than 25 years. CPP Investments invested in Antares in 2015.

“We partner with Antares to access the middle market, and see huge value in originating and underwriting of loans,” Edgell says. “Because the deal sizes are smaller, we see better pricing and terms than we would on the broadly syndicated market. For example, middle market direct loans have offered up to 200 basis point premium versus broadly syndicated loans since 2013.¹我们在若干情景中与Antares合作，在其发起的情况下，开发了随着时间的推移的关系，投资于资本资本和资本结构的混合物部分。我们提供了初级资本，在赞助商将业务销售给另一个赞助商，甚至公开。与Antares的共生关系使我们随着时间的推移，我们可以在资本结构中全面地发挥。我们认为在中间市场上有很多机会，以及整体债务。“

变化的中间市场

The definition of middle market has expanded as the market has matured and become a more attractive asset class. There was a time when investors would get covenants on every mid-market deal, but cov-lite has become increasingly common, particularly at the upper end of the middle market size range.

“There are ways we strive to mitigate the risk associated with the loss of covenants, but it’s becoming more difficult to harvest yield premium unless you are well positioned as a lending leader,” says Edgell.

多年来，中期市场也有更多的球员 - 与更多的球员 - 不是很多，而且更多 - 愿意写下更大的支票。例如，美国在2019年9月以来，Unitranche贷款大约50亿美元的贷款。²直接贷方交易规模与他们多年来一直在融资的投资组合公司一起发展，但只有最大的球员只能在中间市场的最高端发挥持有规模的能力。

“即使在中市之外，直接贷款人也正在占银行通常领导的广泛混合大型交易 - 并且仍然获得高级差价，因为直接贷款可以更容易执行。Edgell说，没有[信用]评级或路演，没有Flex - 并且有保密性，“Ed​​gell说。

Wider opportunity set

At CPP Investments, the credit investment business is highly diversified, providing debt-financing solutions across the entire capital structure. About 80% of its strategies are private, and a large chunk of that is corporate leveraged buyout [LBO] finance.

“Private debt and private credit include many different sleeves, of course, but the main part of our business is LBO finance,” says Edgell. “Because we’re one of the world’s largest private equity LPs, we’ve been able to create some incumbency in many capital structures and be there for multiple iterations of the company’s lifecycle. This is very attractive for identifying credit opportunities as we look to grow our AUM. Also, from an underwriting and risk management perspective, it puts us in a position to better understand company management teams and see how their strategies play out.”

Edgell and his team tend to be fast followers of sponsor-backed debt because, as he puts it, “sponsors tend to invest in better businesses, so we get behind their diligence. They bring a lot of industry expertise to the table. They tend to organize themselves around industry sectors.”

在他的经验中，Edgell已经发现这尤其如此，他的团队熟悉养老基金的私募股权基金和直接私募股权业务。这将在私募股权赞助商的大门进入大门时，这一业务已经被审查的信心。赞助商也在大流行高度的金融和敏捷管理支持方面加强。

A huge driver of growth in the credit markets is private equity sponsors. There’s over $1.1 trillion of PE dry powder according to recent numbers from Preqin, and similarly cited direct lending numbers are about 20% of that amount. Even with all that dry powder, there’s likely not enough debt capital available to meet demand.

Edgell likes what he sees in that regard, but he’s not overlooking other opportunities.

“At a high level, we see great opportunity in the corporate credit markets,” he says. “Seeing a big opportunity, however, doesn’t stop us from trying to diversify the portfolio and target other pockets of opportunity. And that’s ultimately how we drive long-term value for CPP Investments’ contributors and beneficiaries.”

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¹Refinitiv LPC

²“Direct Lending Deals,” Q3 2021