Private credit activity in the middle-market space has grown in recent years as traditional financing available from commercial banks has retreated, and nontraditional players have entered the space to pursue these opportunities. The middle market accounts for a large percentage of sponsored private equity transactions, which often include junior/mezzanine financing.
Benefits of Middle-Market Private Debt Investing
Opportunistic credit (particularly mezzanine) transactions can play a significant role in middle-market leveraged buyout (LBO) financings, while regulatory constraints and a rising interest rate environment should have positive impacts. The middle-market lending space offers potentially lower competition, greater access to information from sponsors and company management, and the ability to customize transaction structures.
Acquiring the mezzanine finance business and team from Credit Suisse in 2013, Portfolio Advisors focuses on middle-market direct lending through sponsored/LBO private debt and mezzanine investments. We provide direct lending in support of growth, acquisitions, recapitalizations and/or refinancing of older, more expensive debt. We are also an early mover in private credit secondary transactions, having built one of the industry’s few dedicated strategies aimed at this growing market. Key characteristics of our approach include the following:
- Investment Characteristics: Generally $10-75 million investment size; typically structured with 90% debt and 10% equity upside; companies with $10 million of EBITDA
- Diversified Portfolio: We seek to build a diversified portfolio across multiple sectors and industries.
- J-curve Mitigation: The combination of contractual yield with potential equity upside can limit J-curve effects.
- The Portfolio Advisors Platform: Extensive relationships with sponsors translates into significant sourcing opportunities and closing credit transactions.
- Experienced Team: The senior members of our credit team have decades of private debt/equity experience and work closely with our primary, secondary and co-investment teams on credit-related investment opportunities.