MARCH 2018 PRIVATEDEBTINVESTOR.COM ANNUAL REVIEW 2017 STILL ON THE RISE THE KARTESIA TEAM IS HONOURED TO RECEIVE THE PDI ‘LENDER OF THE YEAR, EUROPE’ AWARD 2017 “WE TRULY APPRECIATE THE RECOGNITION FROM OUR INVESTORS, PEERS AND BUSINESS PARTNERS FOR OUR PAN-EUROPEAN CREDIT PLATFORM FOCUSED ON SMALL AND MEDIUM SIZED BUSINESSES.” Kartesia is dedicated to providing fully customised financing solutions to the vast universe of c. 950,000 European small to mid-cap companies. Through our differentiated positioning on this growing private debt space, we have generated an attractive illiquidity premium combined with low loss rates, demonstrating our ability to offer strong risk-adjusted returns despite two credit cycles in the last decade. With continued hard work, strong credit expertise and passion we will endeavour to consistently deliver solid results to our investors. Brussels • Frankfurt • London • Luxembourg • Madrid • Paris • www.kartesia.com Any investment carries risk and you may not get back the amount originally invested. This document is for professional clients only and does not constitute a financial promotion, investment ad- vice or recommendation, offer or a solicitation of an offer to buy or sell any asset or interest by Kartesia Advisor LLP (authorized and regulated by the Financial Conduct Authority to provide invest- ment services), registered in England and Wales under number OC 385 042 with its registered offices at 14 Clifford Street, London W1S 4JU, United Kingdom, or any other entity of the Kartesia group. PRIVATE DEBT INVESTOR | ANNUAL REVIEW 2017 EDITORIAL COMMENT ISSN 2051-8439 Senior Editor Andy Thomson Tel: +44 20 7566 5435 [email protected] Special Projects Editor Andrew Woodman Tel: +44 203 862 7494 [email protected] A year we reached Americas Editor Andrew Hedlund Tel: +1 212 633 2906 [email protected] News Editor John Bakie dizzying heights Tel: +44 20 7566 5442 [email protected] Reporter Adalla Kim Going into 2017, the overall of a broader downturn. This Tel: +852 2153 3874 [email protected] sentiment was one of opti- sentiment came across in Head of Marketing Solutions mism. Despite a politically our US report in September Beth Piercy Tel: +44 20 7566 5464 fraught 2016, the market had when managers asked whether [email protected] Senior Production Editor a relatively good prognosis. the market was now into an Mike Simlett [email protected] Fundraising was down, but extra innings. The fact six Head of Production we still saw a healthy $111 of the largest 10 funds cur- Tian Mullarkey [email protected] billion raised at a time when rently in market are target- Subscriptions the broader global markets ing distressed opportunities, Ian Gallagher (Americas) +1 646 619 8131 [email protected] were braced for a rough ride. certainly suggests some GPs Daniele Lorusso (EMEA) +44 (0)20 7566 5432 Fast forward 12 months are already preparing for all [email protected] Sigi Fung (Asia-Pacific) +852 2153 3140 and the optimists seem to possibilities. [email protected] have been vindicated. Not “MORE CAPITAL That said, if the last two For subscription information visit RAISED DOES www.privatedebtinvestor.com only did fundraising rebound years have shown us anything, NOT MEAN MORE Director, Digital Product Development in 2017, but it also reached it is that making predictions Amanda Janis CHAMPAGNE CORKS [email protected] new heights with private debt is a precarious business. Editorial Director funds raising more than $180 BEING POPPED” Whatever the future holds, Philip Borel [email protected] million in aggregate. Though, this annual review provides Research and Analytics it must be said, more capital an indispensable record of Dan Gunner [email protected] raised does not mean more where the asset class stands Publishing Director Paul McLean champagne corks being popped. The number today and, with the publication of our fifth [email protected] of fund closes by individual managers was at annual awards, a view on the major players that Chief Executive Tim McLoughlin a five-year low as the industry incumbents are making their mark on the industry now. [email protected] Managing Director – Americas absorbed the lion’s share of LP commitments. Colm Gilmore [email protected] While 2017 was a good year for the big guys, Enjoy the review, Managing Director – Asia things were not as easy for first-time managers. Chris Petersen [email protected] There is also the sense the market could yet NEW YORK be a victim of its own success. One topic that 130 W 42nd Street, Suite 450,New York, NY 10036 LONDON has cropped up several times in this review 7th Floor, 100 Wood St, London EC2V 7AN – and throughout the year – is the weight of HONG KONG 19F On Hing Building, 1 On Hing Terrace, all the dry powder that needs to be deployed. Andrew Woodman Central, Hong Kong The opportunities may not yet be thin on the Special Projects Editor © PEI Media Ltd 2018 No statement in this magazine is to be construed as a ground, but managers will still have to work [email protected] recommendation to buy or sell securities. Neither this publication nor any part of it may be reproduced or transmitted in any form or harder to find and win new deals in a more by any means, electronic or mechanical, including photocopying, recording, or by any information storage or retrieval system, competitive environment. without the prior permission of the publisher. Whilst every effort has been made to ensure its accuracy, the publisher and All the while, the industry faces the prospect contributors accept no responsibility for the accuracy of the content in this magazine. Readers should also be aware that external contributors may represent firms that may have an of the tide eventually turning in the context interest in companies and/or their securities mentioned in their contributions herein. Annual Review 2017 | Private Debt Investor 1 PRIVATE DEBT INVESTOR | ANNUAL REVIEW 2017 CONTENTS ANALYSIS DATA PDI ANNUAL 4 What we learned 6 Tailored solutions AWARDS 2017 Private debt investors have in 2017 19 On the rise Bigger funds, niche strategies and increased dealflow across Europe, Now into their fifth year, PDI's friendlier banks were just a few of providing bespoke structures annual awards recognise the the trends to emerge over the last for predominantly event-based achievements of the private debt 12 months financings industry’s leading lights in 2017 48 Land of the giants 8 Calculated cuts As predicted in H1, 2017 revealed 22 Roll of honour At first glance, the US government’s itself to be the biggest fundraising tax bill is business friendly. But year on record for the private debt industry it is a 24 Global double-edged blade 29 The Americas 10 State of the union The fast-growing European private GUEST debt market is in a state of flux. COMMENTARY 35 Europe While the UK may still dominate, 16 Dry powder its neighbours are growing in 41 Asia-Pacific prominence as the industry matures and diversity Following a standout year of 14 Pacific prospects fundraising, Tavneet Bakshi and Asian investors have traditionally Christian Allgeier, partner and had a relatively small footprint in director at placement agent First the world of private debt, but some Avenue Partners, respectively, offer institutions are becoming more insight on LP perspectives active. We reveal some of the Asian insurers that are making their mark 46 Partner predictions Two senior industry figures share their thoughts on the themes of 2018 2 Private Debt Investor | Annual Review 2017 UNITRANCHE SPECIAL 22 Do unitranches work?Flexibly The ‘agreement among lenders’ is relatively untested, but Peter J Antoszyk and Stephen A Boyko of Proskauer describe one court case that provides comfort for those concerned aboutdesigned enforceability 24 Our flexible friends Unitranche offers options to borrowers, but doessolutions it offer sensible terms? Investing in private debt, credit 28 Not all unitranche loans are created equal and equity for 29 years Unitranche has established itself as a viable product, but questions about risk and reward need to be asked in order to make informed investment decisions, write Kelli O’Connell and Joseph Lazewski Congratulations to of NXT Capital 30 The ‘smidcap’ segment the award winners The breadth of opportunities offered by the lower end of the market is key to unitranche’sSenior lender Fundraising Global sponsored sustainable success, maintains Jaime Prieto of Kartesiaof the year of the year deal of the year SDP III SDP III Synerlab £5.2bn £5.2bn €162m Oct 2017 Oct 2017 Investment General enquiries [email protected] Disclaimer: This advertisement is issued by ICG Alternative Investment Limited, which is authorised and regulated by the Financial Conduct Authority. The value of investments can go down as well as up. ANNUAL REVIEW OVERVIEW What we learned in 2017 Bigger funds, niche strategies and friendlier banks were just a few of the trends to emerge over the last 12 months, writes Andrew Woodman MORE CAPITAL IS GOING INTO FEWER HANDS One of the most significant takeaways from our annual fundraising report is that more capital is being raised by fewer funds. As the private debt market matures, investors are gravitating towards managers able to demon- strate a track record, can leverage immense scale and have a global footprint. Over a third of the capital raised in 2017 was gathered by just 10 managers. Apollo’s hybrid debt and equity fund was the largest vehicle, raising $24.7 billion; Oaktree raised the largest pure debt vehicle with an $8.9 billion final close for Opportunities Fund Xb. Beyond fundraising, we have also seen consolidation at the manager level.