Pemberton, a UK-based asset manager backed by insurance giant Legal & General, has launched a new private debt strategy to fund mid-market companies.
The “strategic credit opportunities” strategy differs from Pemberton's previous offerings as it will provide junior capital, as well as senior.
The junior capital, which has a lower repayment priority in event of liquidation, will be available to “proven companies” seeking funding for expansion and acquisitions.
Meanwhile senior and unitranche funding will be loaned to companies who may have experienced difficulties and are looking to “return to growth”, whose risk is perceived as too high for Pemberton's senior-only fund.
“We are expanding on the lending capacity we have generated through our senior debt strategies to provide greater opportunities throughout the capital structure,” said managing partner Symon Drake-Brockman.
“With this new strategy, we will continue our commitment to delivering the risk-adjusted returns investors expect and the capital European companies need.”
Pemberton has not disclosed how much it intends to raise from investors for this strategy, but City A.M. understands it will be seeking at least as much as it dedicated to its €1.2bn European mid-market fund.
The firm believes there is a call for this type of “flexible” funding solution in the market currently, as banks who have been the traditional lending sources are increasingly affected by regulation.
According to Pemberton, the Basel III international regulatory framework has made it “prohibitively expensive” for banks to provide subordinated debt (that which is repayable only after other higher-ranking securities) as it typically counts as a capital deduction.
“Europe has seen more than €4 trillion in cross-border bank lending withdrawn since 2008. For UK and European mid-market companies, this reduction has left them with one less avenue for accessing flexible finance,” said Ben Gulliver, Pemberton's strategic credit portfolio manager.
“The pull-back in European cross-border lending, as banks retrench to their domestic markets, has left an air pocket that needs to be filled.”
The fund will invest in businesses with a turnover of between €75m and €1bn.