A Swedish Credit Investor Just Opened $1.6 Billion War Chest

(Bloomberg) -- The chief executive of Swedish credit manager Proventus Capital Management AB says the time is ripe to invest the 1.5 billion-euro ($1.6 billion) stockpile of capital it’s built as mid-sized companies in Europe cry out for financing.

“In the private credit market we are beginning to see quite a few situations,” CEO Daniel Sachs said in an interview. “We expect quite a strong deal flow in the coming months and are already starting to see that materialize.”

The damage wrought by the Covid-19 pandemic has more or less closed the new issuance market for speculative-grade borrowers in the Nordic region and across Europe more broadly. That’s opening up fresh opportunities for Proventus to provide loans directly to privately owned family companies with a refinancing need, or to those that are keen to grow through acquisitions.

“Companies that were just about to go to market to raise funds before all this happened are now looking for different alternatives,” said Sachs, whose Stockholm-based firm was originally spun off from the family office of Swedish financier Robert Weil.

The fallout from the virus also means that banks are now “very preoccupied” with their existing customers, cutting off yet another potential source of funding for new borrowers.

Sachs says Nordic lenders have been more active during the crisis than in many other European countries, where “we see banks being quite bureaucratic.”

He cites the example of companies that were doing well before Covid-19 now being assigned to lenders’ restructuring teams at a time when they most need support. Such a decision consumes “a lot of time with the production of consulting reports” and “sometimes unduly burdens” the affected company, he said.

Europe’s private credit market has grown tenfold in the past decade, according to Sachs. And even amid the volatility triggered by the pandemic, the industry in Europe has continued to see mutlibillion dollar fund raising from the likes of GSO Capital Partners and Crescent Capital.

Proventus Capital Management closed its fourth fund after raising 1.8 billion euros in October, exceeding the size of its previous private debt vehicle by 40%. At the time, the firm said 20% of the fund had already been invested and committed through nine investments.

“We have a lot liquidity to invest,” Sachs said, “and of course we are working closely with our existing investments, but we are spending at least as much time looking at new ones.”

Still, Sachs acknowledges that risks have been rising in corporate credit of late, saying “we’ve seen deteriorating credit quality in recent years.”

On Thursday, for example, a $416 million Swedish credit fund suspended redemptions as investors clamored to withdraw money representing nearly 20% of the vehicle’s assets. The Scandinavian Credit Fund I provides direct lending to small- and medium-sized companies.

Read More: Swedish Direct Lending Fund Blocks Investors From Withdrawals

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