Investing in Private Debt
Providing debt to established, private UK companies in exchange for high annual yields and a share in any capital growth.
Target returns from private debt
Our private debt investments aim to deliver net returns to clients of 15-20% IRR over a two to five year period. This typically involves an annual yield of 10-15%. Debt returns are more modest than equity returns as the associated investments carry comparatively lower risk.
Investment criteria for debt transactions
We help solid, ambitious UK private companies to fund their growth plans as an alternative to bank lending or equity investment. We provide between £3m - £10m of debt funding and impose no constraints on our lending capacity or criteria, preferring to evaluate each opportunity on its own merits and requirements.
This enables us to structure terms to suit each business, whilst providing attractive terms for our clients.
Case study: Selection Services - 180% IRR achieved
Our clients provided a £3.5m flexible debt package to enable capital to be released to a former Chairman of IT services business Selection Services. The former Chairman required liquidity ahead of a sale and we were introduced as a financing partner. Selection Services was sold in January 2016 generating a net return to clients of 1.3x capital (180% IRR) within just three months.
Debt to facilitate cash-out for non-operational stakeholders. In the case of Selection Services, we purchased existing Loan Notes and Equity from an existing Director and former Chairman of the business.
We provide replacement debt with far greater flexibility than traditional providers. For oil consultancy EPI we refinanced a senior debt package, adding new CID facilities, which enabled them to make an in-fill acquisition and placed the business on a stronger footing to take advantage of commercial opportunities.
Supplemental Acquisition Capital
Where an equity investment is not appropriate we may still be able to consider providing acquisition capital for buy-outs to supplement or complete a debt package.
Private debt investment structures
Our private debt investments take the form of debt instruments with a combination of paid and rolled interest, along with warrants or other mechanisms to secure value upon redemption.
There is no ‘one size fits all’ and we work with targets to determine the best overall package depending on the individual circumstances of each transaction.
As with our private equity offering, the fact that we are not a fund means that we can be far more flexible than most other traditional sources of capital in ensuring the appropriate structure is used in each case.
View SME portfolio and exits