Middle Market Lending Europe

Middle Market Lending - Drohne

Middle Market Lending Europe

ACCESS TO ATTRACTIVE CREDIT PREMIUMS THROUGHOUT EUROPE

Middle market (direct) lending is also referred to as corporate private debt and describes the provision of loans to mid-sized corporate borrowers on a bilateral basis or by a small number of lenders (club deal) e.g. to finance growth or acquisitions. 

200
Billion euro
Estimated size of the European private debt market
> 2.5
Trillion euro
Decline in domestic bank financing in Europe's private non-financial sector
10-100
Million euro
EBITDA range of Europe's most important SMEs

What sets our manager apart?

  • Independent private debt specialist, established in 2013, backed by L&G
  • Necessary scale for bilateral loans with AUM exceeding EUR 9.3 billion
  • Pan-European market access at eight locations
  • Proven deployment with EUR 8.3 billion invested since inception across 88 companies
  • Over 100 specialists in the company and a management team with an average experience of over 20 years
  • Dual-track investment process with two independent teams for origination and credit analysis
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Diversification

  • The pan-European model allows for broad diversification across countries, industries, sponsors and borrowers
  • Pan-European diversification with a cap of 35 percent for UK borrowers as Europe's largest direct lending market
  • Focus on defensive sectors with a sector cap of 25 percent
  • 10 percent limit for loans to borrowers with the same private equity sponsor
  • Target average allocation per borrower of 3 to 4 percent
 

Reduction of the credit risk

  • Seniority and risk limits control the credit risk and ensure compliance with the prudent investment philosophy
  • Only senior secured loans
  • Exclusion of loans without maintenance covenants (cov-lite loans)
  • Additional restrictions with regard to the credit quality and debt ratio 
 

Benefit from access to attractive opportunities

  • Pemberton's size and presence provide for selectivity and negotiating power
  • Focus on companies of the core middle market in Europe with EBITDA of EUR 10 to 100 million
  • Focus on bilateral loans to drive and control the terms
  • Upfront fees for deal origination and structuring paid by the borrowers are fully passed on to investors
 

Institutional approach and service

  • Investment philosophy and service tailored to institutional clients' needs
  • Local presence: experts on site in Europe's most important legal areas
  • Dual-track investment process with dedicated workout team
  • Internal rating model according to BaFin rating standards
  • Strong ESG awareness and reporting 
 

Only senior secured bilateral loans

The focus on senior secured bilateral loans ensures priority with regard to the capital structure, control and negotiating power vis-à-vis borrowers. The portfolio guidelines have been customized for institutional clients in Switzerland. Thus, we can control the credit risk, ensure diversification and make sure that the investment philosophy is duly complied with. 

A partner with scale and expertise

Partnering with Pemberton, a true private debt specialist, we benefit from a highly experienced team locally present in Europe's key direct lending markets. Zurich Invest Ltd selected Pemberton from more than 30 European direct lending managers. 

Cost and tax-efficient structure

Attractive conditions, realized by a Lux RAIF (Reserved Alternative Investment Fund) structure that offers regulatory security, tax efficiency, low costs and rapid implementation. Thus, it is the optimal solution for investors to access Europe's corporate private debt market.

The target portfolio in a nutshell

  • 100% core middle market in Europe
  • Senior secured corporate direct loans with variable interest rates
  • Diversified across countries, industries, private equity sponsors and borrowers
  • 100% focus on bilateral loans
  • Focus on loans to companies with asset-light business models, contractual income flows and high free cash flow conversion in defensive sectors

Key facts

 Name  Zurich Invest Middle Market Lending Europe I (EUR hedged)
 Legal structure  Lux RAIF (Zurich Privat Debt Europe LUX RAIF)
 Investor group  Institutional investors domiciled in Switzerland
 Currency  Euro (EUR) (non-euro investments hedged back to Euro)
 Administrator  Bank of New York Mellon (BNY)
 Loan administrator  Erste Financial Services GmbH (EFS)
 Auditor  PricewaterhouseCoopers (PwC)
 Target size vintage
 approx. EUR 300-500 Mio.
 First close  January 1, 2021
 Final close  End of Q3 2021
 Investment periode  3 years (capital calls in EUR: T+5 BD)
 Minimum commitment  EUR 5 Mio.
 Term  8 years, closed-ended (2 x 1 year extension option)
 Management fee  1.0% Management fee on invested capital
 Performance fee  10.0% Performance fee (5.0% hurdle)
 Expected TER  approx. 1.8% (depending on performance fee)

Our advisory service

Would you like further information? We would be glad to advise you.
Markus Binder
Markus Binder, lic. iur
Head of Institutional Customers
Hans Baumann
Hans Baumann
Customer Advisor Institutional Customers
Oana Ardelean
Oana Ardelean
Customer Advisor Institutional Customers
Peter Bezak
Peter Bezak, MSc MAS
RFP Content Writer & Consultant Relations, Institutional Customers
Marcel Wüthrich
Marcel Wüthrich
Customer Advisor Institutional Customers
Thomas Sonderegger
Thomas Sonderegger
Customer Advisor Institutional Customers

Address

  • Zurich Invest Ltd
    P.O. Box
    8085 Zurich