Private Debt Presentation - Edl - June 2019
Private Debt Presentation - Edl - June 2019
Private Debt Presentation - Edl - June 2019
• Investment Objective
̵ Capital protection with generation of consistent, low volatility and superior risk-adjusted returns
̵ The strategy is designed to capitalize on the funding gap resulting from increased regulatory restrictions on banks and
provide investors with exposure to a market that requires specialized knowledge and is otherwise difficult to access
̵ Opportunity to build a highly scalable business in the European lower mid-market lending market
Quarterly European Leverage Bank-led vs Institutional Loans Volume, Source: Dealogic Insights
Loans to European Corporations Over €1m as of October 2018 Source: ECBDatabank, Stone Mountain Capital Research
EDL Fund - Strictly Private & Confidential 5
SME Market
We lend to growing lower-mid market companies as we believe the
companies are underfinanced by both traditional and alternative lenders.
The need for capital is increasing as the number of SMEs and their growth
are increasing with availability of equity upside. EDL will focus on core
markets in Northern/Western Europe, where there is solid lender
friendly legislation with proven workout procedures and data availability.
EDL’s core market consists of more than 14 million corporates in UK &
Ireland, Belgium, Netherlands, Luxembourg, Germany, Switzerland, Austria, 0.02
Denmark, Sweden, Finland, Norway and Iceland.
Core Market
̵ European-focused direct lending funds have raised $83.7 billion from 2013 to 3Q18
̵ The size of the alternative lending market in the US highlights the market potential for alternative lenders in Europe
US Europe
Non-Bank Non-Bank
25% Institutional 20% Institutional
Lenders Lenders
Bank Bank
75% 80%
• Sector focus
̵ Healthcare
̵ Energy (oil & gas, also renewables)
̵ Business Services
̵ Manufacturing
̵ Consumer
̵ Real estate
• Legal systems
̵ “Beer vs wine countries”
̵ Proven bankruptcy regimes and workout procedures
̵ Tested inter-creditor agreements
• Structural alternatives
̵ Cash-flow based, real-estate collateralized
̵ Stretched senior and asset-backed facility
̵ Further diversification
̵ Limited admixture involving non-European, cross jurisdictional opportunities (e.g. assets in Europe, HQ elsewhere)
EDL Fund - Strictly Private & Confidential 8
Private Debt Market
Private Debt AuM, Forecast 2023, Source: Preqin Private Debt Fundraising 3Q18 by Fund Type, Source: Preqin
Lending Activity in Europe, Source: Deloitte Alternative Lender Deal Leverage and interest rate coverage of European corporates, 2008-2Q18
Tracker Autumn 2018 Source: ICG
Corporate Capital Stack Spectrum in US and EU, October 2018, Source: Barclays Research, Moody’s, Stone Mountain Capital Resea rch
John is the Ma naging Pa rtner and the Co-CIO of the European Di rect Lending Fund. Prior to this, he was a Senior Advisor to Belgra ve Ca pi tal Mana gement, a member of
the investment committee of Bri dge Asset Management and Chief Investment Offi cer and a founding pa rtner of Pampl ona Ca pital Management LLP wi th $3.5 billion
under management. John has held a number of senior roles in the asset management and banking i ndus try, including Chief Investment Offi cer of Spyre Asset
Mana gement, a $500 million Fund of Hedge Funds Group, Head of Al terna ti ve Inves tments and Financing within Abbey Nati onal Treasury Servi ces and Principal Fund
Ma na ger and Managing Director of Gottex Asset Management.
John Haam
co-CIO
Tel.: +44 7740640259
Oli ver is Managing Pa rtner and CEO of Stone Mountain Ca pital Pa rtners, the general pa rtner of the European Di rect Lending Fund. He is managing pa rtner and CEO of
Stone Mountain Capi tal , a London and Swi tzerland based alterna ti ve investment advisor, providing al terna ti ve i nves tment resea rch, s tructuring and pla cement
solutions to hedge funds , pri va te debt, pri va te equi ty and corporate finance wi th Al ternati ve Assets under Advisory (AuA) of $51bn. He has over 20 yea rs of experience.
Prior, Oli ver was a Pa rtner and Member of the Executi ve Commi ttee of Pryta nia Inves tment Advisors , a credi t asset manager in London wi th $1.2 billion AuM seeded
and ma jori ty owned by JP Morgan. As Head of Ori gina tion & Client Mana gement he marketed the credi t fund ra nge to i nsti tuti onal investors gl oball y and developed
investment and risk advisory for legacy asset holders in bad banks , governmental agencies , central banks and insurers . Pri or, he was Head of Gl obal Business Soluti ons
a t Moody's Anal ytics in London. Here he developed client solutions around risk anal yti cs and advisory servi ces in the a rea of valua tion and risk assessment of structured
Oliver Fochler fi nance and deri va ti ves , credi t portfolio management, liquidi ty risk and Sol vency II. He ini tiall y covered Moody's KMV's global accounts in banking, insurance and asset
CEO ma nagement in relati on to credi t portfolio and risk management solutions . Prior, he was responsible for business development of s tra tegi c solutions encompassing
Tel.: +44 7922 436 360 Basel II credi t risk, s tructured products, ALM, and deri va ti ves in Reuters Trade & Risk Mana gement i n Zuri ch. Oli ver is a regula r speaker at international fi nance
conferences and semi nars and publishes a rti cles a round the topi cs al terna ti ve i nves tments , credi t, modelling, regula tion and quantita ti ve ris k mana gement. Oli ver is a
certi fied Fi nancial Risk Manager (FRM) of GARP. He holds a BBA from the Uni versi ty of Augsburg in Germany a nd an MBA and Li centiate in finance and computer
s ci ence with honors magna cum laude from the University of Zurich i n Switzerland, where he did his PhD studies (ABD) in quantitative finance.
Alexander is CFO of the European Di rect Lending Fund and Senior Advisor for Financial Structuri ng in Stone Mountain Ca pital since 2014 wi th special focus on credi t
products and al terna ti ve i nves tments. He was Di rector for European sustainable infrastructure investments in the Energy Effi ciency team a t SUSI Pa rtners i n Züri ch,
s tructuri ng tailor-made financing solutions for i ts technology pa rtners whi ch included debt and equi ty s tructures . Prior, he was head of asset-based financi ng a t
MainFi rst Bank in Fra nkfurt and Zuri ch. He has more than 20 yea rs of experience in s tructuri ng and origi nating structured products . Prior to MainFi rst, Alex was
Pa rtner and Managi ng Di rector a t Aurelius Capi tal Management, an asset mana ger focused on s tructured credi t based in Vienna. Alex was in cha rge of client
solutions and portfolio management wi th over EUR 2 billion assets under management. Between 1994 and 2006, Alexander was with Bea r Stearns i n New York and
Alexander Rothlin London and HSBC in London, worki ng on va rious securi tiza tion transactions in Latin Ameri ca, Europe and Japan. During his time i n London, Alex was a boa rd
CFO member a t Tituliza ción de Acti vos (TdA) Sociedad Ges tora de Fondos de Tituliza ción SA, a joi nt venture between va ri ous Spanish sa vings banks and Bea r Stea rns
Tel.: +41 79 9625818 International. Al ex holds a Master of Arts i n Business Administration from the University of St Gallen, Switzerland.
Ashvi n is a Senior Credi t Researcher for European Di rect Lending Fund and focusses on company resea rch from a corpora te credi t perspecti ve of specifi c i ndus tries
and make credi t recommenda tions to management. As hvin is Senior Advisor for Research in Stone Mountain Ca pi tal since 2013. He has been invol ved in the anal ysis
of the interna tional automoti ve indus try since 1989 and is Mana ging Di rector of Intelligence Automoti ve Asia, whi ch provi des research, anal ysis and advisory servi ces
on developments in the global automoti ve indus try, wi th speci fi c focus on Asia and Asian companies . Main a reas of current research acti vi ties include the anal ysis of
provincial and ci ty level demand and competi ti ve dynami cs i n China ’s auto industry, luxury ca r market dynami cs in China, opportunities and challenges i n China ’s
Electri c Vehi cle (EV) ma rket, India’s auto industry developments including compa risons wi th China, gl obal opportuni ties and challenges for Japanese and Korean
brands and evolution of vehi cle markets in ASEAN region. Between 1992 and 2007, he advised at Global Insi ght (toda y IHS Global Insight), ini tially in the European
Ashvin Chotai auto-consulti ng pra ctice and then specialized in Asia. Between 1996 and 2007, he was the Head of Asian Automoti ve Research and pla yed an ins trumental role in the
Senior Credit Research development of Global Insight’s Asian and emerging ma rket automoti ve resea rch and anal yti cal capabili ties. He is frequentl y invi ted to make presenta tions a t
Tel.: +44 7740 823049
conferences and at ma jor corpora tions in North Ameri ca , Europe, and Asia . He has presented a t Inves tor Forum in Las Vegas, Shanghai , Hong Kong, Tokyo, San
Fra ncisco and New Delhi and conducted meetings with investors and automoti ve companies a cross the globe. He is also wi del y quoted in media on gl obal and Asian
automoti ve issues . Ashvin's ca reer sta rted in the oil explora tion i ndus try wi th Schl umberger, where he worked for nine yea rs , mainl y in Asia. He held a number of
positions, i ncluding Field Engineer, Opera tional Mana gement, Country Manager a nd Business Development i n several European a nd Asian countries , including
assignments in Indonesia, India , Taiwan, Philippines, China , Norwa y and the UK. Ashvi n holds a Bachelor of Science in Electroni c and Electri cal Engineering from Bristol
Uni versity, UK a nd has a n MBA from London Business School.
Alexandros is a Credi t Anal ys t in the European Di rect Lendi ng Fund with focus on assessing and performing due dili gence of transa ctions for the fund and credi t
resea rch. Alexandros is Anal ys t in Stone Mountain Capi tal since 2015 and focuses on quanti ta ti ve al terna ti ve investment anal ysis and product development. He
worked as a performance anal yst in Elen and has published a cademi c papers a round real esta te, life expectancy in insurance, the equi ty premi um puzzle in beha vioral
fi nance, portfolio theory and the effi cient frontier, a compa rison of fund of hedge funds against single manager hedge funds and other alternati ve inves tment and
corpora te fi nance related topi cs. Alexandros holds a Ba chelor of Science i n Accounti ng and Finance from Athens Uni versity of Economi cs and Business and a Mas ter of
Sci ence in Corporate Finance from ICMA Centre of the University i n Reading, UK.
Alexandros Kyparissis
Credit Analyst
Tel.: +44 7843 144007
The team has been working together in different roles and capacities to structure and invest in European private lending deals for over 10
years.
• Most senior investment professional and deal structurer at • Pamplona Capital (2004 – 2007):
Oaktree Capital’s Strategic Credit platform in Europe AUM over $900m
• EDL deploys same investment strategy and approach for - Global Emerging Market: Annualised Return:
firms with lower EBITDA in European lower middle market 23.52% / Annualised Volatility: 6.39%
We believe the value-added to investors comes from thorough and niche investment process.
• Deal originated • Corporate • Take lead role in • Qualitative and • Alignment of • Track actual • Board
from our team Overview transactions quantitative due transactions performance vs. representation
through existing diligence with projections giving us up-to-
relationships • Evaluation of • Determine yield, investment date information
management team maturity, seniority • Focus on the legal objectives • Filings (if public), and company
• Global network of aspect and laws of business update knowledge
financial advisors • Advanced Cash • Creditor protections every jurisdiction • Document and and press
and other flow analysis investment releases • Risk identification
relationships with • Covenants • Extensive research execution and mitigation
lawyers, banks, • Relative Value and partnering with • Monitoring
service providers, analysis and • Warrant on Equity rating agencies for • Monitoring payments, ratio • Stress testing
marketplace illiquidity premium data, analysis executed by compliance and
platforms with test • Currency hedging processes and analyst team collateral • Diversification and
underwriting scoring methods high rejection rate
capabilities, co- • Asset valuation • Financial & Legal • Align • Maintain
investments, club structuring • Background check, documentation fundamental • Measures to
deals • Financial modelling referrals and with valuations address liquidity
• Tax structuring interviewing investment and liabilities
• Deals focused on • Comparable credit management team exit objectives • Harmonised mismatch
lower mid-market analysis • Negative voting and BoD relationship with
and CRE-backed • Board service provider • Constraints on
lending in UK, • Legal and • Contractual • Analyse company’s representation Leverage
Germany, Nordics jurisdictional protection competitive • Purchase or sale
and analysis positioning and in open market or • Constraints on type
opportunistically in • Contingencies financial health private of investors
rest of Continental • Stress test transactions
Europe downside equity • Management based on market • Pre-defined risk
cushion representation inefficiencies limits
• Deals need to meet
initial requirements • Equity upside yield • Expertise in risk
for size, geography analysis monitoring
and sector
EDL Fund - Strictly Private & Confidential 15
Investment Process – Evaluation & Analysis
EDL operates within the context of top-down analysis of macro-economic and sectoral trends
• Macro-economic trends are evaluated on an ongoing basis to assess relative value and investment timing
• Sectoral trends and opportunities are assessed to direct sourcing priorities
EDL monitors the portfolio investments and manages risk on a ongoing basis
• Actual vs projected performance monitored
• Diversification, concentration, and portfolio biases and changes monitored real time
Risk Management
• Diversification across borrowers and less in regards to sectors. Our sector specific knowledge and expertise partially
outweigh sector diversification
• Board level representation when appropriate
• Constraints on the type of investors
• Stringent credit assessment and high rejection rates
• Industry appropriate constraints on leverage
• Closed-end structure addresses assets-liabilities mismatch and redemptions
Risk Resolution
• Management Restructuring
• Reorganization
• Downsizing Payroll
• Sale of Part of Business
• External Assessment and Advisory
• Debt Restructuring, Debt for Equity, Extension, Convertible Structure
• Sale, Windup, Administration
Primary Characteristics
• Focus on senior secured, 1st lien, unitranche lending with equity kickers to SMEs and middle-market corporates
• Individual names not to account for more that 10% of target fund volume
• Cash flow lending, but loans may also be collateralized by real assets
• 5y + 1y + 1y term in closed end fund Lux AIF SCSp (GP / LP)
Target Performance
• Ultimate net portfolio return: 8-10% (including any equity kickers)
Industrial
10% 9%
5% Consumer 16% DACH
17% Business Services 35% UK & Ireland
Healthcare
20%
Energy 19% Nordics
19% TMT
Benelux
Real Estate
20%
30%
Investment Period 3y
Provide credit to mid sized European business - Exploit funding gap resulting from increased regulatory restrictions on Banks