The launch of Private Debt Partners (PDP) wasn’t planned to coincide with Covid-19, but the timing could prove serendipitous to investors in search of predictable yields in an unpredictable market.
PDP, an alternative asset manager headquartered in Toronto with an office in Montreal, announced its launch on Wednesday — a launch that had been in the works “well before the Covid crisis became a reality,” said Jeffrey Deacon, the firm’s co-founder.
Deacon and fellow PDP co-founders Greg Dimmer and Jean-Christophe Greck were previously managing directors at Fiera Private Debt. They’re now all managing directors at PDP, which is currently raising a $750-million senior secured direct lending fund.
The closed-end fund, which will be open to institutional investors, high-net-worth investors, endowments and family offices, plans to offer five- to 10-year loans to mid-market businesses at fixed interest rates, targeting an annual yield of 6–6.5% for investors.
The loans offered by PDP could prove especially attractive to private companies at a time when banks are likely to tighten their lending rules, Dimmer said.
“When we’ve raised our fund and we’re going out to the mid-market in Canada, there’s going to be less liquidity and less capital available to good companies that are looking to borrow money,” Dimmer said. “We think that’s definitely in our favour.”
Another factor that could work in PDP’s favour is the fixed interest rates on its loans, which Greck expects will appeal to borrowers and investors alike.
“On the borrower side, any CFO looking at a fixed rate for the term of a loan has a lot of predictability of the future cash flow needed to repay the debt,” Greck said. “On the investor side, most of our investors in the past were pension plans, and a predictable cash flow allows them to match their liabilities with the cash flow of the loans.”
Dimmer said the PDP fund will cater to an “underserved niche in the Canadian mid-market” by offering long-term loans to companies with track records of recurring revenue.
“We’re going to lend money to best-of-breed companies in their sector with good management teams that aren’t over-levered and have predictable cash flows,” Dimmer said.