The portfolio will primarily target borrowers struggling to source long-term financing from traditional banks.
Fund manager Shard Credit Partners has closed its first UK lower mid-market direct lending fund at £90m.
All commitments come from UK and European institutional investors, including British Business Investments (the commercial arm of the British Business Bank) and the European Investment Fund, with the fund aiming to provide senior and junior loan capital to a diverse range of SMEs operating in the UK lower mid-market.
Shard Credit Partners will primarily target borrowers with annual revenues of below £100m struggling to source long-term financing from traditional banks.
The loan capital will fund business growth and expansion for firms, or for event driven M&A activity, such as a transformative acquisition or a management buy-out. Typical loan sizes will range between £5-15m per borrower, with maturities of three to seven years.
Following a flurry of fund launches the UK mid-market is becoming increasingly competitive, with more than forty direct lending funds seeking to deploy billions of pounds equivalent in committed capital.
Nonetheless, the UK lower mid-market, Shard argues, remains significantly under-developed in terms of alternative, non-bank financing. Platforms such as Funding Circle rarely venture above £500k while the larger direct lenders such as ICG and Alcentra tend operate with much larger ticket sizes.
There are approximately 33,500 SMEs in the UK lower mid-market, representing a large and sustainable market opportunity for Shard Credit Partners’ direct lending fund.
Shard Credit Partners is currently in advanced discussions with a broad range of UK and international institutional investors seeking to commit to the fund at a second close in early 2018. The team is planning to hold a final close for the fund at £250 million, with a hard cap at £300m, by Q4 2018.