Resetting the hotel balance sheet to be fit for recovery was the theme of the latest conference organised by global hotel consultancy HVS, legal expert Bird & Bird, publishing group EP Business in Hospitality and restructuring advisory firm AlixPartners.
Addressing both in-person and online delegates, Graeme Smith, EMEA head of hospitality & leisure at AlixPartners considered the support received by hotels from lenders, resulting in limited restructuring activity, despite the disruption that the pandemic caused.
“There are now a number of different lenders, the landscape is more diversified so the ability to absorb shocks in the system is much greater,” he said. The sector is now operating on a lower loan-to-value basis and the pandemic caused an issue with the supply side. “Financial shareholders stood still,” he said. “They held on and provided support, which was the right thing to do.”
However, as we enter the recovery phase the current standstill consensus runs the risk of falling away and leveraged covenants will begin to be tested again which may trigger refinancing, restructuring or disposal processes. As the coming winter is likely to prove tough, Smith advised operators to actively engage with financial stakeholders to maintain support, be realistic about their outlook, plan accordingly and take early action to renegotiate terms or explore funding options if necessary.
James Salford of Bird & Bird said that while hotel values had held up, market outlook was more difficult to call as technology had changed the way people do business. “Staycations have driven performance in the domestic leisure market whilst luxury city centre, conference and airport hotels have struggled,” he said, adding that while some banks were still actively lending to hotels, this was in significantly smaller numbers than before the pandemic – although debt funds and alternative lenders were active together with an increase in the availability of mezzanine financing.
“The shift from banks to alternative lenders has been happening for a while, but has accelerated due to Covid. This is likely to be a permanent change with pricing becoming more competitive. Development finance will be difficult for the foreseeable future,” he added.
A lively Q&A session, moderated by HVS chairman Russell Kett, addressed factors likely to hamper recovery progress. “The challenge around financial forecasting particularly if you have London hotels, as well as the pace of the change – when will it come back and how will it come back,” was a keyissue for Arron Taggart of Cheyne Capital, with travel restrictions, lack of airlift and scarcity of MICE business highlighted by Jan-Willem Terlouw of Westmont Group.
Edwardian Hotels’ Peter Anscomb said the difficulty was the inability to predict hotel performance, which was “purely down to what the restrictions allow”.
Environmental, social and corporate governance [ESG] has become a growing issue, said panellists. “We are being pushed incredibly hard on ESG now,” said Taggart. “One of the key challenges is whether corporate travel will come back; if it does, it’s not going to be as before as it’s not consistent with ESG policies.”
Barclays Bank’s Tim Helliwell, citing recent research, said that Generation Z will pay a 30% premium for ESG. The panellists predicted a time that lenders wouldn’t lend to businesses that weren’t carbon neutral.
Whether or not branded hotels were in a better position going forward was also under debate, with some panellists arguing that assets and location had become more important than brand values.
“Flexibility is now very important and brands can be very restrictive,” commented Louise Gillon of Bank Leumi. She advised operators to be clear about their core business and to be realistic about what you can achieve over the next four to five years.”
There is general acknowledgement in the alternatives industry that diversity can help to improve industry outcomes but, putting in place an effective strategy to promote diversity can be challenging. SBAI’s report provides five guiding principles which act as a framework for asset managers and allocators to define their own culture and diversity strategies.
In February 2021, the SBAI formed a Global Advisory Committee comprised of senior industry leaders from asset managers and allocators. This Advisory Committee provides guidance on the strategic direction of SBAI’s Culture & Diversity initiatives.
Jane Buchan, Chair of the Global Advisory Committee, SBAI Trustee, and CEO of Martlet Asset Management said “We are thrilled to have a large and committed group of industry leaders helping guide our efforts on culture and diversity. As asset managers and allocators we must work collaboratively to solve for better and SBAI provides a great platform to do this.“
SBAI’s Culture & Diversity initiative’s primary objective is to provide practical tools to help improve culture and diversity in the alternatives industry. They will produce further guidance reports, including a focus on smaller firms and manager selection for allocators, and host discussion forums and informational events on the topic. On Monday, SBAI hosted a Culture & Diversity event to launch this report led by Jase Auby (CIO of the Teacher Retirement System of Texas), Leda Braga (SBAI Trustee and CEO of Systematica), Luke Ellis (SBAI Deputy Chair and CEO of Man Group), and Phillip Meyer (COO, GC and CCO of Oasis Management Company) – all members of the Global Advisory Committee. The event focused on Moving Beyond the Why for Culture and Diversity in the Alternatives Industry.
Mario Therrien, SBAI Chair and Head of External Investment Funds and External Management at CDPQ said “Through our collaborative platform of asset managers and allocators representing over $5 trillion of assets in our industry, at the SBAI we have an important role to help drive responsible practice, partnership, and knowledge including on culture and diversity. Ultimately, we seek to improve industry outcomes. I am excited to see this report published and look forward to further publications this year”
Maria Long Research and Content Director of the SBAI said “Our mission is to solve for better and culture and diversity is an important part of this. Through collaboration with our asset manager and allocator community in both our culture and diversity working group and the Global Advisory Committee, we have focused on moving past why this is important and on to providing practical guidance on how to improve diversity.”
For more information on the SBAI Culture & Diversity Initiative and how to get involved please contact us at info@sbai.org.
About the Standards Board for Alternative Investments (SBAI)
At the SBAI we are an active alliance of managers and investors dedicated to advancing responsible practices, partnership, and knowledge in the alternatives industry. At our core is a community that is committed to knowledge sharing, informed dialogue, and innovation. We set clear standards and actively promote responsible practice to normalise quality and fairness. Together, our community of allocators and managers create real world solutions – in short, we solve for better.
Our SBAI Alternative Investment Standards are supported by more than 140 alternative investment managers with over $1 trillion in alternative assets under management and by more than 90 major institutional investors, overseeing $4 trillion in assets. More information about our work can be found at www.sbai.org or reach out to us at info@sbai.org
Notes to Editors:
1. SBAI Culture and Diversity Global Advisory Committee
European credit specialist AlbaCore Capital Group (AlbaCore) has made three senior hires to reinforce its Operations, Business Development and Investor Relations teams.
As part of the growth of the AlbaCore platform, investing across the European credit spectrum with USD8.5bn AUM, AlbaCore has bolstered its senior executive group. Jenny Fung is appointed as Managing Director of Investor Relations in New York to further expand global investor relationships and our commitment to the region. Tara Mulholland joins as Head of Business Transformation and Micaela Kelley as Deputy Chief Operating Officer to support Matthew Courey, Chief Operating Officer and Founding Partner.
Fung brings a wealth of financial services experience with 25 years in the industry. She joins from Taconic Capital, a global investment firm, where she was Director of Marketing and Investor Relations for 13 years, and prior to that at Bank of America, AIG and CSFB.
Mulholland will oversee an operational change programme across the firm, joining with 19 years’ experience from Cheyne Capital where she was a Partner and served as Head of Business Transformation, Chief Administrative Officer and Head of Operations.
Kelley joins with over 11 years of experience as a Chief Operating Officer with alternative funds. She joins from JNE Partners where she served as Partner and Chief Operating Officer following the spin-out from MSD Partners, and previously as Partner and Chief Operating Officer of Observatory Capital Management. Micaela has 17 years prior experience in prime brokerage and credit risk management at Goldman Sachs and Morgan Stanley.
Matthew Courey, Founding Partner and Chief Operating Officer at AlbaCore Capital Group, says: “We are excited to have Jenny, Tara and Micaela join the AlbaCore team. Their unique backgrounds and depth of experience will continue to drive our business and position our team optimally for the many opportunities ahead.”
David Allen, Managing Partner and Chief Investment Officer at AlbaCore Capital Group, adds: “I am delighted that such high calibre executives have chosen to join the firm. We are proud of the talented team we have built at AlbaCore with 20 nationalities and a diverse set of backgrounds and experiences. Tara, Micaela and Jenny will further strengthen our ability to deliver for our investors across the credit spectrum”.
Professional Pensions spoke to Cheyne Capital co-founder, president & head of responsible investment Stuart Fiertz as part of an exclusive series of interviews with some of the finalists of the UK Pensions Awards 2021. This is what he had to say…
What have been your main achievements as an organisation over the past 18 months?
In 2020 we launched our second impact real estate fund which builds or buys property for use as affordable or specialist housing, demonstrating that private capital can work with the public sector to help tackle the chronic shortage of such housing in the UK. The fund launched with Local Government Pension Scheme investment and has already committed £36m to homes for adults with a learning disability, £34m to a development in central Manchester with 35% of homes allocated to keyworkers at discounted rents, and £38m to building three state-of-the-art care homes with 35% of beds allocated to publicly funded residents.
In the case of the Manchester and care home developments, we are particularly proud to be delivering accommodation at discounts to market rents in schemes where there was no planning requirement to deliver any affordable housing at all. Further, we have introduced indexation limits on all rents to ensure the long term affordability of the accommodation.
Across the wider firm, we continued to provide other funding solutions for real estate and corporates, launching the sixth and seventh vintages of CRECH, our £2.2bn European real estate lending programme, and we closed our second €1bn (£850m) strategic value credit fund which focuses on providing constructive capital solutions to financially constrained mid-market businesses.
What do you believe sets you apart from your peers and contributes to your successes?
In impact real estate, we launched the UK’s first affordable housing fund in 2014 so we have had the chance to establish a track record and build up a large pipeline of investments to which future capital can be quickly committed. In addition, we are one of the few managers with in-house development capabilities, which means that development gains go to the benefit of our investors rather than being paid away to external developers. We favour diversification across location, tenant and counterparty type to reduce risk for investors and to aid the rapid deployment of capital for impactful purposes; we are evangelical about our schemes being ‘tenure blind’ so there is absolutely no difference between the homes for market-rate rent and those at discounted rents; and we focus on additionality (creation of stock) rather than buying existing stock which would always have been made available for use as affordable housing anyway. Our experience of having operated in this space for seven years means that investors benefit from the lessons we have learned and we are always happy to share details of our experiences, for example why we have chosen to launch our second fund as an evergreen fund rather than a closed-ended fund, with anyone who is interested in this sector.
How has your business dealt with the challenges of Covid-19?
As an asset class, affordable housing has not been negatively impacted by Covid-19. Rather Covid-19 has exacerbated the chronic housing issues in the UK and heightened the need for institutional capital to help plug the funding gap. Indeed, some estimates suggest that councils’ waiting lists will increase to two million people as a result of the pandemic. While we did experience some delays in construction timetables in the short period when construction workers were not able to get on site, these were temporary. For existing and completed schemes, rental income was not affected.
What are the key challenges facing your pension scheme clients at the current time and how are you helping them address these issues?
With various traditional sources of yield having become less attractive (UK 10-year Gilts, for example, are currently offer a negative yield), pension schemes need to look elsewhere for long-term, stable, inflation-linked income to match their liabilities. Our experience shows that the distributable yield on a diversified portfolio of affordable housing, supported living and social care assets can be approximately 5% (net of fees) and is inflation-linked. With supply/demand dynamics suggesting a 20+ year backlog in UK affordable housing and the stability of the rental receipts, we believe this asset class is a perfect match for UK pension schemes in the current environment. And on top of the financial investment case, investment in this sector also makes a “real impact on individual lives”
How will you continue to improve your services to pension scheme clients over the coming year?
We hope to continue meeting the needs of our pension scheme clients by providing cost effective funds that demonstrate a visible and stable running income and attractive internal rates of return. We know that rapid deployment of capital is important to our clients and we plan to continue to deliver this through our substantial investment in our origination platform along with fundraises which are purposefully limited in size so that capital can be put to work quickly. Finally, we will continue to strive for best-in-class ESG credentials both directly, such as in our affordable housing schemes, and in other areas for example, incorporating ESG-linked covenants and pricing incentives into agreements when we act as a lender.
Cheyne Strategic Value Credit has raised €1bn for its Cheyne European Strategic Value Credit Fund II (SVC II), reaching its capacity less than six months following its first close.
Funding came from existing investors and significant excess demand from new investors, it added.
Cheyne said the investment fund “enjoyed broad investor representation and strong institutional support, with approximately 80% represented by pension and insurance companies predominantly in Europe and North America.”
According to the Texas County & District Retirement System’s website, the US pension fund committed $22.5m to the fund this summer – an additional investment to the $150m invested last December.
The firm – established in 2017 as a new investment division within alternative asset manager Cheyne Capital – launched its inaugural European Strategic Value Credit Fund which was substantially oversubscribed and closed at its hard capacity limit of €1bn in June 2019.
SVC II continues the same investment strategy as its predecessor fund, providing constructive capital solutions to mid-market corporates facing liquidity and other complex financial challenges, working on a consensual basis with management teams and shareholders to provide a positive turnaround, it said.
The new fund has already initiated seven investments, in five different European countries and across a range of industries including business process outsourcing, ground & cargo handling services, security solutions and food products.
Managers partner to accelerate development of Iceberg Data Lab
AXA Investment Managers, Natixis Investment Managers and its affiliate Mirova, Sienna Investment Managers and Solactive have entered into an agreement with Iceberg Data Lab to participate in its series A fund raise.
Following this minority investment, each investor will also be represented on Iceberg Data Lab’s supervisory board in order to support the development of the company.
With increased demand from both financial institutions and their stakeholders for better transparency on the impact of portfolios on climate and the environment, the partner firms plan to support Iceberg Data Lab’s global expansion and product development which includes data coverage enlargement, automated machine learning and autonomous AI.
Iceberg Data Lab is a fintech company leveraging data treatment tools and science-based models allowing financial institutions to assess the impact of their portfolios on the environment.
The company has developed methodologies to calculate the various environmental impacts of issuers and assets throughout their value chain (supply chain to end use).
Cheyne Capital Management closed its latest European fund, Cheyne European Strategic Value Credit Fund II, at its €1 billion ($1.2 billion) target, a spokeswoman confirmed.
The fund has a value-oriented, opportunistic focus on special situations and debt restructuring. It is also focused on providing capital to midmarket companies facing liquidity issues across sectors such as business process outsourcing, ground and cargo handling services, security solutions and food production. The fund applies ESG and engagement framework to its investments.
Among investors in the fund is the $40.7 billion Texas County & District Retirement System, Austin, which committed an additional $23 million in July from the fund’s $1.1 billion distressed debt portfolio. The system initially committed $150 million to the fund in December 2020.
Predecessor fund Cheyne European Strategic Value Credit Fund I also closed at €1 billion in June 2019.
Cheyne Strategic Value Credit has successfully raised its second fund, Cheyne European Strategic Value Credit Fund II (SVC II) securing EUR 1 billion capacity less than six months after its first close, with strong support from existing investors and significant excess demand from new investors.
Cheyne Strategic Value Credit was established in 2017 as a new investment division within alternative asset manager Cheyne Capital and employs a value-oriented, opportunistic approach to investing in corporate credit, with a focus on special situations and debt restructurings. The group’s inaugural European Strategic Value Credit Fund (SVC I) was substantially oversubscribed and closed at its hard capacity limit of EUR1 billion in June 2019.
SVC II continues the same investment strategy as its predecessor fund, providing constructive capital solutions to mid-market corporates facing liquidity and other complex financial challenges, working on a consensual basis with management teams and shareholders to effect a positive turnaround. The new fund has already initiated seven investments, in five different European countries and across a range of industries including business process outsourcing, ground & cargo handling services, security solutions and food products.
As part of its aim to promote higher ESG standards within private credit, the team has adopted an enhanced ESG framework for new investments with an increased emphasis on positive engagement. The group is seeking to influence ESG strategy and outcomes more meaningfully at the corporate borrower level and is actively incorporating ESG-linked covenants in new facility agreements. This includes, for example, pricing incentives when pre-defined ESG targets have been met and adhered to.
Key sources of opportunity for the fund include the ongoing sell-down of underperforming and other non-core corporate loans by European banks, and the provision of rescue and liquidity bridge financings to stressed but fundamentally viable businesses. The fund has been deliberately capacity-constrained to maximise its participation in the broadest range of opportunities and capital structures, with a focus on smaller transaction sizes which fall below the minimum size requirements of the larger distressed debt and opportunistic credit funds.
Anthony Robertson, Managing Partner & CIO of Cheyne Strategic Value Credit, says: “We are honoured that so many of our existing investors have chosen to continue the journey with us, and we warmly welcome our new investors. There is a huge need for alternative sources of capital to support European mid-market businesses facing financial challenges, particularly those which have been negatively impacted by the pandemic. Our team has a recognised track record in providing flexible capital solutions to facilitate a normalisation and recovery in operating performance.”
We’ve written before that much of U.S. antitrust law is antiquated, having been written over a century ago to regulate railroads.
What we’ve not really mentioned, however, is that railroad-specific rules were updated much more recently, and are complicating one of the largest announced mergers of 2021.
Background: Kansas City Southern in March agreed to be bought for US$25 billion by Canadian Pacific, in order to create the first freight railroad network to connect the U.S., Canada, and Mexico.
Two months later, KCS walked away in favor of a $33.6 billion offer from Canadian National Railway, and paid a $700 million termination fee.
The larger deal included plans to use a voting trust, which would buy and operate Kansas City Southern while the deal is under regulatory review.
But the voting trust was subject to approval by the Surface Transportation Board, which in 2001 established new rules that would make it tougher for railroads to combine — requiring them to prove such mergers would enhance competition.
STB initially denied Canadian National’s voting trust request, but said it would reconsider after KCS accepted the offer.
Fast forward to last week and STB held firm, unanimously rejecting the voting trust request.
Canadian National also is taking fire from inside the locomotive, as 5% stakeholder TCI Fund Management is agitating for board control and the removal of Canadian National’s CEO and chairman for “incompetent” and “weak” management.
Were it to succeed in its proxy fight, indirectly aided by U.S. regulators, TCI has pledged to stop pursuing the Kansas City Southern deal.
What now: Canadian Pacific, which was given a waiver to the 2001 rules, lay in wait for most of the time Canadian National was sweating out the STB decision. But last month it upped its bid to $31 billion, and KCS on Saturday said the two sides have restarted talks, acknowledging that the lower-priced deal might be the better deal.
Not so fast: It might not be quite as simple as KCS picking Canadian Pacific. That’s because TCI, the activist hedge fund pressuring Canadian National, happens to be the largest outside shareholder in Canadian Pacific — with more than a 8% stake — which could create a different set of legal challenges, given the arguable conflicts of interest.
The bottom line: The route from Canada to Mexico still runs through Kansas City, but there is no longer an estimated time of arrival.
The BFD
PayPal (Nasdaq: PYPL) agreed to acquire Paidy, a Japanese installment payments enabler, for around $2.7 billion.
Why it’s the BFD: This sets up a global consolidation spree in the “buy-now, pay-later space,” following Square’s agreement last month to buy Afterpay for $29 billion.
Bonus: Addi, a Bogota-based “buy-now, pay-later” startup, today announced $75 million in new Series B funding led by Greycroft.
ROI: Paidy has raised $585 million from firms like PayPal Ventures, Arbor Ventures, Visa Ventures, Unusual Ventures, SBI Holdings, Eight Roads, Goldman Sachs, Itochu Corp., JS Capital Management, Tybourne Capital Management, Soros Fund Management and Wellington Management.
The bottom line: “Japan is the third largest e-commerce market in the world, and so this is a significant move by PayPal to gain more market share both in the country and the region, specifically in the area of providing deferred payment services as an alternative to credit cards.” — Kate Park, TechCrunch
Venture Capital Deals
• Cao Cao Mobility, the ride-hail unit of Chinese automaker Geely, raised around $589 million in Series B funding led by state-backed Suzhou Xiangcheng Financial Holding Group. http://axios.link/4YAa
• Aviatrix Systems, a Santa Clara, Calif.-based multicloud network platform, raised $200 million at a $2 billion valuation. TCV led, and was joined by Insight Partners and Tiger Global. http://axios.link/FNTo
• Spiber, a Japanese developer of plant-based protein polymers, raised $91 million at a $1.2 billion valuation from The Carlyle Group, Fidelity and Baillie Gifford. http://axios.link/shl8
• Marshmallow, a London-based car insurer, raised $85 million in Series B funding at a $1.25 billion valuation from backers like Passion Capital, Investec and SCOR. http://axios.link/Wuxb
Emulate, a Boston-based developer of “organ-on-a-chip” products, raised $82 million in Series E funding co-led by Perceptive Advisors and insider Northpond Ventures. http://axios.link/1a6Y
• SingleStore, a San Francisco-based real-time database platform, raised $80 million in Series F funding at a $940 million valuation. Insight Partners led, and was joined by Khosla Ventures, Dell Capital, Rev IV, Glynn Capital and GV. http://axios.link/sdCR
Owlstone Medical, a British breath biopsy startup, raised $58 million in Series D funding led by Horizons Ventures. http://axios.link/yzVP
• Leap, an Indian study abroad platform, raised $55 million in Series C funding. Owl Ventures led, and was joined by Harvard Management Co., Sequoia Capital India and Jungle Ventures. http://axios.link/pkg9
• UnitQ, a Burlingame, Calif.-based product quality monitoring platform, raised $30 million in Series B funding. Accel led, and was joined by Creandum and Gradient Ventures. www.unitq.com
PetMedix, a British animal medicines startup, raised £27 million in Series B funding from Tencent, Kyoritsu Holdings, Digitalis Ventures, Parkwalk Advisors and Cambridge Innovation Capital. www.petmedix.co.uk
• Jetty, a New York-based renter payment platform, raised $23 million. Citi and Flourish Ventures co-led, and were joined by Credit Ease and K5. Previous backers include Farmers Insurance Group, Khosla Ventures and Ribbit Capital. http://axios.link/Hpqt
• Rainforest, a Singapore-based e-commerce aggregator, raised $20 million in seed funding. Monk’s Hill Ventures led, and was joined by January Capital, Crossbeam Venture Partners, Amasia and Lo & Behold Group and insiders Nordstar and Insignia Venture Partners. http://axios.link/oqKC
• Borneo, a real-time data security and privacy observability platform, raised $15.5 million in Series A funding. Vulcan Ventures led, and was joined by Prosus Ventures, Lytical Ventures and Wavemaker Partners. www.borneo.io
• Vowel, a New York-based virtual meeting platform, raised $13.5 million in Series A funding. Lobby Capital led, and was joined by insiders Amity Ventures and Box Group. http://axios.link/WSXe
• Novi, a San Francisco-based B2B marketplace for helping brands make more sustainable products, raised $10.3 million in Series A funding. Greylock led, and was joined by Defy Partners, Thomas Layton and Yannis Skoufalos. http://axios.link/Wong
Orbit Fab, a San Francisco-based orbital refueling startup, raised $10 million. Asymmetry Ventures led, and was joined by Northrop Grumman, Lockheed Martin Ventures, Ventures, Audacious Venture Partners and insider SpaceFund. http://axios.link/CDpE
• Accure, a German provider of battery safety software, raised $8 million in Series A funding. Blue Bear Capital led, and was joined by Capnamic Ventures and 42CAP. www.accure.net
• HoneyBee, a financial wellness as-a-benefit startup, raised $5.7 million. FFVC led, and was joined by Resolute Ventures, Afore Capital, Rebalance Capital, K50, Financial Venture Studio and Baron Davis. http://axios.link/OTwr
Private Equity Deals
• Apollo Global Management agreed to buy up to a 50% stake in MaxCap, an Australasian commercial real estate financier and fund manager. http://axios.link/oflw
• The Blackstone Group agreed to buy The Chamberlain Group, an Oak Brook, Ill.-based provider of smart access solutions, from The Duchossois Group at a $5 billion valuation. http://axios.link/IkIh
Bradford Health Services, a Birmingham, Ala.-based portfolio company of Centre Partners, acquired Cornerstone of Recovery, a Louisville, Tenn.-based substance use disorder treatment provider. www.bradfordhealth.com
• Morrisons (LSE: MRW), the British grocery chain, is planning a formal auction to decide on if it will be acquired by Clayton Dubilier & Rice or by Fortress Investment Group. The ultimate deal is expected to be worth around $10 billion. http://axios.link/Qppo
Neptune Energy, a London-based oil and gas exploration company backed by The Carlyle Group and CVC Capital Partners, is considering a merger with Harbour Energy (LSE: HBR), per Bloomberg. http://axios.link/lDf5
• Sherpa Capital acquired Forenqui, a Spanish maker of hygiene and personal care products.http://axios.link/fuCg
Smiths Group (LSE: SMIN) agreed to sell its medical equipment group to ICU Medical (Nasdaq: ICUI) for $2.4 billion, walking away from an earlier $2 billion agreement with TA Associates. http://axios.link/mpVH
Public Offerings
Definitive Healthcare, a Framingham, Mass.-based health care commercial intelligence software provider, set IPO terms to 15.6 million shares at $21-$24. It would have a $3.3 billion market cap, were it to price in the middle, plans to list on the Nasdaq (DH) and reports a $26 million net loss on $77 million in revenue for the first half of 2021. Backers include Advent International and Spectrum Equity. http://axios.link/n0vb
• First Watch Restaurant Group, a Bradenton, Fla.-based breakfast and lunch restaurant chain with over 420 U.S. locations, filed for an IPO. It reports nearly $2 million of net income on $281 million in revenue for the first half of 2021. Backers include Advent International. http://axios.link/Jajx
Procept BioRobotics, a Redwood City, Calif.-based developer of robotic systems for minimally invasive urologic surgery, set IPO terms to 5.5 million shares at $22-$24. It would have a $1.1 billion fully diluted value, were it to price in the middle, and raised over $400 million from firms like CPMG, Viking Global Investors and Fidelity. http://axios.link/1y7c
• TDCX, a Singapore-based provider of customer experience solutions to tech companies, filed for a $400 million IPO. It plans to list on the NYSE (TDCX), and reports $33 million of profit on $187 million in revenue for the first half of 2021. http://axios.link/ebdV
SPAC Stuff
• AEI CapForce II Investment, an Asia fintech SPAC led by John Tan (AEI Capital Group), filed for a $100 million IPO. http://axios.link/mJ7B
Monterey Bio Acquisition, a biotech SPAC led by Sanjeev Satyal (ex-CEO of pH Pharma), filed for a $100 million IPO. http://axios.link/Ev2u
Liquidity Events
• Advent International agreed to sell Distribution International Inc., a Houston-based mechanical insulation distributor, to TopBuild (NYSE: BLD) for $1 billion in cash. www.distributioninternational.com
• Altisource Portfolio Solutions (Nasdaq: ASPS), a Luxembourg-based mortgage services company, hired Guggenheim Partners to advise on a possible sale of its origination business (dba Lenders One), per Bloomberg. http://axios.link/Leep
Astorg and Goldman Sachs agreed to sell Héra, a Paris-based maker of OTC products for women’s health and scar and blister care, to Perrigo Co. (NYSE: PRGO) for €1.8 billion in cash. www.hra-pharma.com
• Shutterstock (NYSE: SSTK) bought PicMonkey, a Seattle-based online graphic design and image editing platform, for $110 million in cash from sellers like Spectrum Equity. www.picmonkey.com
More M&A
• Elliott Management has amassed more than a $1 billion stake in Citrix Systems (Nasdaq: CTXS), representing more than 10% ownership, per WSJ. http://axios.link/uSDD
• Enthusiast Gaming (Nasdaq: EGLX) acquired Addicting Games, a Los Angeles-based casual gaming company, for $35 million. http://axios.link/CjU1
• First Abu Dhabi Bank hired Morgan Stanley to find a buyer for its Magnati payments business, which could fetch around $1 billion, per Bloomberg. http://axios.link/lEMF
• Globe Telecom, the Philippines’ largest telco by market cap, is considering a sale of its data centers, which could fetch around $200 million, per Bloomberg. http://axios.link/pTy4
• JPMorgan (NYSE: JPM) agreed to buy a majority stake in Volkswagen’s payments business. http://axios.link/h4Y4
Mars agreed to buy Los Angeles-based cat litter maker PrettyLitter for more than $500 million, per Bloomberg. Sellers include BAM Ventures and Draper Associates. http://axios.link/PtqH
• MTN Group, Africa’s largest mobile operator, is in talks to sell its Afghani business, per Bloomberg. http://axios.link/ABNB
Sanofi (Paris: SAN) agreed to buy New York-based biotech Kadmon (Nasdaq: KDMN) for $1.9 billion in cash, or $.950 per share (79% premium to yesterday’s closing price). http://axios.link/e5bY
TransUnion (NYSE: TRU), a credit reporting agency, is seeking a buyer for its healthcare revenue-cycle management unit, which generates around $100 million in EBITDA, per PE Hub. http://axios.link/DkPG
• Vertiv (NYSE: VRT) agreed to buy E&I, an Ireland-based provider of electrical switchgear and power distribution systems, for around $1.8 billion in cash and stock (plus up to $200m in earnouts). www.vertiv.com
Fundraising
• Alpine Investors, a San Francisco-based private equity firm, raised $2.25 billion for its eighth fund. www.alpineinvestors.com
• Cheyne Capital of London raised €1 billion for its second corporate credit fund, which focuses on special situations and debt restructurings. www.cheynecapital.com
• H.I.G. Capital raised €2 billion for a European middle-market LBO fund. http://axios.link/jIOY
• Intudo Ventures, an Indonesian VC firm, raised $115 million for its third fund. http://axios.link/Jz7y
• Trill Impact, a new impact PE firm focused on Northern Europe, raised €900 million for its debut fund. http://axios.link/ffSr
• Volkswagen is forming a €300 million VC fund focused on decarbonization. http://axios.link/iOrx
It’s Personnel
• Jenny Fielding is stepping down as a managing director with TechStars, after seven years, per her LinkedIn.
• Jack MacDonald, Gary Kirkham and Steve Miller each left BofA Merrill Lynch to join advisory firm Centerview Partners as Palo Alto-based partners. www.centerviewpartners.com
Real Estate Credit Investments Ltd (LON:RECI) is the topic of conversation when Hardman & Co’s Analyst Mark Thomas caught up with DirectorsTalk for an exclusive interview.
Q1: Your recent report on Real Estate Credit Investments sits behind a disclaimer. What can you tell us about that?
A1: It is just the standard disclaimer that many investment companies have. In essence, for regulatory reasons, there are some countries (like the US) where the report should not be read. It is not a simple asset class, and the report should only be looked at by professional/qualified investors.
Q2: Your recent report reviewed RECI’s latest quarterly update and factsheet. What can you tell us about it?
A2: The key messages we take from RECI’s July quarterly investor update and end-July 2021 factsheet are i) attractive returns from low LTV (average 65%) credit exposure to UK and European large, well-capitalised and experienced institutional borrowers, ii) stable dividends, at 3p per quarter (latest yield: 7.9%), iii) a highly granular book – 61 positions, with the top position 14% of NAV (by commitment), iv) modest leverage – gross 29%, net 16.0% (with £44.4m cash on the balance sheet), and v) access to a strong pipeline of enhanced return investment opportunities identified by Cheyne.
The premium to NAV (2%) is back in line with pre-pandemic average levels.
Q3: You talk of the resilience in the model. Do you have any facts to support that assertion?
A3: Sure. The most important fact is that there were no defaults in the portfolio. Cheyne completed a successful and favourable completion on the last remaining hotel loan restructuring, showing that other finance providers consider its lending robust too.
There has been a continued migration of the portfolio to senior lending, with nine new deals completed (£117m of commitments) since 31 March 2020, showing strength of opportunity post the initial impact of COVID-19. Senior loans and bonds were equal to 82% of NAV at end-June, with the portfolio concentrated in credits to large, well-capitalised and experienced institutional borrowers.
We also note that the net debt position was halved within the first few months of the pandemic, before being increased steadily from summer 2020, as the risk/return outlook improved. RECI had also said it would manage liquidity, and that its performance through COVID-19 had delivered on this aspect of resilience too.
Q4: And the outlook?
A4: Bank lending remains constrained across Europe, and high barriers to entry secure a continuing compelling investment landscape, especially in senior lending. RECI is well-positioned to address future market uncertainty, with a strong portfolio profile (see above), cash on the balance sheet of £44.4m and modest leverage (1.29x gross, 1.16x net of cash held), as at end-July 2021. Cheyne advises that its real estate business’s current pipeline comprises £0.9bn across 17 deals.
The main constraint on RECI accessing this deal flow, and so achieving economies of scale, was the share price discount to NAV until recently, which prevented the further issuance of equity. Should the shares move to a sustained premium, RECI would be able to access this capital and grow its loan book, and so achieve better performance. RECI’s stable dividend through COVID-19 reflected its confidence in delivering on this outlook.
Q5: And, finally, what can you tell us about Real Estate Credit Investments’ valuation?
A5: Despite what management said, the company’s track record, and the portfolio and management process characteristics which suggested that the portfolio would be resilient, when the market took fright in spring 2020, RECI’s discount ballooned to well over 20%.
Over time, the continued delivery of steady returns – combined with no defaults and management reiterations that it expected full repayment of principal and contractual interest – has restored confidence, and there has been a steady recovery.
The shares are now trading at a modest premium to the accounting NAV, very much in line with the five-year average ahead of the pandemic. In our note, we gave comparisons of RECI with a close and broad peer group. The NAV rating is now the highest in the peer group, but so is the dividend yield, which, as noted earlier, is close to 8%.
RECI continued to pay its 3p quarterly dividend through the pandemic, and it is covered by recurring interest income, leaving any capital gains to feed through to NAV accretion.
July 6, 2021 (Investorideas.com Newswire) A new survey (1) of institutional investors and wealth managers from the US, UK, France, Germany, and the UAE who currently have exposure to cryptocurrencies and digital assets, reveals that 82% expect to increase their exposure between now and 2023. Four out of ten say they will dramatically increase their holdings. Only 1% said they would sell their entire holdings, and just 7% said they would reduce their exposure.
However, Nickel Digital Asset Management (Nickel), Europe’s leading regulated and award-winning investment manager dedicated to the digital assets market, which conducted the study, says in most cases institutional investors with holdings in Bitcoin and other cryptocurrencies have very low levels of exposure as many have just been testing to market to see how it works.
The main reason given for investing more in digital assets is the long-term capital growth prospects of cryptocurrencies and digital assets – the view cited by 58% of respondents. This is followed by 38% who said it is because having some exposure to cryptoassets means they have become more comfortable and confident in holding the asset class. Some 37% cited more leading corporates and fund managers investing in cryptoassets as a reason as this too is giving them more confidence, and 34% said an improving regulatory environment was also a key factor in wanting to increase their allocation.
Anatoly Crachilov, co-Founder and CEO of Nickel Digital, commented:
“The number of institutional investors and corporates holding Bitcoin and other cryptoassets is growing and their confidence in the asset class is also increasing. Our analysis (2) at the start of June this year revealed that 19 listed companies with a market cap of over $1 trillion had around $6.5 billion invested in Bitcoin, having originally spent $4.3 billion buying the cryptocurrency. We also found a staggering $43.2 billion worth of bitcoin is held through various bitcoin closed-ended trusts and exchange traded products.
“Many of those professional investors with holdings in cryptoassets are looking to increase their exposure and this is being driven by several factors including strong market performance during the Covid-19 crisis, more established investors and corporations endorsing the market, and the sector’s infrastructure and regulatory framework improving. These trends will continue to expand.”
Nickel Digital’s infrastructure is designed to offer various access points to the crypto market
Nickel currently has four funds investing in the digital asset space. Its market-neutral Digital Asset Arbitrage Fund pursues an absolute return strategy without expressing directional views on the underlying cryptoassets market. It exploits market inefficiencies and price dislocations and harnesses swings of volatility to deliver consistent positive returns within a strictly defined risk management framework. Since inception 24 months ago, the fund has delivered strong risk-adjusted returns with no drawdown months and Sharpe of over 4.
The Nickel Diversified Alpha (Digital Factors) Fund is a non-directional multi-strategy fund which wraps a portfolio of attractive but hard-to-access and capacity-constrained strategies into a single, investible fund. Among the strategies it deploys are high-frequency market making, statistical arbitrage, relative value, trend following, and momentum.
Digital Leaders DeFi Fund is designed to capture the growth potential of the broader digital assets space outside Bitcoin, also called Altcoin space, spotting early winners in Layer 1 protocols and Decentralised Finance, the area of greatest financial innovation. The fund is an actively-managed research-driven vehicle.
Nickel’s Digital Gold Institutional Fund, a Bitcoin tracker, provides secure, efficient, transparent, and liquid access to physically allocated Bitcoin. It delivers institutional-grade precision of trade execution available 7 days a week with one of the industry’s lowest expense ratios.
Defensive Bitcoin Fund aims to offer institutional-grade exposure to Bitcoin while managing downside volatility of this exposure. Nickel will apply an overlay of derivative instruments to reduce downside volatility while aiming to capture the majority of the upside. Nickel aims to launch the fund in August 2021.
Footnotes
Nickel Digital commissioned the market research company Pureprofile to interview 50 wealth managers and 50 institutional investors across the US, UK, France, Germany, and the UAE. The survey was conducted online in May and June 2021.
Nickel Digital Asset Management (www.nickel.digital) is a London-based FCA-authorised and regulated investment firm that offers a range of digital asset strategy solutions for institutional investors. Its mission is to provide an institutional grade gateway into the digital assets market for institutional investors.
The firm deploys highly sophisticated low-latency algorithmic trading, pursuing a range of arbitrage strategies in both spot and derivative markets, as well as offering directional exposure to the market aiming to capture the structural expansion of this space.
Nickel is led by a senior team of traders and investment professionals of experience gained in major Wall Street banks, such as Bankers Trust, Goldman Sachs, JPMorgan, Morgan Stanley, BofA Merrill Lynch, Rothschild, and Credit Suisse, as well as global hedge funds, including DE Shaw, Tudor, Eisler Capital, and Cheyne Capital.
Risk management is the core of Nickel’s approach to investment management. This was evidenced in both March 2020 and May 2021, the times of sharp market sell off, when Nickel protected investor capital and delivered positive returns. Nickel was named by Opalesque, the hedge fund advisory firm, as top 2% of global asset managers “who delivered during the meltdown”.
Nickel’s flagship fund, the market-neutral Digital Asset Arbitrage fund, won HFM EuroHedge 2020 Emerging Manager Awards in the Specialist category.
Nickel Digital Asset Management is authorised and regulated by UK’s FCA.
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