Risk warning: The value of investments and derived income can fall. Investors may get back less than they invested.

UK lower mid-market direct lending fund first close at £90 million

Shard Credit Partners announces the first close of its inaugural UK direct lending fund with £90 million in commitments from both UK and European institutional investors. The fund will provide innovatively structured senior and junior loan capital to a diverse range of SMEs (including private equity-backed businesses) operating in the UK lower mid-market (defined as companies with an enterprise value below £50 million and having between 50 and 249 full-time employees).

Shard Credit Partners will primarily target borrowers with annual revenues of below £100 million that are finding it increasingly difficult to source long-term financing from traditional bank sources. The fund will provide flexible loan capital in support of business growth and expansion, or for event driven M&A activity, such as a transformative acquisition or a management buy-out or other change of control. The fund will lend to businesses located throughout the UK and operating across a diverse range of industries. Typical loan sizes will range between £5-15 million per borrower, with maturities of three to seven years.

Whilst 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, the UK lower mid-market remains significantly under-developed in terms of alternative, non-bank financing. Only a small handful of direct lending funds exist which specifically focus on the £5-15 million direct lending segment in the UK, the main addressable market for the new Shard Credit Partners fund. Conversely, the UK lower mid-market offers a high volume of good quality lending opportunities, with more than 200 buy-outs being completed each year by more than one hundred private equity and venture capital firms. 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.

Tim Hames, the Director General of the British Private Equity and Venture Capital Association, said “The arrival of a new and innovative fund in this space should be excellent news for ambitious UK SMEs.”

Shard Credit Partners was founded by a team of experienced leveraged finance market practitioners. In total, the founding partners have a combined 80 years of experience in leveraged loan sourcing, origination and structuring and asset management, having completed in excess of £70 billion equivalent of leveraged loan transactions during their careers to date.

Alastair Brown, Chief Executive, commented, “We are delighted to have held a first close and greatly appreciate the support of our investors, which includes significant commitments from each of British Business Investments (the commercial arm of the British Business Bank) and the European Investment Fund. We can now focus on providing much needed flexible loan capital to help small businesses invest in their own growth and expansion plans, supporting job creation and growth in the critically important SME segment of the UK economy. Ultimately our objective is to become the direct lender of choice for SMEs operating in the UK lower mid-market.”

Catherine Lewis La Torre, CEO of British Business Investments, said: “British Business Investments is committed to providing capital to direct lending funds focused on SME lending, where there is a continued under-serve by banks and other lenders. We are pleased to make this commitment to Shard Credit Partners as it launches its first fund, and look forward to seeing new finance made available to SMEs throughout the UK.”

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 £300 million, by Q4 2018.