Sagard Holdings, an investment arm of Power Corp, has raised about $325 million (US$260 million) in the first close of a debut credit fund managed by former members of Canada Pension Plan Investment Board’s private debt group.
Sagard Credit Partners LP, earmarked for loans to North American mid-market companies, secured more than half of its $625 million (US$500 million) target in the initial close. It is expected to wrap up by the end of 2018, Sagard Managing Partner and CIO Adam Vigna told PE Hub Canada.
SCP, Sagard’s first fund marketed to third-party investors, was anchored by Canadian limited partners. Capital from Healthcare of Ontario Pension Plan, BRK Capital, Walter Financial and an unidentified corporate pension system was matched with a “very significant” commitment by the parent, Vigna said.
Sagard plans to raise the rest from institutional investors and family offices in Canada, the United States and Europe. Negotiations for a placement agent are underway.
Vigna says Sagard is finding a “lot of appetite” for a fresh credit offering among LPs disillusioned by high valuations and large amounts of private equity capital “sitting on the sidelines.” SCP is targeting a net 10 percent to 12 percent return to its investors.
SCP will lend directly to family- and founder-owned companies and small public companies looking to grow, make acquisitions, manage successions and meet other goals. It will offer a range of flexible solutions, with a preference for senior loans and other instruments at the “top part of the capital structure,” Vigna said.
Vigna says direct mid-market credit opportunities are attractive because they allow SCP to forge long-term partnerships that facilitate access to information and management, as well as the potential for more deal-making down the road.
Unlike lending to sponsored transactions, which is the focus of many traditional players, direct debt is also “under-served,” he added.
Vigna was recruited to Sagard’s credit group in 2016 from CPPIB, where he served as a managing director and head of global principal credit investments. He was the pension system’s point man on the 2015 acquisition of Antares Capital, the mid-market lending unit of GE Capital, for US$12 billion.
Mustafa Humayun, formerly a CPPIB senior principal in Vigna’s operation, joined the same year. Now a Sagard managing director, Humayun also worked with Vigna in the special situations group at Goldman Sachs.
Other CPPIB alumni, Josh Borys and Bin Li, joined Sagard in 2017.
SCP’s links to the brand and networks of Power Corp, an industrial conglomerate controlled by Canada’s Desmarais family, will give it an edge when sourcing deal flow, Vigna said. Since January 2017, the fund has reviewed some 225 opportunities, roughly half of which are Canadian.
SCP has already made its first investment. Last May, it provided a $100 million (US$75 million) senior secured facility to Founders Advantage Capital Corp, a listed mid-market investment firm based in Calgary. The initial draw at closing was US$42 million.
Strong demand conditions have spurred 14-fold growth in the global private debt industry since 2000, the Alternative Credit Council reported last year. The industry is on track to reach about US$1 trillion by 2020, the report said.
Sagard Holdings has offices in Toronto and New York.
Photo of Adam Vigna courtesy of Sagard Holdings