LONDON Park Square Capital and SMBC are setting up a new €3bn direct lending fund which will be a joint venture between the two firms, banking sources said on Thursday.
Fundraising is expected to close shortly on the joint venture, which will provide unitranche loans to European mid-market companies, the sources said.
The venture will reunite two former GE colleagues as it will be headed by Howard Sharp, Park Square’s head of mid-market direct lending and Owen Verrier-Jones, SMBC’s head of sponsor coverage and origination, who both joined their respective firms from GE Capital in 2015.
Park Square and SMBC declined to comment.
SMBCE bought GE's European Sponsor Finance business in 2015 for $2.2bn. GE's €1.75bn European joint venture unitranche fund with Ares, which was established in 2012, was not part of the sale and SMBCE has been seeking to establish a similar fund, bankers said.
Direct lending has been gaining ground since the financial crisis as borrowers look for alternative sources of capital to offset a decrease in bank capital, as lenders try to improve their balance sheets.
Investors are chasing the attractive returns offered by direct lending in a low-yield environment.
Hayfin Capital Management, a leading direct lending firm, last week announced it had raised more than €3.5bn for its European direct lending strategy.
Hayfin attracted commitments from a wide range of new and existing global institutional investors, including public and private pension funds, sovereign wealth funds, insurance companies and endowments.
(Editing by Tessa Walsh)