H&A Global Investment Management Private Debt's particular focus is on German and European SMEs in need for innovative financing solutions for
The Private Debt team’s goal is to support both companies and lending banks as a partner. A further pillar will be the provision of support to companies in the hands of private equity (PE) investors, although initially this field will be pursued on a selective basis. The ticket size of individual investments is expected to be between € 10 million and € 100 million.
Private Debt’s strategy is initially set at a target volume of € 1 billion. The first closing is in the amount of € 500 million. Mr. Kuckelkorn will lead the specialized team mandated to deal in private debt instruments and will additionally be appointed Chairman of the Private Debt Investment Committee. The team will be based in Frankfurt, whereby Mr. Kuckelkorn will be supported by three other investment specialists.
Unlike conventional listed bonds, private debt is not publicly traded. Thus, it is defined as a loan to medium-sized companies that is not provided by a bank but by other market participants such as pension funds, family offices or insurance companies, often in the form of private debt funds.
The rise of private debt is often seen in the financial crisis of 2008, which led to significantly expanded regulation and, under Basel III, higher capital requirements for banks. More restrictive lending processes meant that traditional bank loans were denied, especially to small and medium-sized enterprises. However, it is precisely these companies that rarely have good access to the capital market or an adequate rating from one of the major rating agencies. In search of a financing alternative, they often found what they were looking for in private debt transactions.
In contrast to traditional listed bonds, private debt is not standardized either. Thus, it offers the financing partners involved significantly more flexibility in contract design and can also cater to the individual needs of borrowers and lenders. However, this also leads to higher transaction complexity and interest premiums compared to traditional bonds, in particular through illiquidity and complexity premiums.
In investors' portfolios, private debt not only offers higher returns but can also contribute to further diversification of asset classes. For example, interest rate sensitivity is significantly lower than that of traditional non-investment-grade bonds.
Regulated insurance companies in particular are constantly on the lookout for attractive investments in times of long periods of low interest rates. They also have a long-term investment horizon and are therefore ideally suited as investors for private debt.