Deerpath raises assets as private debt opportunities grow

Deerpath Capital Management closed its fifth fund today after collecting $1.1 billion of equity capital from global investors. Exceeding its initial target, Fund 5 is part of Deerpath’s senior debt financing platform that has deployed more than $4 billion to date. Combined with the debt financing raised for certain levered vehicles with the fund, Deerpath raised over $2 billion in total capital available for deployment. Much of the origination recently has happened due to consolidation of a facility services and home repair services combining in order to take advantage of the benefits of larger scale and brand awareness, said Reed Van Gorden, managing director and head of origination, credit underwriting and research in a recent interview from Deerpath’s Chicago office. Key to the firm’s success is being consistent to the tried-and-true strategy of safety first in doing financing deals in long-standing businesses and with private equity sponsors with which they have forged long term relationships. “We have steadfastly maintained our initial investment thesis that we implemented nearly 14 years ago of prioritizing safety in all economic climates to protect against the unexpected,” said Tas Hasan, partner and chief operating officer at Deerpath. “This strategy has been time tested and provides clear differentiation for Deerpath within the direct lending market." Founded in 2007 by Gary Wendt, James Kirby and John Fitzgibbons, Deerpath Capital Management has become a leading provider of customized, cash-flow based senior debt financing to lower-middle market companies across diverse industries. To date, Deerpath has committed approximately 75% of Fund 5 to a large pool of portfolio companies, wholly diversified by industry, geography and sponsor. Like its predecessor funds, Fund 5 pursues first lien, senior debt financing to lower-middle market companies ($50 million to $100 million in Enterprise Value) in the U.S., emphasizing investments high quality private equity sponsor-backed companies with longevity and proven profitability in their respective markets and highly cash generative business models. Deerpath's investment model is designed to deliver sturdy returns while prioritizing capital preservation in any economic climate. Fund 5's closing marks another fundraising record for Deerpath and is the firm's largest fundraise in Europe and Asia to date. Deerpath was pleased to welcome over 50 limited partners from around the globe into Fund 5, including investors from Australia, Canada, Germany, Lebanon, Luxembourg, Switzerland, South Korea and the U.K. “We are very proud of the success of this fundraise, which was oversubscribed despite a challenging environment due to COVID-19,” added Hasan. “We are pleased to see increased interest from new investors globally combined with the sustained support from our existing LP base.” Last month, officials raised their third CLO offering, raising $360 million in capital. According to Van Gorden, the stable nature of CLOs makes the strategy attractive as well as the complementary nature of CLOs and direct lending. “There is a ton of crossover from the CLO investors and our fund investors,” he added. The closing of Deerpath CLO 2021-1 represents the third CLO issued by Deerpath since 2018 and brings the firm's total CLO assets under management to approximately $805 million. Deerpath CLO 2021-1 is secured by a portfolio of primarily directly originated, senior secured loans to middle market private equity-backed companies. Deerpath sold securities rated from AAA through BBB- to third-party investors, including insurance companies, pension funds, banks and asset managers. Deerpath managed funds purchased 100% of the subordinated notes issued by the CLO. The Fund has a three-year reinvestment period. “Our third middle market CLO allows us to continue to shift loan assets into more sturdy financing while enhancing our levered returns for investors without creating undue risk,” said Derek Dubois, managing director and treasurer at Deerpath. “Deerpath’s conservative credit culture, consistent performance, track record through COVID and excellent history of avoiding credit losses resonated very strongly with investors, attracting both reups and new investor capital.” In April 2020, Deerpath Capital announced the closing of Deerpath CLO 2020-1, a $325 million CLO investing in leveraged loans to middle market private equity-backed companies. Overall, the firm’s assets under management have grown to $2.6 billion.

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