Permira Debt Managers set to close third direct lending fund

The third direct lending fund of Permira Debt Managers (PDM), Permira Credit Solutions 3 (PCS3), is believed to have a hard-cap of €1.75bn, with the final close in sight. Following the first close last December at roughly €900m, there was an intermediary close in May of a further €620m, which brings the total capital raised to date to more than €1.5bn, according to a market source. Deployable capital will likely be in excess of €2bn including leverage.

Although there is a natural crossover, only a minority of the credit arm's LP base are also Permira private equity investors to date, according to the market source.

PDM declined to comment on current fundraising.

PDM has already made eight investments from the direct lending fund it is currently raising: it has backed French software group DL Software, Benelux medical equipment distributor Duomed, UK private members club Soho House, European business information provider Autovista, UK holiday park operator Away Resorts, German auto parts manufacturer Reutter Group, online property business atHome Group & Casa and French food manufacturer DGF Group. This is understood to amount to a total of €630m deployed in primary deals so far from the current fund.

A handful of the recent deals were refinancings – such as Soho House and Away Resorts – which is testimony to the wave of debt deals being done due to favourable market terms, such as high leverage and lower yields on offer. 

Says PDM's CEO, James Greenwood: "Yields have marginally flattened over the last 21 months and there has been a leverage elevation to 4-4.5x-4.5-5x, but we are not at 2007 levels; and remember, interest rates are still at 0%."

"The definition of unitranche is very much up for debate these days and seems to come down to pricing" – James Greenwood, PDM

Broadly speaking, the direct lending offering is senior secured debt, and whatever the facility is called by the market – unitranche or stretched senior – the fund ultimately has a first lien on the borrower's assets. 

"The definition of unitranche is very much up for debate these days and seems to come down to pricing," says Greenwood.

The lender is also sector agnostic, and only steers away from areas with specialist financing, like real estate.

Team building
Not only is Permira's debt arm in full deployment mode, it is also in full expansion mode with more than 30 team members compared to six when it started 10 years ago.

The lender's previous two direct lending funds were PCS1 and PCS2, which deployed €1.4bn and €1.2bn respectively, including leverage and recycling. The second fund, raised in 2015, is currently about 95% invested. 

PDM also has a structured credit product and, in September 2016, the lender held a final close for its fourth structured credit fund, Permira Sigma IV, raising in the region of €275m for the strategy.

Permira is not alone in its status as a private equity house with a separate debt arm. Ardian and TPG have been doing the same for a while with CVC joining in recent years. Bridgepoint is also rumoured to be on the cusp of setting a dedicated arm up, according to unquote" sister publication Debtwire.

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• Topics
• Debt
• Permira
• Senior debt