ACP holds EUR 90m first close for debut credit fund

Mariusz Grendowicz, CEO and member of the investment committee of ACP Credit, joined ACP as part of the fund launch. He has held various banking roles over the course of his career, including as the CEO of mBank and as the founding CEO at the current Polish Development Fund.

Grendowicz told Unquote that the fund was launched based on the firm’s conviction of market opportunity in the CE region, as well as the long-term relationship between himself and ACP’s team.
“I have watched what are now the CE member states of EU from a banker’s perspective for almost 40 years, and I have seen that the move towards models often results in the lower mid-cap market being underserved in lending, in both sponsor and non-sponsor deals,” Grendowicz said. “Banks’ scoring models are IT-assisted, and deals are often declined as they don’t fit the defined model parameters.”

ACP has traditionally raised mezzanine-focused funds, but the GP saw an opportunity to expand its offering, according to Grendowicz. “From a different perspective, Franz [Hoerhager] and his ACP colleagues knew that there were potential investee companies at a more mature stage who didn’t need to share their equity benefits with others and who wanted plain borrowing at a lower cost, which would make the return too low for an equity and mezzanine-oriented fund, but which were, for various reasons, unacceptable to banks,” he said.

The fact that direct lending has not penetrated the CE market as extensively as the broader European one makes for opportunities for the fund, Grendowicz noted. “Contrary to western Europe, where non-bank direct lending represents close to 50% of total lending, this is not the case in CE,” he said. “We see our role as complementary to the banks’. Model-driven scoring for lower mid-cap companies, with limited ability to override these scores manually based on expert input, makes some potentially good deals and clients temporarily disqualified – they are not considered bankable. But we will perform ‘old-school’ lending based on expert assessment, and this is where the combined experience of our team through economic cycles comes in.”

The firm began fundraising in March 2020, Grendowicz said, meaning that the fund was raised over the course of the worst of the pandemic and the outbreak of war in Ukraine following Russia’s invasion in February 2022. The fund has a EUR 200m target and expects to hold a final close in a year.

Headquartered in Warsaw, ACP Credit has a senior team of four and expects to make additional junior hires, Grendowicz said.

ESG is also on the GP’s mind as it continues its fundraising and team development. “If you’re not part of the ownership pack in a company, there is limited ability to drive ESG, but we will keep selecting deals that are ESG-compliant, “Grendowicz said. “We have signed all the responsible investing treaties available, and as I am the chairman of the Polish WWF, I can bring this in.”

The fund is sponsored by ACP and C Quadrat investment, who funded the setting up of the fund.

Investors
The European Investment Fund (EIF) has backed the fund through its Pan-European Guarantee Fund – Selective Loan Fund Facility. European insurance companies, pension funds, banks and family offices have also joined the fund’s LP base, according to a press release.

“The war became a major determinant for investors with a longer geographical distance from the CE region and made it difficult for them to consider this exposure,” Grendowicz said, adding that the fund predominantly has existing AMC investors with the exception of the EIF. These investors are almost exclusively from Austria, Germany and the CE region itself, he added.

“So investors who understand these markets have invested in us without hesitation,” Grendowicz said said. “This is a time for opportunities, a time when businesses are acquiring other businesses, and a market with many buyers and many sellers.”

“We are definitely expecting more internationally oriented investors to come into the fund for the final close, because the situation of the pandemic and the war seems to be something that the world has grown used to,” Grendowicz said. “This will be a fantastic time for PE businesses. When the market is extremely bullish, valuations go through the roof, and this raises questions on the final outcome of these deals. But now, although some potential buyers will wait, there will be a lot of price arbitrage opportunities.”

Investments
The fund expects to issue 15 loans over a three-year investment period and is expected to make its first investments in the coming months, according to Grendowicz.

The vehicle will deploy EUR 5m-EUR 15m per deal in senior-secured debt solutions, focusing on first lien and unitranche facilities. The fund will invest in sponsor and non-sponsor deals and could have a 50:50 split, although this is not a requirement, Grendowicz said.
The fund expects the Polish market to account for 35%-40% of its deals, in line with its typical M&A market share in the CE region, Grendowicz said. The fund is sector-agnostic but will not invest in commercial real estate deals, he added.

Deal sourcing is likely to come from avenues including ACP’s existing clients, the credit team’s personal network, lawyers, corporate finance advisers, and banks, Grendowicz said.

“M&A deals don’t typically lend themselves well to bank scoring as it’s usually based on historical information, whereas M&A looks forward to what a company will be like in the future,” he said. “So we will be a good interim address for the banks. But we can’t do services like cash management, treasury, hedging or overdrafts, and we already have friendly bankers reaching out to make a more formal arrangement.”

People
ACP Credit – Mariusz Grendowicz (CEO, investment committee member); Ciprian Nicolae (CIO, investment committee member).

• Tweet  
• Facebook  
• LinkedIn  
• Google plus  
• Send to  

• Topics
• Funds
• Debt
• CEE
• Poland