Pemberton targets Brexit opportunities with direct lending fund

The alternatives firm hopes to raise £500 million for the vehicle, which will target the UK mid-market.

Managing partner Symon Drake-Brockman said that the latest sterling fund was being launched, in part, to “fill a gap that will be caused by some foreign banks reducing their exposure to the UK because of Brexit”.

Some £1.6 trillion of domestic and cross-border lending was withdrawn from the UK market between 2008 and June 2016, Pemberton said in a statement announcing the fund launch on September 28, citing data from the Bank for International Settlements and the Bank of England.

Troubles in Europe’s wider banking system are expected to further retract bank lending, Drake-Brockman added, citing ongoing headwinds facing the German banking system. Shares in Deutsche Bank, the country’s largest bank, fell after it was slapped with a $ 14 billion legal settlement proposal from the US Department of Justice following probes into its role in packaging and selling mortgage securities, The Wall Street Journal reported on September 16.

Pemberton has secured two cornerstone commitments to its new sterling fund from Legal & General, which owns a 40% stake in the firm, and another large unnamed financial institution, according to the statement.

Drake-Brockman said the firm was “in discussions with a series of other investors”. He declined to disclose the size of the secured investor commitments but, according to the statement, the firm expects to announce a first close by the end of the year.

The fund will supply senior secured loans and unitranche loans to UK mid-market companies, Drake-Brockman said. It will invest alongside banks, which have restrictions on the amount they can lend to individual companies in the UK market due to their internal credit limits.

“Our view is to work with the banks,” he said. “Banks don’t want to be sole lenders to companies. Most banks would look to share the credit with another party.”

The fundraising comes as Pemberton nears a final close on its inaugural European mid-market debt fund. The euro-denominated fund is expected to close at over €1 billion “within the next four weeks”, Drake-Brockman said.

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