BC Partners, Crown target Main Street investors for cross-border credit fund

'We want to create an institutional-quality product for the retail market,' BCP Credit head Ted Goldthorpe, a former Apollo Global Management executive, told Buyouts.

BC Partners and Crown Private Credit Partners are eyeing retail investors for a jointly managed offering focused on private debt opportunities in North America’s mid-market.

BCCP Private Credit Fund will operate with a direct lending strategy, BCP Credit head Ted Goldthorpe and Crown managing director Brent Hughes told Buyouts. It will target credit-based dealflow among small and mid-sized borrowers, both sponsored and non-sponsored, across the US and Canada.

The fund, the size of which has yet to be determined, is expected to provide unitranche, first-lien and second-lien financings to companies with EBITDA in the range of $10 million to $50 million. Other details will be finalized in time for the vehicle’s launch in the early fall.

To capitalize the fund, BCP Credit and Crown will primarily target the under-served community of Main Street individual investors in Canada, Goldthorpe and Hughes said. Fundraising, relying on local wealth management distribution channels, will be spearheaded by Hughes and BCP Credit managing director Mike Terwilliger.

“We want to create an institutional-quality product for the retail market,” Goldthorpe told Buyouts. He said his firm, which has long experience tapping into the US retail space, has for a couple of years been talking with Crown about a platform aimed at “the lack of fixed-income solutions in the Canadian retail market.”

Hughes agreed, saying a Canadian retail-oriented credit strategy represents “a massive opportunity.” He said BCP Credit and Crown are a natural fit because of their “similar cultures” and complementary approaches to private debt investing. BCP Credit’s role in the platform will also ensure “a wide origination capability” on a cross-border basis.

The fund’s joint investment committee will be divided between BCP Credit and Crown executives. They will include New York-based Goldthorpe, a former Apollo Global Management principal, and Toronto-based Chris Johnson, a Crown managing director.

Offensive & defensive

BCCP Private Credit Fund will take advantage of an array of opportunities and challenges in the emerging post-pandemic recovery cycle.

Today’s economy is being spurred by “pent-up demand from corporations and unbelievable demand from consumers,” Goldthorpe said. There are also “some headwinds on the horizon,” he added, including the prospect of inflationary pressures and the lingering effects of covid. The fund will for this reason be both offensive and defensive in its investing.

The fund’s strategy is expected to benefit from a North American supply gap created by the long-term retrenchment of traditional private debt players, such as banks, Goldthorpe said. “The banks in 2007 had a 90 percent market share,” he said. “Now that is closer to 4 percent.”

Goldthorpe was president of Apollo Investment Corp and CIO of Apollo Investment Management before joining BC Partners in 2017 to launch and lead its credit arm. BCP Credit invests through opportunistic credit and direct lending strategies in mid-market opportunities in North America and Europe.

Crown, a direct lending firm focused on Canadian mid-market borrowers, started out in 2000 as the credit arm of an insurance company. Following a general partner-buyout in 2002, it began raising institutional funds. Going public in 2015, it also began drawing on the capital of retail investors.

This year, the listed Crown Capital Partners divested control of Crown Private Credit Partners. The buying group consisted of Canadian Western Bank, Concentra Bank, Mount Logan Capital as well as GPs, among them Hughes and Johnson. The privatized Crown unit assumed management of the firm’s flagship vehicle.

Despite the promise of fresh post-pandemic opportunities, private debt fundraising has been slow. Nearly $89 billion was collected globally in H1 2021, Private Debt Investor reported, down slightly from a year earlier.