CPPIB-owned Antares targets up to $5bn for sophomore direct lending fund

Antares Capital, a high-profile lender to private equity-backed mid-market companies, is seeking $4 billion to $5 billion for its second major third-party offering.

The target range for Antares Senior Loan Fund II was disclosed in materials prepared for Plymouth County Retirement Association.

The vehicle is expected to hold a final closing later this year or in early 2023. Antares declined to comment.

Majority owned by Canada Pension Plan Investment Board, Antares has little history of raising outside capital. This changed in a big way two years ago, when the Chicago firm wrapped up a debut senior loan fund at $3 billion, double its $1.5 billion target.

In 2021, Antares signaled it might launch a successor when it hired Jeffrey Stammen as head of investor coverage in asset management and charged him with building new relationships and raising institutional capital. He joined from Barings, where he was regional sales head, North America institutional business development.

Antares’ Fund II is the latest of several new direct lending products to hit the market. It and others, among them Fortress Lending Fund III and Sixth Street Lending Partners, seem aimed at growing LP demand for private credit in a rising-rate environment.

In May, Blackstone’s Joe Zidle and Dwight Scott wrote that private debt could prove resilient in this environment. That is because it generally consists of floating-rate loans, which can facilitate income growth alongside interest rate increases. As such, they “may limit both the rate risk and the duration risk that are inherent in traditional fixed income today.”

This perhaps explains solid private credit fundraising in North America in this year’s first half. Capital inflows totaled $48.2 billion, Private Debt Investor reported, only slightly off from 2021’s record pace.

Antares’ Fund II will maintain its predecessor’s strategy of providing senior secured loans to PE-backed mid-market companies in the US and Canada, according to PCRA documents. A key factor in sourcing capabilities will be the firm’s relationships with more than 400 sponsors.

Antares is the lead lender on roughly 90 percent of all its transactions, PCRA documents said. In each deal, it will invest from the balance sheet alongside LP capital.

Last year saw record activity by Antares, with it closing 360-plus deals and issuing nearly $31 billion in financing commitments. Across healthcare and technology sectors, it did about 90 transactions apiece, with the former accounting for $7.8 billion in financing commitments, and the latter, $6.3 billion.

As of the end of June, the firm had completed more than 136 deals. Recent examples include unitranche credit facilities for the $1.8 billion acquisition of NSM Insurance by Carlyle and the 123Dentist-Altima Dental merger backed by KKR and Peloton Capital Management.

Founded in 1996 by ex-Heller Financial professionals, Antares was acquired in 2005 by GE Capital for more than $5 billion. In 2015, GE sold the business to CPPIB for $12 billion. Northleaf Capital Partners a year later bought a 16 percent interest from CPPIB.

Antares recently announced a change in its top leadership. Last October, it said that Timothy Lyne, a founding partner and then COO, would replace David Brackett as CEO at year’s end. Brackett remains with the firm in an advisory capacity.

Antares Senior Loan Fund I was as of December earning a 7.5 percent net IRR on an unlevered basis, according to PCRA documents. The net IRR on a levered basis was 16.9 percent.