Fund financing pushes further into traditional banking territory

Julia Seidl: Our company was originally a carve-out from Wolters Kluwer Transportation Services, with Ardian providing the debt for our private equity owner, Castik Capital. We operate a freight marketplace where companies can deal with each other directly to arrange transport, and we also have a Transport Management Software business that sells and implements our logistics software in large companies. The original deal was back in early 2017, before I joined the business, but since then Ardian has provided two more funding lines for an add-on acquisition in Spain and to support investment in organic growth.

Mark Brenke: Our relationship with Alpega is interesting because this deal was our first stretched senior facility, so it shows how we are expanding the strategy to include situations with lower leverage, where bank syndicates have always been the dominant providers. As European banks continue to retrench, even from midmarket corporate lending, more borrowers are starting to see the advantages of working with a debt fund for senior debt, as opposed to the unitranche products that we’ve historically been known for. On the other side of the coin, our investors have also become more familiar with our asset class over the past few years and are able to distinguish between different risk/return profiles on private debt. That means there’s growing appetite among LPs to provide funding for these lower-leverage, lower-risk deals.

Julia Seidl: If I compare this relationship with my previous experience with a bank syndicate, I can see the benefits of fund financing very clearly. One major advantage of working with Ardian is its flexibility in structuring the financing to suit our needs, compared to the more standardized terms and products that commercial banks offer. Then there’s the level of understanding they have of our business, which is much higher than what I experienced with a lot of banks, and the fact that we deal with the same people all the time. We have a single relationship with the Ardian deal team, so we don’t have to worry about being referred to multiple departments of several different banks.

Mark Brenke: From our perspective those points are equally important. We have built up a good knowledge of Alpega’s sector, and this allows us to take a flexible approach to their funding needs and to move quickly when they need us to, for example when M&A opportunities come up. And although leverage on this deal was low on day one because of the challenges of executing the carve-out from Wolters Kluwer and because the business model is fairly complex, there was always an understanding between us and Castik that over time there would be the potential to provide further funding to support the company’s growth. Again, having a good understanding of their business and a stable relationship with the management team locally allows us to give them the flexibility they need from us as their funding provider.

Julia Seidl: The financing we have from Ardian is a bit more expensive than the package we could get from a bank but we’re ready to pay a premium for the service we get because we feel Ardian can grow with us. And another important point from our perspective is that although the refinancing process itself is fairly intense, the ongoing reporting system we have with Ardian is very reasonable compared to what we would experience with commercial banks. We don’t have to deal with multiple reporting streams from four or five different banks that tie up time from management and finance teams. This leaves us more time to get on with really driving the business. We’re pushing very hard to achieve sustainable double-digit growth over the next couple of years and although we have no M&A plans today, we will continue to look for opportunities. With these ambitions, we definitely hope to have Ardian as a long-term partner to support us.

Mark Brenke: And us too. Having that straightforward bilateral relationship brings significant benefits because it allows us to provide a bespoke facility that meets the borrower’s needs much better. I believe our ability to do that and to manage our borrower relationships through local teams gives us a big advantage in this market, especially with borrowers who have never used fund-led finance and would always have gone to a bank in the past. They understand the benefits, but they also want someone local to talk to – as they would expect from a bank.