2024-01-15 08:22:16
They are financial assets issued by large companies that enjoy first rank in collection priority, have real guarantees and offer their investors a return at a variable interest rate.
In the last 12 months, as a complement to traditional fixed income, interest in senior secured syndicated loans has emerged, the relevance of which has been accentuated in a context of high interest rates and inflation.
Syndicated loans are financial assets issued by large companies that enjoy first rank in collection priority, have real guarantees and offer their investors a return at a variable interest rate. The collection priority and the existence of specific guarantees give them a differentiated risk profile and greater protection in the event of non-payment compared to other debt instruments. Which represents valuable protection in situations of economic slowdown or uncertainty.
To take advantage of these instruments, the fund was born in 2019. Alma European Senior Secured Loans. The project arose from a joint venture between the firm Alma V and Singular Bank. “We saw that the Spanish offer of investment products focused on Investment Grade (IG) bonds and, in recent years, on closed-end products, Private Equity, infrastructure, photovoltaics and some direct financing (Direct Lending). There was a very well-managed risky offer, but there were no products that were between the IG and the totally illiquid funds,” explain Omar García Peral, responsible for debt and credit portfolio management at Alma V, and Enrique Díaz-Barceló, responsible for of the sale of the fund to institutional clients.
The market prospects are good since, as they explain, an annual profitability of between 7% and 8% in the next three years. “It would be necessary to face much worse economic conditions than those experienced in the last crises to anticipate losses in the principal in a medium-term horizon,” they say.
A comprehensive analysis
How to avoid defaults? With a rigorous analysis. The background has some 35-40 positions in portfolio. These are the requirements they are looking for: large companies, leaders in their sector and whose management team has previous experience in previous crises. “We are agnostic by sectors and countries. We look at the microphone and we are company specialists. We have pharmaceutical, consumer and educational companies,” they specify.
In addition to the above, it is a requirement that the company has high liquidity ratios, access to the financing market, that the debt issuance is above 300 million and the loan is syndicated and originated by banks. “At the moment, we only do syndicated loans because we think interest rates are going to stay where they are for longer than people think. And that means return for our investors,” they comment.
Currently, the fund has a net worth of 100 million. A figure that for now they are seeking to consolidate, although they warn: “In our management model we have estimated that we are capable of achieving what we expect up to 500-600 million. From then on we will no longer comply because we will not be able to have the same diversification as now.”
They distribute this product to Singular Bank’s private banking. Today it can only be sold to professional and institutional investors. “The objective of our clients is to preserve the principal and have a recurring return with the least possible volatility,” they clarify.
And an experienced team
García Peral has 19 years of experience in Capital Markets. Since 2014 he was Global Head of Trading & Sales for loans for BBVA UK, promoting the active management of the bank in the United States, Latam and EMEA. Previously, he was responsible for managing non-strategic credit portfolios at the bank under the recapitalization program of the European Commission.
From 2002 to 2012 he has led and developed different Trading and Portfolio Management businesses in Loans, Bonds, ABS and structured credit notes, being a member of the Management Committee of the portfolios of 3 CLOs launched by Caja Madrid under the Neptuno program. .
For his part, Díaz-Barceló has 26 years of experience in the financial sector. In the last 13 years he worked as a senior banker responsible for the sale of all the group’s products. BNP Paribas (including derivatives and funds but also deposits) to institutional. Previously, he spent two years leading the global strategy of the group’s Corporate and Investment Banking unit. BBVA. Previously, he spent 11 years as an equity analyst in different sectors at various brokers, FG, Merrill Lynch, BBVA, Exane BNP Paribas.
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