Palio Capital Partners have responded to demand for non-bank finance by unveiling plans to provide senior debt and mezzanine loans to SMEs.
The firm is aiming its services at businesses with an enterprise value of between £10- £100 million, and the model has already been enthusiastically received by European investors and The European Investment Fund (EIF). The EIF has already pledged a cornerstone investment to Palio’s Superflex Fund I LP, which has taken the fund a third of the way to its first close of #100 million.
CEO and founder of Palio Mike Henebury is confident that the new fund will help UK SMEs to gain access to necessary finance.
He commented: “The SME market is the engine-room of the UK economy but the major constraint on the growth of these businesses is the scarcity of debt finance.
“The government has recognised this issue and recently launched the Business Finance Partnership to ease the flow of credit by investing £1 billion through managed funds that lend directly to UK SME’s.
“We fully support the government’s plans and have been invited to participate in this project which we see as a force for good.”
Backing from the EIF reflects the wealth of experience that Palio can offer to businesses looking for finance. The team, which will be led by CIO Jerry Wilson, comprises of a number of highly experienced finance professionals who have structured both senior loans and mezzanine instruments totalling £3 billion to over 80 UK companies.
Mr Wilson believes that the new fund will allow institutional investors unprecedented access to superior risk-adjusted returns from UK backed SMEs.
He added: “There is an imbalance between demand and supply of senior debt for private equity deals and this will result in higher pricing and better overall lending terms, giving the asset class a very favourable risk-return profile.
“This will attract capital inflows from institutional investors in search of superior returns.
“The value of private equity deals in the lower mid-market has more than trebled in the last three years to £3.4 billion and we are receiving significant interest from the wider private equity community who see the attraction of our flexible loan product.”
Palio now plans to build a hybrid loan portfolio of approximately £250 million, initially lending exclusively yo SMEs with experienced management, capable of attracting private equity management and thereby representing a relatively safe lending proposition.