In this fireside chat, Nicole Downer, Managing Partner at MV Credit, shared her expertise on the private credit space, particularly in the upper mid market. Here’s a summary of the discussion:
Defining Upper Mid Market Private Credit: Downer defined the upper mid-market as companies with EBITDA ranging from €13 million to €100 million. She highlighted that this space is often overlooked, with most activity focused on the lower mid-market.
Origination and Relationships: Downer emphasised the importance of relationships in private credit, stating that MV Credit’s long-standing relationships with private equity sponsors have been key to its success. She also discussed the team’s approach to originating deals, which involves building trust and providing feedback quickly.
ESG Considerations: Downer discussed how MV Credit incorporates ESG considerations into their investment thesis and documentation. She mentioned that they engage with sponsors and management teams to identify meaningful KPIs and incentivize sustainable practices.
Independent vs. Integrated Asset Manager: Downer highlighted the advantages of being an independent asset manager, including the ability to say no to deals and maintaining independence from private equity firms.
Consolidation and Competition: Downer predicted that consolidation in the private credit space is inevitable but may not necessarily lead to a significant “wow” deal. She also expressed confidence in the upper mid-market, citing the comfort of having a niche space with fewer competitors.
Risks and Worries: Downer addressed concerns about risks in private credit, stating that while some managers may have been less disciplined, the asset class has shown resilience. She also downplayed the threat of banks setting up private credit funds, seeing opportunities for partnerships instead.
Investment Allocation: When asked how she would allocate €1,000 or $1,000 to invest, Downer chose a senior secured strategy in private debt, reflecting her defensive and credit-focused approach.
Key timestamps:
00:09: Introduction to ION Influencers’ Fireside Chats
00:35: Nicole Downer’s Background and MV Credit
01:51: MV Credit’s History and Strategy
02:45: Defining Upper Mid-Market
03:47: Repeat Business and Relationship Building
05:00: Evolution of Private Equity Firms
06:07: Selection of Private Equity Sponsors
06:30: Importance of Relationships and Uniqueness
08:16: Human Interaction vs. Technology in Deal Origination
09:53: Impact of Technology on the Industry
10:52: Investors’ Concerns and Due Diligence
12:28: Shift in Investor Focus
13:11: Qualities of an Excellent Team Member at MV Credit
14:56: Experience and Learning from Losses
16:45: Red Flags and Industry Focus
18:27: Mezzanine and Senior Strategies
20:09: ESG Considerations in Investment
23:11: Incentivization and Management Engagement
24:22: Independent vs. Integrated Asset Manager
25:40: Market Consolidation and Concerns
27:06: Potential Risk in Private Credit
28:57: Investment Allocation