Direct Lending and the Leverage Finance LandscapeDirectLendingandtheLeverageFinanceLandscape

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  Allison Lam: PGIM Private Capital is a private credit unit of PGIM. PGIM is the $1.4 trillion global investment management firm backed by Prudential. So we're a large global organization, 200 investment professionals across 15 offices, and we've been investing in the private debt markets for over 75 years, managing third party institutional capital since 1976.

  And today we manage about 100 billion in private debt through the full risk spectrum, and that's deployed really across various strategies which span long-term fixed rate debt tranches out to leveraged finance in the form of both senior secured floating rate loans, damaged junior capital, that ranges in the form of mezz, debt, and structured equity.

  And so, joining us is Matt Harvey. Matt is a managing director and head of our direct lending business. So Matt's been with PPC for nearly 20 years now. Started as an analyst in our Mezzanine business, moved to London to build out our European mezzanine practice there. And most recently shifted his focus to expand our direct lending efforts at PPC. And so today, we're going to talk to you about PGIM Private Capital's approach to direct lending and the private debt landscape. And so with that, Matt, I'll turn it to you.

  Matthew Harvey: Great. Thank you, Allison, and good morning everyone. It's a pleasure to be here to talk about this asset class. It's an asset class, I think, as most of you all know and appreciate has grown quite a bit over the last 10 years; really was born in the depths of the financial crisis as bank regulation and other market shifts created a demand for an alternative source of leverage capital to middle market companies. And so what we'd like to do today is spend a little bit of time introducing the asset class itself. We'll keep the comments, I think, objective and educational, and then we'll obviously have some time for moderated questions between Allison and myself, and would obviously encourage participation and questions from the audience.

  Usually we find those to be frankly the richest source of content discussion. And I notice here, I'm based in Chicago, so this is a picture of the Chicago River looking west down Wacker Drive, so maybe familiar to some of you. But in any event, just to get started here, when we think about direct lending and where this fits in, you have to think about it within the context of the leverage finance landscape. And ultimately what direct lending is, it's senior secured loans to middle market and small cap companies.

  Generally $10 to $50 million of EBITDA in issuer size. Of course, you have outliers to that on the upside. And generally financing event driven transactions for leverage buyouts, for acquisition or recapitalizations. It's something more than just a plain vanilla or traditional refinancing in most. And therefore, the need for capital, the depth of capital, the sophistication of capital is a little greater than the average bank refinancing.

   

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