PLEASE NOTE: A verification email will be sent to your address before you can access your trial. Connell: Its a great group of people. Stewart: Okay. And then, as the borrowing base grows, thats why its a delayed draw term loan, so does our loan.
(a) Individuals (other than high net worth individuals), (b) Individuals (high net worth individuals), (i) State or municipal government entities, (l) Sovereign wealth funds and foreign official institutions, (m) Corporations or other businesses not listed above. Significant legal events involving law firms, companies, industries, and government agencies. Connell: I think if the loan profile matches well with an insurance company balance sheet, from my perspective, from a life and annuity perspective. All of our loans have floating rate coupons and all of our loans have a full suite of covenants. Please email me at podcast@insuranceaum.com. The firm was founded in 2007 and is headquartered in Chicago with additional resources in New York, Los Angeles and Austin. Then from ongoing portfolio management, were able to actively manage these loans because we most often have board observation rights, et cetera. All right, so heres the deal. Its interesting. And today, as you conclude in this podcast with our more focused remarks, everybodys talking about risk management. I think these companies can, and in my opinion should, take on some illiquidity premiums in private credit. The landscapes changing and its an interesting asset class and one that I wasnt familiar with. So there is a difference between cash flow lending and asset-backed lending. And what that means is, in other words, we have to monitor the performance of our loan collateral because that is the entire point of our underwriting. And in addition to that, we actively manage all of our loans, and really we do that by operational controls and ongoing portfolio management. Stewart: And so, I have a weird background, and I think versus kind of some other folks in your space, your backgrounds a little unusual as well, and that you came out of the insurance side, right? You may have just had some invitations canceled just on that comment alone. Add some SG&A in that, youre at, call it 5-ish and the investment-grade corporate Single-A index is at 4%, 4.8% today. Help us improve this page by adding information. Connell: I lived in Seoul, Korea, in Jakarta, Indonesia, for three years of my life when I was younger. In contrast, asset-backed lending, generally speaking, is when the loan attaches specifically to a borrowers assets and that forms the basis of the loan size. InsuranceAUM.com is the #1 rated industry investment resource. Connell Hasten, Direct: +1.312.663.7472 I looked yesterday the 2 to 10 looks flat, 2 to 30 looks flat or pretty flat. Connell: First job. Partner Thats at a very important point that its not a static pool. I appreciated how an investor can really take a long-term investment view and take some illiquidity premiums along the way, given that the cash flow profile of its liabilities offers you to do so. So thats the general structure. So if the entity that issues the thing somehow fails, the SPV entity survives, it is not going to be attached to the issuers failure. Stewart: I appreciate your kind words, I really do. I saw a slide from St. Johns University yesterday that showed over the last 15 or 20 years, the investment portfolio, these insurance companies drive results. Stewart: So that admission right there, Connell, will crush your social life. Everything you do in the insurance space is very interesting. Connell: Yeah. Again, I think its pretty attractive. Kredivo is operated by Singapore-based fintech FinAccel. Can you give me the differences so that an audience, somebody, a CIO that just isnt that familiar with the area can understand it starting from square one? I joined Victory Park in 2018, and as you mentioned, co-founded our insurance services platform. It funds over time. Victory Park Capital Advisors, LLC (VPC) is a private credit specialist with a focus on investing in emerging and established businesses across various industries in the U.S. and abroad. And youve got rates that are significantly higher. Its more mainstream, and has proven success through multiple cycles. And keep in mind that our borrowing base moves, meaning its a dynamic pool of collateral versus a static pool of collateral. Mobile: +1.312.505.1457, https://www.victoryparkcapital.com/ And given that there could be thousands of underlying receivables or loans or whatever the collateral is in our borrowing base, we have a full team that monitors that weekly or even sometimes even daily, depending on the type of collateral. Connell: Thanks, Stew. So, I think its a really good space to allocate some of your portfolio in, especially in todays market, but insurance, its a small margin business, so as crediting rates rise, you still need to make that spread on the investment side. How do you see this asset-backed loan strategy performing from here forward, given that here is a lot different than here was six months ago or seven months ago? In my first summer of high school, I worked on the assembly line at St. Louis-based manufacturing company that basically made specialized tubes for chemical companies. If you look at the ABL market holistically, how we look at it is, you can lend to traditional assets like accounts receivable and inventory, which is primarily done by banks. Connell: Yeah. Stewart: Its great to have you. So operational controls can be, we have security over bank accounts. Before we go any further, lets start off with our first three questions. And its great to meet you. Absolutely. And if something, if I understand this correctly, if something does default in the collateral pool, then its swapped out for performing collateral. Stewart: Yeah, no, me too.
Then after the investment management firm, I worked for mid-sized life and annuity provider. So cash flow lending is really when a lender determines a loan size based on the borrowers enterprise value, with a particular focus on EBITDA and cash flow. Is that why its done that way? Weve gotten a gas tax holiday. Register today to confirm your status as an institutional investor and gain access to the latest thought leadership in the industry. And in addition to those covenants, we also set corporate level covenants and that could be liquidity covenants, network covenants. So can you walk me through what a typical Victory Park Capital asset-backed loan looks like? Im a follower of your other podcasts. And thats why insurance companies started getting into private credit. Connell: Sure. Youve come a long way from that manufacturing assembly line in St. Louis to here as a partner of Victory Park Capital. Buffet proved that years ago. I did not plan to get into the insurance space. So at some point during this journey, I really fell in love with investing out of insurance vehicles, specifically from a life and annuity perspective, which is where I sat. Suite 5200 Connell, welcome. You have to know whats happening with clients, competitors, practice areas, and industries. I think I hear that at Victory Park Capital twice a day. And so youre exactly right, structuring it in that way allows you to do so. I've upgraded the servers (much faster than before!
Stewart: No one does Connell. Stewart: Yeah. And we are talking specifically today about asset-backed lending. So in addition to my investing duties, I also make sure that our insurance company investor base can access our private credit strategies in a way that best suits their needs. You have middle market loans and lower middle market loans, and thats mostly where non-banks play. And I dont think thats going away. The first round was closed in July 2020. So we like to say, we wake up and go to bed thinking about risk management. And exactly, it can be swapped in kind, with an eligible receivable or whatever the collateral is or in cash by the company because they have to meet the max LTV. Kredivo announced today it has secured another $100 million debt facility from Victory Park Capital (VPC). Im Stewart Foley, and this is the insuranceaum.com podcast. So we have, from the covenant perspective, two lines of defense, if you will. Were joined today by Connell Haston, partner and head of the Insurance Services Platform at Victory Park Capital. Lets go with St. Louis, Missouri. Connell: Okay, here we go. Theres a lot of macro risks. Stewart: There you go. I think I hear that at Victory Park Capital twice a day. Sometimes we have corporate guarantees. And I think that continues to stay because its a spread business and if you put everything into Single-A to Triple-A, very liquid securities, its really hard to make money. This is the largest loan facility [], Andrew Ross Sorkin, Jason Karaian, Sarah Kessler, Michael J. de la Merced, Lauren Hirsch and Ephrat Livni. Password (at least 8 characters required). I started in banking trying to follow a prescribed career path. Try our Advanced Search for more refined results, Searching articles in Victory Park Capital Advisors Llc And given that there could be thousands of underlying receivables or loans or whatever the collateral is in our borrowing base, we have a full team that monitors that weekly or even sometimes even daily, depending on the type of collateral. Me too. Stewart: And you mentioned liquidity, I do think the regulator, by all indications, the most recent regulatory changes that seem to make it easier for insurance companies to hold private credit, hopefully get some reliefCIOs have a very tough job these days. A little bit off-topic, but do you see the flow of funds to private assets continuing at the current pace as rates increase, nominal rates increase? And we directly originate all our loans and therefore were generally the sole lender, and always the agent because we like to control everything we can. About | Advertise | Contact | Disclaimer | News | The Daily Deal Newsletter FinSMEs.com by FinSMEs is licensed under a Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Unported License. Stewart: I love it. Connell: Yeah. So the borrowing base should always consist of eligible assets, which, since we set the eligibility, are always performing assets. And if you look at our ABL strategy, its a great complement to other private credit strategies in an insurance investment portfolio. Seven months ago, all anybody was talking about was finding yield. Thats another form of stimulus. Please see our Privacy Policy. And so since inception, we invested approximately eight billion or so and our primary strategy is in the private credit space, with an emphasis on asset-backed lending. Three, were asset-backed, which helps with recovery rates in a higher default environment, which looks like a lot of people think were heading towards. Theres supply chain issues, theres a war going on, theres volatility, not only in the fixed income space, but in the equity space. Stewart: Insurance companies are buying private assets like never before, and asset-backed lending is one of those areas. Were floating rate, so that helps with interest rate volatility. So were kind of insulated in the capital stack. Stewart: With regard to covenants, I think in private assets, thats a really important consideration because theres a liquidity premium that you mentioned. Thats a good one, thats a good one. ), please let me know if you see any issues, I'll fix asap! Weve got mutual friends here in Chicago and were very happy to have you on the platform and I appreciate everything very much. All right. Law360 provides the intelligence you need to remain an expert and beat the competition. Sometimes we have corporate guarantees. Two, were senior secured in the capital stack so that helps with equity valuation volatility. Stewart: We want to hear your ideas for future podcasts. Victory Park Credit Opportunities Intermediate Fund, L.P. Avenue Europe International Management LP. Information presented may or may not be current as of the date of the presentation, andInsuranceAUM.comhas no duty to update and maintain the information, reports, or statements made during events. And as far as covenants we have, covenants are very important to us and we set covenants at the borrower level, which is the asset level. Stewart: I think, having run money for insurance companies for a lot of years and working on the insurance side, I think that downside protection is always as front-of-mind for insurance investors in particular. Then from ongoing portfolio management, were able to actively manage these loans because we most often have board observation rights, et cetera. chasten@victoryparkcapital.com This doubles the Indonesian digital lending and credit platform's total warehouse financing facility from VPC to $200 million. Youre a pro. Now they have comfort with it because theyve seen the realized performance. When we first met, and we have some mutual friends in Chicago who are also in the industry, I was not familiar with Victory Park Capital. Stewart: And its interesting, Im not a private credit guy, but I learned a few things, and I love learning on these podcasts because I get to talk to guys like you. And this was all out of our general account. So before we go any further, maybe some of our listeners arent familiar, as well. Hometown: born in Wilmette, Illinois. Stewart: An SPV, so SPV and covenants, a special, if I understand this right, and believe me, when I tell you practicing law without a license, here we go. Can you give me the high points of Victory Park Capital? Connell: That does not work. So this is where I like to say, I met insurance, meaning I learned the language, memorized a few states statutes, and became familiar with the rules and regulations when investing out of an insurance general account. And to answer your question on really the characteristics of our loan and how I think these characteristics can help in a time of uncertainty, Ill just focus on four things. Connell: Yeah, were certainly in a market environment that creates a lot of uncertainty, and so you really want to be in defense strategies. Examples of collateral in the non-traditional space can include hard assets like real estate or soft assets like consumer loans, small business loans, or any really verifiable or contractual stream of cash flow. So what we did was we outsourced our publics and then internally ran our private credit portfolio, which was focused on real estate mortgage investments, private loans, and structured products. And then from an insurance perspective and an asset allocation, I think private credit, both direct cash flow lending and asset-backed lending have become an extremely attractive asset class due to just compelling risk-adjusted returns. Connell: The reason for it is just to get access to our collateral as quickly in the event we need to. Asset-backed lending follows the same themes as cash flow lending, but its just a different structure. Its private credit, so theres capital-efficient ways to enter that space. By clicking submit you confirm that you qualify as an institutional investor and you consent to allow Insurance AUM to store and process the personal information submitted above. So we like to say, we wake up and go to bed thinking about risk management. 150 North Riverside Plaza I certainly came out knowing a lot more and I hope our listeners did too. And, those are a little bit different than whats eligible and whats not. And we really didnt talk about structure in terms of floating versus fixed rate. Stewart: So thats a really interesting point. The firms differentiated offerings leverage an extensive network of industry relationships, disciplined deal origination, creative financing capabilities, and broad credit structuring expertise. So its an important point with regard to the risk management and particularly right now. And often our borrower is a bankruptcy-remote SPV, which stands for special purpose vehicle, which is basically a wholly-owned subsidiary of the corporate entity versus lending to the corporate entity itself. And, you can lend to non-traditional assets where we play and most banks do not. None of the information presented is intended as an offer or solicitation of an offer to buy or sell, or as a recommendation, endorsement, or sponsorship of any security, company, or fund. And after banking, I worked as a portfolio manager at a large investment manager where I first managed real estate debt. In the direct cash flow world, you have broadly syndicated loans, which they call BSL loans, and thats mainly where banks play. A "historic" agreement by the G7 is a big step toward global tax coordination. https://mcdn.podbean.com/mf/web/45f5ve/IAJ_Connell_Hasten_0701227ln0b.mp3, Opportunities and challenges in the Asian insurance market, Asset-backed Lending Masterclass with Victory Park Capital, Modeling Multifamily Real Estate Wall Street Prep, Infrastructure for Insurers A Deep Dive with Macquarie Asset Management, CIO Spotlight: Leena Punjabi CIO at F&G Annuities & Life, Kids These Days: Perspectives From New Graduates, Loans from Federal Home Loan Banks: An opportunity for US insurers to enhance investment yield and total return, Thought leadership delivered to your inbox, Confirm your status as an Institutional Investor, Complete CFA Continuous Professional Development requirements. Connell: Youre right on. {"search": "/search", "clicked": "/clicked", "portfolio_add": "/portfolio-add", "portfolio_remove": "/portfolio-remove", "portfolio_create": "/portfolio-create", "portfolio_activate": "/portfolio-activate", "portfolio_delete": "/portfolio-delete", "portfolio_rename": "/portfolio-rename", "portfolio_color": "/portfolio-color", "home_filter": "/home-filter", "htmlspeed": "/htmlspeed", "add_tag_firm": "/add-tag-firm", "add_tag_click": "/add-tag-click", "copy_aum": "/copy-aum", "stripe_checkout": "/stripe-checkout"}, {"uid": 42666947, "pid": -1, "pid_a": [], "name": "", "email": "", "blacklist_f": false, "paywall_f": false, "paywall_n": 0, "random_n": 0}, VPC Asset Backed Opportunistic Credit Fund Levered LP, VPC Asset Backed Opportunistic Credit Fund LP, VPC Asset Backed Opportunistic Credit Offshore Fund LP. Have you experienced any changes in the flow of funds there? The information presented is provided for information purposes only, and is not intended to be and does not constitute financial advice, investment advice, trading advice, or any other advice, is general in nature, and is not specific to you. 2022, Portfolio Media, Inc. | About | Contact Us | Legal Jobs | Advertise with Law360 | Careers at Law360 | Terms | Privacy Policy | Cookie Settings | Help | Site Map, Menu options for Victory Park Capital Advisors LLC, Windy City Shuffle: Crowell & Moring, Benesch, Ballard Spahr, Fintech's $2.5B Deal Latest De-SPAC Axed Over Foggy Market. So I think this is, private credit holistically, aspect lending or direct cash flow lending, really is a defense strategy. Thats not a political remark at all, its just a fact. Have I got that about right? The floating rate aspect of this helps with raising interest-rate environment, but again, the insurance companys crediting rates, lets talk about an annuity company for an example, seven-year MYGAs are at 4.5% last time I checked, which was yesterday. Can you talk about the typical structure of a loan like this? An SPV is whats known as bankruptcy remote. And here is where I was tasked to build the internal investment management team. Raised in St. Louis, Missouri. That helps. Connell: Yeah, Ill talk about kind of our structure and then the covenants that go with that, and some other operational controls that we have. So, it follows the same themes. Its return of capital trumps return on capital. Law360 may contact you in your professional capacity with information about our other products, services and events that we believe may be of interest.Youll be able to update your communication preferences via the unsubscribe link provided within our communications.We take your privacy seriously. And when I say delayed draw term loan, that just means we dont fund the entire commitment on day one. x. So insurance investors now have comfort with private credit. So senior mortgages and mezzanine loans, and then managed private credit portfolios on behalf of insurance companies. And one investment class that I came across was an asset-backed loan strategy, which, as I mentioned, is our main credit strategy and a main reason why I thought Victory Park Capital was a great place for me to join in 2018. In the legal profession, information is the key to success. Connell: But Ill tell you what, Im genuinely glad it happened this way. I took a free trial but didn't get a verification email. And also, I guess Ill add one other thing. We are committed to our mission of education through the distribution of thought leadership and research. Connell, hometown; first job of any kind; fun fact. These are portfolio concentration limits and theres a whole suite of asset-level covenants you can have, depending on what the collateral is. Click here to login, Enter your details below and select your area(s) of interest to stay ahead of the curve and receive Law360's daily newsletters, Email (NOTE: Free email domains not supported). Our Insurance Services Platform provides customized solutions for insurance companies to invest in our private credit strategies designed to meet their specific objectives. Connell: Yes, practicing without a license, Stew, I dont think so.