The Perfect Match: Finding the ideal fund finance solution partner

By: Mohith Sondhi, Senior Director of Debt Finance at OakNorth Bank

In mid-December, I spoke with Emilio Di Spiezio Sardo, Co-founder of Bluegem Capital Partners, a private equity firm focused on European consumer-facing businesses, as well as Alice Murray, Editor of The Drawdown. We discussed OakNorth Bank’s subscription line facility to Bluegem, and what it takes to get a complex deal like this done quickly in the midst of a pandemic.

As the world went into lockdown in 2020, we saw high-street lenders in the UK pulling back from commercial lending to focus on managing their existing loan books. At OakNorth Bank, we saw this as an opportunity to put the pedal to the metal and support businesses at a time when many other lenders would be reluctant to.

While fund finance is common across the private capital fund market, most high-street lenders don’t look at deals under £25m in the fund space, especially in a turbulent market. This creates a gap for us to fill and support what we think is an under-served market niche (funds looking for a loan of £5m to £25m).

One such example, is with the team at Bluegem Capital Partners. A contact of mine from Marlborough Partners knew about our lending capabilities, specifically with funds finance, and facilitated the intro to the team at Bluegem who were looking to raise more for their fund.

The more we went through the process with the Bluegem team and their LP, it was evident the management team was incredibly well-versed in the space and that both parties needed to be transparent from beginning to end if we wanted to complete in a timely manner, while ensuring everyone was comfortable with the terms. As a lender, we always say you can’t just underwrite the LP’s, you have to underwrite the underlying investment.

This is where our Credit Intelligence software comes into play. By coupling this technology with a human touch, we’re able to make more informed and consistent credit decisions. Since it’s a thorough and detailed process, we’re able to expediate our lending decisions in a matter of weeks vs the months it takes other high-street lenders. We also invite all our borrowers into Credit Committee to co-discuss their business proposal directly with the decision-makers. This creates additional transparency and helps build a stronger relationship with the borrower.

After thorough due diligence, we were able to structure a solution that fit both parties (us and Bluegem) in just six weeks – not bad considering this was OakNorth Bank’s first ever funds finance subscription facility line especially taking into consideration the unprecedented times we are currently in.

Despite 2020 being a turbulent year, I strongly believe there are still plenty of opportunities to support strong management teams across a variety of sectors, including within the private capital fund market.

Over the next six to twelve months, I predict we’re going to see a flood of activity in the space, especially as a number of funds will be looking for funding to bolster liquidity.

You can watch our full discussion here and if you’d like to discuss your fund finance needs, please reach out to me directly at [email protected].

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