Private credit refinancing shows concerns about sector overblown: Ninepoint co-CEO
Private credit funds have been under scrutiny in recent months as rising interest rates prompted some observers to worry that the handsome returns generated by lending to companies that can’t get traditional bank financing might not stand the test of time.
But John Wilson, co-chief executive and managing partner of alternative investment manager Ninepoint Partners LP, says a refinancing deal his firm just announced involving one of their borrowers shows the private credit ecosystem is working — and capable of generating a double-digit internal rate of return.
Ninepoint and Third Eye Capital Corp. made a $200-million loan in 2019 to Pieridae Energy Ltd., a Calgary-based company that wanted to purchase Shell Canada Energy’s midstream and upstream assets in the Southern Alberta Foothills. The loan was made with the financial backing of a pair of private credit funds they co-advise, Ninepoint-TEC Private Credit Fund and Ninepoint-TEC Private Credit Fund II.
The outstanding $185-million debt will now be refinanced and repaid in full through a senior secured non-revolving term loan facility with Prudential Private Capital and Voya Investment Management. Ninepoint and Third Eye’s private credit funds are receiving $123 million of the proceeds and, after the refinancing, they will have received a total of $370 million in cash payments including principal, interest and fees.
Since inception in 2010, the Ninepoint-TEC private credit partnership behind the Pieridae Energy loan has produced an annualized net return of 10.33 per cent, the companies said in a June 14 news release.
The Pieridae refinancing appears to be a bright spot for Ninepoint, which is winding down the smaller of the two funds, Ninepoint-TEC Private Credit Fund,
Read more on financialpost.com
