Weve got mutual friends here in Chicago and were very happy to have you on the platform and I appreciate everything very much. 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. 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. 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. Its private credit, so theres capital-efficient ways to enter that space. Mobile: +1.312.505.1457, https://www.victoryparkcapital.com/ Again, I think its pretty attractive. And after banking, I worked as a portfolio manager at a large investment manager where I first managed real estate debt. The firm was founded in 2007 and is headquartered in Chicago with additional resources in New York, Los Angeles and Austin. development water indian clerk study india Connell: Yeah. 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. So we have, from the covenant perspective, two lines of defense, if you will. I think I hear that at Victory Park Capital twice a day. And this was all out of our general account. And keep in mind that our borrowing base moves, meaning its a dynamic pool of collateral versus a static pool of collateral. So can you walk me through what a typical Victory Park Capital asset-backed loan looks like? Already a subscriber?

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. Connell: Yeah. And, outside of other things we do like structured products and mortgages, which there are ways to access this space, both direct cash flow lending and asset-backed lending where its not so capital intensive. This is the largest loan facility [], Andrew Ross Sorkin, Jason Karaian, Sarah Kessler, Michael J. de la Merced, Lauren Hirsch and Ephrat Livni. I did not plan to get into the insurance space. Chicago, IL 60606. 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. Everything you do in the insurance space is very interesting. So its an important point with regard to the risk management and particularly right now. These are portfolio concentration limits and theres a whole suite of asset-level covenants you can have, depending on what the collateral is. This doubles the Indonesian digital lending and credit platform's total warehouse financing facility from VPC to $200 million. Its great. 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. 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. So the borrowing base should always consist of eligible assets, which, since we set the eligibility, are always performing assets. Then after the investment management firm, I worked for mid-sized life and annuity provider. And, you can lend to non-traditional assets where we play and most banks do not. 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. I took a free trial but didn't get a verification email. And its great to meet you. Stewart: I love it. Then from ongoing portfolio management, were able to actively manage these loans because we most often have board observation rights, et cetera.

So thats the general structure. And youve got rates that are significantly higher.

Sometimes we have corporate guarantees. 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?

Connell: Yeah, were certainly in a market environment that creates a lot of uncertainty, and so you really want to be in defense strategies. So operational controls can be, we have security over bank accounts. And also, I guess Ill add one other thing. So we like to say, we wake up and go to bed thinking about risk management. Seven months ago, all anybody was talking about was finding yield. Help us improve this page by adding information. I think I hear that at Victory Park Capital twice a day. And I really appreciate you coming on and giving us a walkthrough. And we are talking specifically today about asset-backed lending. Im Stewart Foley, and this is the insuranceaum.com podcast. Right now, weve got a market of high inflation. {"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. Were joined today by Connell Haston, partner and head of the Insurance Services Platform at Victory Park Capital. 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. VPC is privately held and a Registered Investment Advisor with the SEC. The first round was closed in July 2020. 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. 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. 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? And if something, if I understand this correctly, if something does default in the collateral pool, then its swapped out for performing collateral. Our Insurance Services Platform provides customized solutions for insurance companies to invest in our private credit strategies designed to meet their specific objectives. 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. Connell: Yeah. Connell: Yeah. Sometimes we have corporate guarantees. 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? Try our Advanced Search for more refined results, Searching articles in Victory Park Capital Advisors Llc 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. Buffet proved that years ago. Connell: So, this can be through our co-mingled funds, or through a separate account, or we can also invest directly on the insurance companys balance sheet, governed by an IMA, which stands for Investment Management Agreement.

Its more mainstream, and has proven success through multiple cycles. Kredivo announced today it has secured another $100 million debt facility from Victory Park Capital (VPC). So I think this is, private credit holistically, aspect lending or direct cash flow lending, really is a defense strategy. So, it follows the same themes. Connell: Thanks, Stew. None of us did. And, those are a little bit different than whats eligible and whats not. Register today to confirm your status as an institutional investor and gain access to the latest thought leadership in the industry. 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 thats why insurance companies started getting into private credit. Have you experienced any changes in the flow of funds there? Can you talk about the typical structure of a loan like this? Stewart: Insurance companies are buying private assets like never before, and asset-backed lending is one of those areas. Please see our Privacy Policy. 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: Youre right, its important. Connell: Youre right on. 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. Stewart: Yeah, no, me too. InsuranceAUM.com is not a Registered Investment Advisor, Broker/Dealer, Financial Analyst, Financial Bank, Securities Broker, or Financial Planner. Connell Hasten, So there is a difference between cash flow lending and asset-backed lending. Stewart: So that admission right there, Connell, will crush your social life. 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. Daily and real-time news and case alerts on organizations, industries, and customized search queries. Connell: I lived in Seoul, Korea, in Jakarta, Indonesia, for three years of my life when I was younger. I looked yesterday the 2 to 10 looks flat, 2 to 30 looks flat or pretty flat.

Theres supply chain issues, theres a war going on, theres volatility, not only in the fixed income space, but in the equity space. Raised in St. Louis, Missouri. You have to know whats happening with clients, competitors, practice areas, and industries. And when I say delayed draw term loan, that just means we dont fund the entire commitment on day one. So the general characteristics that our loans have are its senior secured, delayed draw term loan. 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.

Weve gotten a gas tax holiday. So were kind of insulated in the capital stack. 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? The landscapes changing and its an interesting asset class and one that I wasnt familiar with. 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. 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. Now they have comfort with it because theyve seen the realized performance. 150 North Riverside Plaza ), please let me know if you see any issues, I'll fix asap!

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. Connell: First job. 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. Victory Park Credit Opportunities Intermediate Fund, L.P. Avenue Europe International Management LP. Stewart: With regard to covenants, I think in private assets, thats a really important consideration because theres a liquidity premium that you mentioned. 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. Partner And we really didnt talk about structure in terms of floating versus fixed rate. Connell: Yes, practicing without a license, Stew, I dont think so. So Victory Park Capital, were an investment management firm founded in 2007 by Richard Levy and Brendan Carroll, with the thesis of investing where banks do not. 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. Thats not a political remark at all, its just a fact. 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. Stewart: Okay.

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. Congratulations on your success and the success of the firm. 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. And so youre exactly right, structuring it in that way allows you to do so. 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.

You may have just had some invitations canceled just on that comment alone. 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. x. Significant legal events involving law firms, companies, industries, and government agencies. 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. While InsuranceAUM.com seeks to present accurate and reliable information,InsuranceAUM.comdoes not endorse, approve, or certify such information, nor does it warrant or guarantee the accuracy, completeness, efficacy, timeliness, or fitness of such information for any particular purpose. All right. Absolutely. Law360 provides the intelligence you need to remain an expert and beat the competition. Stewart: No one does Connell. Asset-backed lending follows the same themes as cash flow lending, but its just a different structure. Im really happy to be here. An SPV is whats known as bankruptcy remote. 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. I certainly came out knowing a lot more and I hope our listeners did too. Connell: I think if the loan profile matches well with an insurance company balance sheet, from my perspective, from a life and annuity perspective. Connell: But Ill tell you what, Im genuinely glad it happened this way. 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. 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.

Password (at least 8 characters required). Its return of capital trumps return on capital. Stewart: Yeah. Its a part of a lot of insurance companies asset allocation. Have I got that about right? All right, so heres the deal. Stewart: Its great to have you. Connell: Okay, here we go. 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. Connell: The reason for it is just to get access to our collateral as quickly in the event we need to. PLEASE NOTE: A verification email will be sent to your address before you can access your trial. Please email me at podcast@insuranceaum.com. Is that why its done that way? And then, as the borrowing base grows, thats why its a delayed draw term loan, so does our loan. We are committed to our mission of education through the distribution of thought leadership and research. Connell: Thanks, Stew. Suite 5200 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 we lend at a max advance rate against the eligible collateral, which defines our borrowing base and we set whats eligible and whats not at loan origination. A "historic" agreement by the G7 is a big step toward global tax coordination. 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. Can you give me the high points of Victory Park Capital? Direct: +1.312.663.7472 It funds over time. 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. 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. Lets go with St. Louis, Missouri. 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. InsuranceAUM.com is the #1 rated industry investment resource. So before we go any further, maybe some of our listeners arent familiar, as well. And in addition to that, we actively manage all of our loans, and really we do that by operational controls and ongoing portfolio management. Me too. Were floating rate, so that helps with interest rate volatility. (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. You have middle market loans and lower middle market loans, and thats mostly where non-banks play. And in addition to those covenants, we also set corporate level covenants and that could be liquidity covenants, network covenants. I started in banking trying to follow a prescribed career path. Connell: Sure. 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. 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). All of our loans have floating rate coupons and all of our loans have a full suite of covenants. Connell: Its a great group of people. Stewart: There you go. Thats a good one, thats a good one. Its interesting. Hometown: born in Wilmette, Illinois. And I dont think thats going away. Im a follower of your other podcasts. Youve come a long way from that manufacturing assembly line in St. Louis to here as a partner of Victory Park Capital. Connell: That does not work. Youre a pro. In the legal profession, information is the key to success.

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. Stewart: So thats a really interesting point. And here is where I was tasked to build the internal investment management team. Thats at a very important point that its not a static pool. I think these companies can, and in my opinion should, take on some illiquidity premiums in private credit. 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. Theres a lot of macro risks. And today, as you conclude in this podcast with our more focused remarks, everybodys talking about risk management. Thats another form of stimulus. Stewart: I appreciate your kind words, I really do. QA Engineer of web and mobile applications, Techno Geek + Gamer + Fashionista + Sense of Humor = It's ME, Buy now, pay later startup Kredivo doubles its debt facility from Victory Park Capital to $200M, Janet Yellen Helps Reshape the Global Tax Order, Kredivo Secures $100M Debt Facility from Victory Park Capital | FinSMEs. So we like to say, we wake up and go to bed thinking about risk management. And if you look at our ABL strategy, its a great complement to other private credit strategies in an insurance investment portfolio. Stewart: We want to hear your ideas for future podcasts. So insurance investors now have comfort with private credit.

Then from ongoing portfolio management, were able to actively manage these loans because we most often have board observation rights, et cetera. Before we go any further, lets start off with our first three questions. So senior mortgages and mezzanine loans, and then managed private credit portfolios on behalf of insurance companies. Connell, welcome. Connell, hometown; first job of any kind; fun fact. That helps. The firms differentiated offerings leverage an extensive network of industry relationships, disciplined deal origination, creative financing capabilities, and broad credit structuring expertise. Two, were senior secured in the capital stack so that helps with equity valuation volatility. 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. And four, our loans do pay monthly interest so from an insurance perspective, its helpful for any J-curve risk and a really good match for life insurance companies, cash flow characteristics, other liabilities. In the direct cash flow world, you have broadly syndicated loans, which they call BSL loans, and thats mainly where banks play. I've upgraded the servers (much faster than before! I joined Victory Park in 2018, and as you mentioned, co-founded our insurance services platform. What about a fun fact? chasten@victoryparkcapital.com