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Audience

Direct lending

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For further information about our direct lending investment opportunities.

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Direct lending can provide an attractive option for investors looking to secure stable, floating-rate returns, coupled with comprehensive covenants and frequently high levels of security.

If you are a company seeking to raise debt financing, please visit our borrower page.

What is direct lending?

Since 2008, UK companies have found it significantly harder to raise financing through the traditional route of commercial bank loans. Direct lending has helped to plug this gap for many small, creditworthy companies in need of alternative sources of funding, and often non-bank lenders lend alongside banks.

Our direct lending team provides senior, floating debt finance directly to mid-sized UK companies. These assets typically do not have public ratings, so require that we do more credit and legal analysis than when investing in public corporate bonds.

Why invest in direct lending?

Besides stable, floating-rate returns, investors in direct lending to UK corporates can also benefit from:

  • diversification: companies that we lend to are typically too small to issue public bonds and are not in leveraged loan indices as they are smaller or not private equity owned
  • seniority: loans are typically senior level and pari passu to any existing or future bank financing
  • structural protection: covenants on loans act as an early warning system and allow us to work with the company to resolve any problems

Our experience

In response to the lending gap that developed during the financial crisis, we launched the UK Companies Financing Fund in 2009, the first institutional fund of its type, drawing on our experience of investing in private placements since 1997.

As a result of the fund’s success, HM Treasury chose M&G to take part in the Business Finance Partnership and a second fund was launched in 2012.

We currently manage £872 mn* of corporate direct lending assets.

*As at 30 September 2015.

Our product range

The two UK company financing funds are now closed to new investors. However, direct lending investments also form part of our private debt multi-asset funds.

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