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Three credit market veterans are launching a new long-term lender, Private Debt Partners Inc., on Wednesday with plans to raise a $750-million fund that will back businesses rebuilding from the pandemic-induced economic downturn.

Former Fiera Capital Corp. executives Jeffrey Deacon, Greg Dimmer and Jean-Christophe Greck had worked on the concept of Private Debt Partners (PDP) for more than six months, but accelerated their plans when the novel coronavirus hit and forced many companies to scramble for capital. Fiera is one of Canada’s largest independent investment managers, with $170-billion of client assets under management and a $2.7-billion private debt operation.

“We lend with the mindset that we will be there for clients right through the business cycle, including times when they encounter challenges,” Mr. Deacon said. He added that banks are pulling back on business lending in the current economic downturn, and “we’re hearing from potential clients that there is unbelievable demand right now for patient capital.”

The new firm will lend for up to 10 years to mid-market Canadian companies – those with 100 to 500 employees – and typically extend between $10-million and $50-million. Mr. Deacon said this category has about 10,000 domestic businesses, and while banks offer short-term credit such as inventory financing, “there is a void in coverage of these businesses that we fill by offering long-term capital.”

PDP is backed by chair Stephen Lister, co-founder of private equity fund Imperial Capital Ltd., while Thomas MacMillan, former chief executive officer of CIBC Mellon and Gluskin Sheff + Associates Inc., will head PDP’s investment committee. In an interview, Mr. MacMillan said: “We’re lucky to have strong banks in Canada, but there is also plenty of room in the market for entrepreneurial, single-purpose financial companies.”

PDP will be based in Toronto, with an office in Montreal. The firm will lend to companies across the country, and Mr. Deacon said the founders expect to work with several in Alberta. PDP expects 90 per cent of their loans will go to private businesses, with a few small public companies accounting for their rest of its portfolio.

Institutional investors and wealthy individuals have flocked to private debt over the past decade as an alternative to traditional bond funds, which offer relatively little income when interest rates are low. Globally, investors put more than US$550-billion into private debt funds over the past five years, according to consulting firm Preqin.

PDP expects to deliver 6-per-cent to 6.5-per-cent annual returns to its backers, predictable performance that is attractive to investors that need dependable income, such as pension plans, endowments and wealthy families. Mr. Deacon said: “We expect alternative debt instruments will be even more vital to fuel the economic recovery while providing institutional investors with diversification and reliable, consistent income.”

Experienced credit managers from several large firms launched their own debt funds in recent years. One of the largest players in private debt is Ninepoint Partners LP, which invests $7-billion for clients. The Toronto-based firm was spun out of Sprott Inc. three years ago and has subsequently more than doubled in size.

Former Brookfield Asset Management Inc. executive Holly Allen established mid-market lender Greypoint Capital Inc. in 2013. The firm lends up to $150-million. In 2012, former Sun Life Financial Inc. chief credit officer Natasha Sharpe co-founded Bridging Finance Inc., a $1.7-billion private debt fund. Bridging Finance recently halted investor withdrawals from its funds as it works through the impact of the pandemic with borrowers.

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