Galvanize Credit and Capital Solutions’ financing deal for EV bus fleet operator Highland Electric Fleets falls squarely into the nascent strategy’s focus on strong management teams and scalable borrowing partners, executives said. The decarbonization and energy transition-focused asset manager this month announced a USD 75m preferred equity commitment to Massachusetts-based Highland, the first deployment from its Credit and Capital Solutions platform, which launched last year.

The deal, which will finance a national expansion of Highland’s electric school bus fleets and charging infrastructure, reflects the strategy’s focus on growth-stage companies with proven management teams that sit in the “missing middle” between early-stage financing and access to commercial bank or other long-term financing options, Meghan Pasricha, partner with Galvanize Credit and Capital Solutions, said.

“Highland is emblematic of the opportunities we target: growing businesses that require capital solutions that don’t fit neatly into traditional debt or equity. Highland’s business model is backed by long-term customer relationships and tangible assets,” she said.

Fleet opportunities

Galvanize sees EV fleet services as an area of opportunity, Pasricha said, noting that school bus fleets, in particular, have a number of advantages with regard to transitioning to electric fleets and matching with Galvanize’s private credit and preferred equity offerings.

The relatively short, predictable, and repeatable routes with frequent stops that characterize school bus routes play to the strengths of electric vehicles, Pasricha said.

Meanwhile, school bus fleets represent hard assets that can be borrowed against, and their operators generally benefit from longer contracted revenue with school districts and municipalities, she noted. Galvanize executives have previously described their growth capital approach as strongly focused on asset-based lending for borrowers with contracted revenue.

The USD 75m deal size for the Highland financing is right around the sweet spot for the firm, but there is flexibility to go smaller or larger as needed, Pasricha said.

Tenor for Galvanize deals generally falls in the 3-to-6-year range, she said.

Beyond Highland, Galvanize is taking a broad view on verticals within the energy and power spectrum, Chris Creed, who co-heads the Credit and Capital Solutions strategy, said.

The strategy is focused on strong management teams that are ready to scale up operations and create opportunities for repeat deals, said Creed.

The firm is closely following opportunities in the energy and power component manufacturing space, as well as battery energy storage systems, said Creed.

Firms that facilitate the energy transition and decarbonization in less developed US and North American sectors are also areas of opportunity for the firm, he said.

Galvanize this year closed on roughly USD 110m for its credit and capital solutions strategy, according to public disclosures. Galvanize executives said last September the firm had secured a USD 1.3bn commitment from an institutional investor.