In a recent fireside chat hosted by Giovanni Amodeo, Alastair Brown, CEO of Shard Credit Partners, shared his insights on enhancing diversity in capital markets and the strategic approach of his firm. The discussion, part of the ION Influencers series, delved into various aspects of the leveraged finance market and private debt capital.

Background and Experience: Brown detailed his extensive background in leveraged finance, starting in 1999 at CIBC World Markets and including stints at Merrill Lynch and Barclays Capital. He highlighted his role in establishing the corporate and leveraged finance practice at Mediobanca’s London office from 2008 to 2012, before leaving to set up Shard Credit Partners.

Niche and Market Focus: Brown identified a niche in serving companies with 50 to 250 employees and annual revenues of $15 to $20 million. He pointed out the significant market dislocation in the low and mid-market segments, emphasizing the underutilization of private debt capital by these companies, which impacts economic growth and job creation.

Investment Criteria and Red Flags: The discussion also covered Shard Credit Partners’ investment criteria and red flags. Brown mentioned standardized screening processes that filter out companies based on size, sector, and financial metrics. He emphasized the importance of a strong management team and a unique business model as critical factors. The firm avoids sectors like property lending, high-street retail, and early-stage tech startups, focusing instead on businesses with robust, recurring revenue models.

Current Market Valuations and Interest Rates: Regarding current market conditions, Brown noted an increase in deal pricing, with margins on deals now reaching between 12% and 13%. He discussed the balance between charging interest and allowing businesses to grow, highlighting the use of a mix of financial instruments to achieve returns.

Key timestamps:

00:09: Introduction
00:42: Alastair Brown’s Background
01:53: Setting Up Shard Credit Partners
03:45: Changes in the Role of Banks
07:10: Awareness of Private Credit
08:28: Specialized Lending Business
09:18: ESG and Sustainability
11:32: Promoting Gender Diversity
13:18: Challenges in Meeting Diversity Covenants
15:03: Success in Gender Diversity
16:33: Impact of Private Credit on Gender Diversity
19:06: Involvement in Recruitment Process
21:21: Investor Reaction and Questions
23:48: Measuring Impact of Diversity
24:30: Future Opportunities
25:51: Challenges in Lower Mid-Market
26:26: Red Flags in Business Financing
28:44: Sector Screening for Financing
30:49: Interest Rate and Deal Valuation
32:39: Conclusion