Park Square Capital, one of the largest lenders to private equity in Europe, has established an office in Paris as part of a move to increase investment across the continent as it looks to reduce its exposure to UK assets likely to take a hit from the effects of Brexit. Robin Doumar, Park Square’s managing director, said its presence in the French capital will make it easier to pursue opportunities in what is a significant market for the firm as its heaps greater scrutiny on UK deals.
Speaking to the Financial Times, Mr Doumar confirmed the timing is down to the UK’s planned exit from the EU, and pointed to the potential added costs and restrictions around trade.“There is far more scrutiny on UK companies that are subject to European and other supply chains.” He added that Brexit had “highlighted” the concern for his firm and that it was being “very selective in what we do” in the UK as a result of Brexit. In recent years, non-bank lenders to private equity have helped fill the gap created by traditional banks retrenching due to regulatory pressures to lower their risk tolerance. Park Square has raised $4.7bn — including leverage — since 2017 to pursue its senior debt investment strategy, according to people familiar with the fundraising.
The firm’s strategy has drawn in a mix of investors, including sovereign wealth funds, pension funds, insurance companies and other institutional investors across Europe, North America and Asia, they added. The group’s total assets under management across its credit strategies — which include providing senior debt, subordinated debt and mid-market direct loans to companies in Europe and the US — now stands at more than $9bn, the sources said. Limbo over the withdrawal agreement and future trade terms have led to a steep decline in the sale of private equity-owned businesses this year, with investors demanding a reduction in their exposure to the UK as a result of the vote to leave the EU. US-based firms are also re-evaluating their exposure to the UK in light of Brexit. Earlier this year, Ares, a Los Angeles-based asset manager that pursues credit strategies similarly to Park Square, raised its largest direct lending fund in Europe at €10bn, including leverage. However, it has scaled back its investments in the UK across private equity and real estate because of Brexit. In terms of deal volumes, Ares has shifted from a peak 65-35 split between the UK and Europe to roughly a 50-50 split. Meanwhile, David Rubenstein, the co-founder of Washington-based buyout fund Carlyle, said last month that his firm was also pursuing fewer opportunities in the UK, again as a result of the uncertainty surrounding Brexit. Other private equity firms, such as AnaCap, have downgraded the UK as a top-tier investment location in light of the recent political instability.
BY Javier Espinoza, The FT
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