March 2018

New Directions: Bain Capital and Antares Capital Join Forces to Provide Unitranche Lending

Both Bain Capital and Antares Capital have global reputations as investment firms. So there was more than a bit of frisson in the lending world when the two companies announced a joint venture in December. This unique unitranche platform combines the strengths of both companies and provides an unusual opportunity for partnership. Bain Managing Director Michael Ewald and Antares Senior Managing Director Timothy Lyne share their thoughts about the new platform with ABF Journal Editor Nadine Bonner.



Tell us about the Antares Bain Capital Complete Financing Solution (ABCS).

LYNE: We announced our joint venture with Bain Capital Credit in December. We were absolutely thrilled to team up with Bain Capital, a firm we have worked with over the years in numerous transactions. In some of those transactions, Antares was the first lien and Bain Capital was the second lien. Other deals we were participating together in the first lien, but importantly, over time, we had developed a lot of mutual respect for one another’s credit and diligence processes. And so, when Antares had an opportunity to purchase a portfolio from Lone Star and start a new joint venture, we viewed Bain Capital as the ideal partner.

An important part of that deal was [Antares] acquiring the portfolio of 14-unit unitranche borrowers, all middle market sponsor-owned companies that Antares knew well. Bain spent a considerable amount of time underwriting and getting comfortable with those credits. The acquisition gave us immediate funding, which is important. In addition, we have the ability on a go forward basis to provide up to $350 million in a single transaction to private equity owned companies and corporate borrowers.

Both Antares and Bain Capital can go beyond that if we need to, and we can pull in the resources of other partners. That is unique because you don’t see many unitranche deals north of that size. And so we really think that we’re going to generate a lot of business together on a go forward basis. Sponsors know both firms really well. We’ve both been in the market for a long time and have deep sponsor relationships. Our sponsors highly respect both firms, so it’s been well received since we closed the program. The other thing I’d highlight is that both firms are very aligned in that we’re playing in the same position in the capital structure and have committed similar dollar amounts. We are looking forward to what we believe is going to be a successful long-term partnership together.

Michael Ewald, Managing Director, Bain Capital Credit

Michael Ewald, Managing Director,
Bain Capital Credit

So how does it work from Bain Capital Credit’s side?

EWALD: From our perspective, we’ve collaborated with Antares many times in investments across syndicated, clubbed and bilateral deals. We had talked in the past about partnering up more programmatically rather than just on individual deals. So from that standpoint the partnership made a lot of sense for both firms. We had been providing some unitranche financing in the marketplace but generally for smaller-sized deals. Now with the two institutions joining forces to expand our lending capabilities, we can play an even larger role in financing underserved, growing businesses.

And given that the two firms have longstanding presences in the middle market, we know the sponsors well and they’re obviously very familiar with us. The certainty we can provide is also attractive to sponsors because we don’t need to go out and syndicate a transaction or partner with other firms in a club deal. We can speak for $350 million and potentially more outside the program within our respective institutions.

That provides a lot of comfort to sponsors who, in a sense, are effectively our target market here.

What are the advantages of working together?

EWALD: Scale is a big advantage. We couldn’t speak for $350 million in a single transaction without having to bring in partners. So it’s that scale, along with certainly and speed.

LYNE: I completely agree. Back to one of the comments I made earlier, we really respect each other’s credit acumen. We understand there may [be] some deals where one of us decides it doesn’t make sense, but hopefully we arrive at better credit decisions because two sets of eyes are better than one. We also have a lot more horsepower in terms of capital available for our sponsors.

EWALD: I would add that that reach is another added benefit of the program. We have reach in the middle market and Antares has significant reach in the middle market as well. Joining forces means that we’re seeing more deals from more sponsors, which effectively increases our hit rate and our potential win rate for new transactions.

Do you think that other firms will emulate this type of partnership?

EWALD: I think it’s hard to find a program like this out in the marketplace. Usually what you’ll see is one active market participant hooking up with effectively one source of capital in an effort to multiply how much capital can be deployed in any single transaction. What you miss there versus our partnership is, again, that expanded reach because only one of those players is typically a middle-market lending participant. As Tim said earlier, you also miss the two sets of eyes being better than one in terms of credit decisions because, again, you have one entity that is typically not necessarily a market participant. So, while I think the scale to some degree from a check size perspective can be emulated, it’s hard to replicate the longstanding presence in the middle market and reach that our two institutions are bringing together with this program.

Timothy Lyne, Senior Managing Director, Antares Capital

Timothy Lyne, Senior Managing Director, Antares Capital

What is your go to market strategy for this product?

EWALD: We are effectively already going to market. It’s the Antares coverage team working with the Bain coverage team to sell sponsors on the benefits of our complete financing solution. In terms of what we can offer, in a lot of cases we will be providing senior financing and in some cases a more junior type financing as well. It adds another proverbial arrow to our quiver, if you will, in that it is another type of product that we can offer to sponsors to help them get deals done without the requirement of agency meetings or a syndication process. As far as who might be attracted to the program, it’s a really sponsor-driven product. Also, there is a confidentiality issue. We find this type of financing solution can be particularly useful in situations where a sponsor might not want it out in the market that they’re bidding on a particular asset. And if you’re running a syndication process, typically word of the process will leak out in the market as opposed to having that certainty to close and that speed up front with us providing the unitranche. I think those are two interesting examples of where our solution might be preferred.

LYNE: I think you hit it. The thing is when sponsors really want to differentiate themselves in the auction process by saying they can close the deal very quickly, they choose us because we don’t need to have a syndication process which takes a lot longer. We can close in a couple weeks. Whereas if you’re taking it through a normal first lien or second lien syndicated process, it’s more like six weeks. So, timing can definitely differentiate the sponsor in the process.

Have you closed any deals since you’ve launched?

EWALD: We haven’t closed any new deals since we just announced the program at the end of the year. So, from a timing perspective, we obviously hit the holidays and we’ve really been ramping up our origination efforts. That being said, I would say that we have a pretty encouraging pipeline and are looking forward to an active 2018. We have enough capital at our disposal to close a significant volume of deals for multiple years.