Our Investors
Strong risk adjusted returns from a performing portfolio of secured corporate loans.
Our Fund provides investors with exposure to a portfolio of performing and secured corporate loans to small and medium sized Australian enterprises (SME).
Historically, this has been a market which has been dominated by traditional banks and the domain of institutional investors and is not easily accessible by wholesale individual investors.
The Fund’s investment objective is to provide regular income distributions and strong risk-adjusted total return with a significantly lower risk of capital loss by investing in a portfolio of performing corporate loans that are secured and meet the trustee’s strict investment criteria.
The Fund’s minimum target return for investors is 15% per annum (net of fees) with regular distributions.
The Australian Corporate Debt Spectrum
Australian corporate debt has experienced a significant increase in the amount of private debt capital available to borrowers; however, the landscape is still dominated by the first and second tier Australian banks.
This is especially the case for SME and mid-market borrowers who do not have the accounting and finance sophistication to access private debt markets.
When various forms of financial distress manifest, debt stacks in excess of $25m are naturally targeted by the major international hedge funds and ultimately restructuring solutions are based on private equity finance that is capable of calculating distressed credit risk and considers aggressive equity play transactions.
This is not the case for smaller debt stacks and restructuring plans frequently fail because finance options are limited to standard bank products that cannot begin to accommodate complex restructuring transactions.
We specialise in credit funding for corporate restructuring to the SME market to facilitate high quality restructuring plans. These secured loans present an excellent opportunity for investors seeking a regular income with a high level of capital protection.
Investment strategy and portfolio construction
Our investment strategy is to invest in a performing secured loan portfolio with exposure to mid-market corporate borrowers. The Fund will manage risk through detailed initial and ongoing due diligence, portfolio construction and risk management. The table below provides a summary of the Fund’s investment guidelines.
Primary investments
- Restructuring finance
- Asset-backed finance
- Trade on funding for voluntary administrations
- Distressed debt acquisition
- Event driven finance
- M&A capital
- Bridging finance
Investment characteristics
• Senior financing (subject to sufficient portfolio diversification)
• Secured or administrator’s lien positions only
• Rated or unrated by a credit rating agency (S&P shadow rating)
• Cash, payment-in-kind (PIK) interest
• Tenor 1-3 years, unless otherwise agreed by the Manager
• Strong asset backing and or recurring, stable cash flows
Asset duration
The Fund will invest in credit positions with a maximum term of 3 years unless otherwise agreed by the Manager. Loans are reviewed to ensure clear exits at the end of the term. The Manager endeavours to diversify the portfolio by term to maturity and targets a weighted portfolio loan term of 2 years.
Location
Investments will be primarily connected to or have their principal business located in Australia.
Maximum exposures
Borrowers: Credit to a variety of public and private companies, and no more than 35% of the Fund assets will be invested in a single borrower group, post the ramp up phase.
Loan assessment process
Origination
All loans originated by Avior Capital from reputable sources:
- Referrals, nationwide, from corporate insolvency practitioners and insolvency lawyers
- Avior Consulting relationships
- Active sourcing
- Event driven finance
- M&A capital
- Daily monitoring of national insolvency appointments
Evaluation
Apply strict investment criteria to ensure the effectiveness of credit assessment.
- Assess security positions and distinguish circulating assets
- High level cash flow modelling
- Assess stakeholder landscape
- Assess management background
- Conflict checks
Due diligence
Robust credit evaluation based on commercial expertise and distressed asset management team experience.
- Proposed borrower management structure
- Detailed financial modelling of cash, profit and balance sheet
- Stress testing model scenarios
- Security assessment
- Assess major contracts commitments and consider risk of default
- Pricing return for risks and strategic position
- Prepare all exit scenarios including security enforcement
- Draft deal structure and estimate costs for documentation
Acquisition decision
Loans considered for acquisition must meet all of the following criteria to be acquired by the Fund
- Loan established for a minimum of 3 months
- All loan payments paid up to date
- No evidence of foreseeable default
- All security arrangements fully documented and registered
- Maximum loan to security value ratio of 85%
- Minimum loan return rate of 15% p.a
- Minimum loan value – $250,000