Antares makes healthcare key part of growth strategy

The CPPIB-owned lender, which has big growth plans, intends to raise its loan hold size and ramp up its back office operations.

Antares Capital, the US lender recently acquired by the Canada Pension Plan Investment Board (CPPIB), has ambitious growth plans. David Brackett, the firm's co-chief executive, speaking at the ACG InterGrowth event this week said he wants to double in size by 2020. The firm had $10 billion in assets when it was sold by General Electric, and Brackett said he'd expect that to go up to $20 billion in four years.

Part of that goal involves holding larger slices of Antares' deals. The firm normally uses a lead-and-syndicate model and holds about $30 million to $40 million of the package. Brackett said he wants that number to go up to about $40 million to $50 million and intends for Antares to hold the largest chunk of the deal.

The lending firm, which works exclusively on North American sponsor-backed transactions, has been back out on the road doing a number of deals after completing the sale to CPPIB. Speaking at the ACG event, Brackett said Antares had a particularly good week last week, having closed 19 deals. Of these, Antares led 17. “It's a great recognition of the new platform,” Brackett said.

Speaking on market conditions, Brackett said he thinks we're in a slow-growth economy, where M&A is slightly up, but corporate earnings continue to show negative numbers. The firm normally works on 225 to 250 deals per year. Last year, Antares closed about 175, which was set back a bit by the transition. Brackett expects to get back to the normal volume under CPPIB, but noted that because of the slow-growth environment, more deals this year might be of the dividend recap variety.

While many industry experts predict that we're heading into an environment of increased defaults, Brackett said he doesn't expect his firm's default rate to go up by much. Historically, defaults have been at a 1.5 percent industry average in the mid-market. Antares' rate tends to fall below 1 percent, Brackett said. The default uptick lately has been around energy, which Antares tends to avoid. “We were always very skeptical around oil and gas, so we have limited exposure there,” he said.

Otherwise, Brackett said his firm is doing more deals in the healthcare space . Healthcare was handled out of a separate division at GE Capital and now that Antares is under different ownership, the firm has hired sector specialists and pursued more healthcare deals. Antares closed on 16 healthcare transactions since moving to CPPIB.

TMT is another area where Antares has been busy. Brackett said 24 percent of the firm's pipeline is in TMT transactions at the moment. He said the firm had to streamline some departments and cut some “front-of-house” staff in its TMT and franchise finance divisions as part of the move, though now that this reorganisation is complete, the firm is pursuing more deals in TMT again.

Staffing wise, Antares has been keeping its executive search firm, Russell Reynolds Associates, busy. The firm has been adding numerous back office positions, having had to rebuild operations from scratch. Antares recently added a new chief financial officer, general counsel, chief information officer and head of human resources. A new treasurer and controller will start shortly and the firm plans to hire 10 more people in information technology and 50 more in operations. In all, Brackett plans to add 90 more people to his staff.

Antares also plans to expand into CLOs. The firm hired Vivek Mathew from JPMorgan as head of structured products. He starts in two weeks. “The CLO market isn't very attractive right now but that will change and when it does, we want to be in a position to take advantage of it,” Brackett said.

He said he wouldn't rule out a BDC at some point, but noted that most BDCs have been challenged and are trading below book value. Brackett estimated that only a handful of BDC managers are executing it right. “It may not be a viable asset class if only 25 percent of the managers can do it well,” he said.