From Breakingviews - Man mixes risk and reward in private credit bet
the fray. However, it may face choppy waters now as high interest rates trigger defaults. That also makes it a good time to buy into the sector, if you can find the right manager. Varagon, which specialises in mid-market buyouts, has a strong record: its loans have suffered an annualised default rate of just 0.05% since 2014, versus the 1.6% average in the Cliffwater Direct Lending Index.
One wrinkle: over half of Varagon’s client commitments come from just three insurers including AIG who were its owners and are now selling out. They will be rewarded with further payments if they extend their commitments, and Man hopes to use its network to broaden Varagon’s investor base. Overall, after factoring in Varagon’s management’s 23% stake, the deal values the whole group at $250 million, equivalent to about 2% of Varagon’s nearly $12 billion of assets under management.
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