Middle-market financing is in full swing. Firms have begun shifting towards credit funds, as investors pursue credit strategies. The demand for credit financing is growing as credit funds make loans to private equity firms backing companies using various strategies: senior secured, unitranche and mezzanine. Monroe Capital, CRG and the Carlyle Group raised credit funds recently.

“Credit funds are a bit sexier than they were 10 to 15 years ago,” says Monroe Capital CEO Ted Koenig. In October 2016, the Chicago-based lender raised an $800 million credit fund with nearly 30 percent of capital invested at the time. The fund’s strategy focused primarily on senior-secured and unitranche loans. Monroe Capital, founded in 2004, has seen a lot interest in the credit fund space, Koenig says. But a crowded field means that “those who are trying to get into the space now are having trouble.” Sellers average between 12 and 15 buyers for every deal, according to Koenig, so PE firms want lenders with experience in closing and executing deals.

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