Welcome to the Fear and Greed Business Interview. I'm Suan Alma. Private credit is evolving. After a boom in this space in recent years, there's now a rising co lending where private credit providers are partnering with specialized lenders catering to people who aren't getting capital from traditional places like banks. M Financial, which is a great supporter of this podcast, recently signed a one point seven billion US dollar joint venture with US direct lender Monroe Capital and Japanese bank SMBC Summatomo Mitsui Bank Corporation. Frank Danielli is Managing Director, head of Global Credit Solutions at M Financial. Frank, welcome back to Fear and Greed.

Welcome to the Fear and Greed Business Interview. I'm Suan Alma. Private credit is evolving. After a boom in this space in recent years, there's now a rising co lending where private credit providers are partnering with specialized lenders catering to people who aren't getting capital from traditional places like banks. M Financial, which is a great supporter of this podcast, recently signed a one point seven billion US dollar joint venture with US direct lender Monroe Capital and Japanese bank SMBC Summatomo Mitsui Bank Corporation. Frank Danielli is Managing Director, head of Global Credit Solutions at M Financial. Frank, welcome back to Fear and Greed.

Suan, good to be back.

Suan, good to be back.

And Christian Samson his investment director, Global Credit Solutions at MAA Financial. He joins us from New York. Christian, good morning, Thanks Sean.

And Christian Samson his investment director, Global Credit Solutions at MAA Financial. He joins us from New York. Christian, good morning, Thanks Sean.

Nice to be here.

Nice to be here.

First up co lending. How does it work? Maybe I'll go to you Frank on that one.

First up co lending. How does it work? Maybe I'll go to you Frank on that one.

Here, Sean.

Here, Sean.

Look, we've always thought that partnership is going to be the next evolution of private credit. What happens when you partner in the world of lending is that you bring together the best of loan origination, underwriting capabilities, and then portfolio management discipline. You bring this together with some really aligned part is and that's what partnership is all about. This is a really big step change, we think, because today the Rhetorican private credit has all been about these new asset managers stealing share from banks, and that's actually just not true. There's some things that banks are really good at, there's some things they aren't at, and there's some ways that we can actually partner together. And that's what a venture like this one that we've done with Monroe Capital and SMBC, but other partnerships that we've done as well in the past, including here in Australia reflect.

Look, we've always thought that partnership is going to be the next evolution of private credit. What happens when you partner in the world of lending is that you bring together the best of loan origination, underwriting capabilities, and then portfolio management discipline. You bring this together with some really aligned part is and that's what partnership is all about. This is a really big step change, we think, because today the Rhetorican private credit has all been about these new asset managers stealing share from banks, and that's actually just not true. There's some things that banks are really good at, there's some things they aren't at, and there's some ways that we can actually partner together. And that's what a venture like this one that we've done with Monroe Capital and SMBC, but other partnerships that we've done as well in the past, including here in Australia reflect.

Okay, you talk about kind of this the next step in private credit. Are you saying because there are more parties coming to the table, in a sense, suddenly private credit will become a lot more I'm going to say flexible, that's probably the wrong word, but robust might be a better word into what it can do.

Okay, you talk about kind of this the next step in private credit. Are you saying because there are more parties coming to the table, in a sense, suddenly private credit will become a lot more I'm going to say flexible, that's probably the wrong word, but robust might be a better word into what it can do.

I think the ambit of what it can do will continue to expand, and that's what this sort of thing reflects. The world of lending is huge. You know, this is at its best the financing of just the real world economy. And that doesn't matter if it's financing companies like we're doing with this particular partnership over in the US midmarket companies, or whether it's home loans, car loans, asset finance, business loans, it's just the real world economy. Most businesses your own, the listeners here, they need finance in many different ways. That finance needs to be provided for them. How that can happen is with a specialist lender, a bank, and an asset manager all working together. And that's a I think that's a path that will see more and more of.

I think the ambit of what it can do will continue to expand, and that's what this sort of thing reflects. The world of lending is huge. You know, this is at its best the financing of just the real world economy. And that doesn't matter if it's financing companies like we're doing with this particular partnership over in the US midmarket companies, or whether it's home loans, car loans, asset finance, business loans, it's just the real world economy. Most businesses your own, the listeners here, they need finance in many different ways. That finance needs to be provided for them. How that can happen is with a specialist lender, a bank, and an asset manager all working together. And that's a I think that's a path that will see more and more of.

Okay, Christian, take me through the JV with Monroe Capital and SMBC, which of course sum Time im Sue Bank Corporation, Japanese corporation. What's it mean and what type of borrowers are you targeting through this model?

Okay, Christian, take me through the JV with Monroe Capital and SMBC, which of course sum Time im Sue Bank Corporation, Japanese corporation. What's it mean and what type of borrowers are you targeting through this model?

So, Sean, we did a lot of work in the US marketing corporate lending, and what came out of that is middle market and companies ranging from ten mil to fifty milieb DAR are the most attractive part of the market. These are real world US companies servicing other US businesses and consumers. These loans feature covenants in the form of leverage ratios and strong downside protection for lenders. So we really think that this co lending structure provides our investors unique access to the most attractive part of the corporate lending market, being the middle market.

So, Sean, we did a lot of work in the US marketing corporate lending, and what came out of that is middle market and companies ranging from ten mil to fifty milieb DAR are the most attractive part of the market. These are real world US companies servicing other US businesses and consumers. These loans feature covenants in the form of leverage ratios and strong downside protection for lenders. So we really think that this co lending structure provides our investors unique access to the most attractive part of the corporate lending market, being the middle market.

And the US obviously is a lot lot bigger than anywhere else in the world, particularly Australia. Are there sectors, are the geographies? I mean, how do you think about it?

And the US obviously is a lot lot bigger than anywhere else in the world, particularly Australia. Are there sectors, are the geographies? I mean, how do you think about it?

So the market's very large, you know, so a ten mil to a fifty milib dar is really deemed the lower middle market and the core middle market, and these companies range up to three hundred five hundred mili in Aviva DA. So we're really targeting the area of credit which is you know, downside protected where we have significant lender protections available and it provides our investors with that downside protection. They'll tell you I was actually just over there, I landed yesterday, and you know, everything's bigger, the cars are bigger, with bigger side of friars, large, and it's you know, it's like that, but it's even like that in the world of lending. That's also why partnership.

So the market's very large, you know, so a ten mil to a fifty milib dar is really deemed the lower middle market and the core middle market, and these companies range up to three hundred five hundred mili in Aviva DA. So we're really targeting the area of credit which is you know, downside protected where we have significant lender protections available and it provides our investors with that downside protection. They'll tell you I was actually just over there, I landed yesterday, and you know, everything's bigger, the cars are bigger, with bigger side of friars, large, and it's you know, it's like that, but it's even like that in the world of lending. That's also why partnership.

Works really well, you know, it's a really efficient way, especially as an asset manager, for us to get access to really attractive parts of the market working with specialists in a particular space, or in the case of like an SMBC, are really established global bank with a really good US franchise.

Works really well, you know, it's a really efficient way, especially as an asset manager, for us to get access to really attractive parts of the market working with specialists in a particular space, or in the case of like an SMBC, are really established global bank with a really good US franchise.

That we can that we can partner up with and just provide capital out there in the world. That makes sense for US and our funds.

That we can that we can partner up with and just provide capital out there in the world. That makes sense for US and our funds.

And when you think about the partners being Monroe and SMBC, so Monroe is a very established and actually the largest lower middle market originator of loans in the US have a huge origination engine. You know, officers all over the US, a team of thirty originators all looking at loan opportunities. They look at in excess of three thousand loans a year and generally execute on one hundred to two hundred. So this really provides us with a unique access to a large funnel of origination opportunities for our investigates.

And when you think about the partners being Monroe and SMBC, so Monroe is a very established and actually the largest lower middle market originator of loans in the US have a huge origination engine. You know, officers all over the US, a team of thirty originators all looking at loan opportunities. They look at in excess of three thousand loans a year and generally execute on one hundred to two hundred. So this really provides us with a unique access to a large funnel of origination opportunities for our investigates.

Frank Christians say with me, We'll be back in a minute. My guest this morning, Frank Danielli and Christian Sampson from m A Financial. Before the break, we were talking about how it works and why you're working with Monroe what they're bringing to the party, and Frank, you're talking about SMBC what it brings to the party. I'm just kind of interested whether we can take any lessons from what you're doing in the US for the local market, because we talk a lot about private credit, but we don't talk about these sorts of jvs very much. Is that where the local market's going, Frank.

Frank Christians say with me, We'll be back in a minute. My guest this morning, Frank Danielli and Christian Sampson from m A Financial. Before the break, we were talking about how it works and why you're working with Monroe what they're bringing to the party, and Frank, you're talking about SMBC what it brings to the party. I'm just kind of interested whether we can take any lessons from what you're doing in the US for the local market, because we talk a lot about private credit, but we don't talk about these sorts of jvs very much. Is that where the local market's going, Frank.

I think it is sewn we in fact, funny, this type of partnership is really applying something we call asset back lending technology to the world of in this case corporate loans, and Australia I think actually has some of the world leading financial infrastructure around asset back lending. It's been happening here for many years and been happening in a really good way, good structures with good performance. I raise that because in fact, we have actually done a three hundred million dollar credit related partnership back in the end of twenty twenty one with one of one of the major Australian backs, one of the Big four. So you know, we've been believing that this partnership model is going to be the next evolution for a while. We did a one billion dollar forward flow transaction, similar style structure with Flexi Commercial, which is a subsidiary of HUM last year. So we've really been pushing this partnership model forward here in Australia, and we do see a world where the Australian market evolves in the inner sort of step change towards these structures in private lending.

I think it is sewn we in fact, funny, this type of partnership is really applying something we call asset back lending technology to the world of in this case corporate loans, and Australia I think actually has some of the world leading financial infrastructure around asset back lending. It's been happening here for many years and been happening in a really good way, good structures with good performance. I raise that because in fact, we have actually done a three hundred million dollar credit related partnership back in the end of twenty twenty one with one of one of the major Australian backs, one of the Big four. So you know, we've been believing that this partnership model is going to be the next evolution for a while. We did a one billion dollar forward flow transaction, similar style structure with Flexi Commercial, which is a subsidiary of HUM last year. So we've really been pushing this partnership model forward here in Australia, and we do see a world where the Australian market evolves in the inner sort of step change towards these structures in private lending.

Tell me on both sides of the private lending transaction and private credit transaction, those providing the funds and those actually receiving the funds. Why is this good for those providing the funds your investors.

Tell me on both sides of the private lending transaction and private credit transaction, those providing the funds and those actually receiving the funds. Why is this good for those providing the funds your investors.

Yeah, well, we've always tried to deliver our investors a very differentiated and proprietary set of lending opportunities. And if you think about the nature of partnerships, let's take back a couple of years ago, the partnership we did with that major Australian bank. Those loans that we partnered up to finance. They were in the world of medical asset finance. Those loans are not available. You just cannot get them anywhere else. They're otherwise sitting on the balance sheet of a bank. The only way to get exposure that would be, I don't know, by a bank bond or maybe have some deposits. This provides direct access to that cohort of lending. We thought it was really attractive and that was a very well performing portfolio for us for many years. I think this will be the same. You can't go and get these lines. If you think about some of what we're partnering up here, the nature of what we're getting exposure to is not widely available. This is co lending. So we're out there with our partners lending together in partnership. We're making credit decisions about what we do and don't want, consistent with our framework of lending and underwriting, and then providing that finance out there. So really, although it's a partnership, the partnership model is quite proprietary and that's what investors get access to. It's something you can't get any other way.

Yeah, well, we've always tried to deliver our investors a very differentiated and proprietary set of lending opportunities. And if you think about the nature of partnerships, let's take back a couple of years ago, the partnership we did with that major Australian bank. Those loans that we partnered up to finance. They were in the world of medical asset finance. Those loans are not available. You just cannot get them anywhere else. They're otherwise sitting on the balance sheet of a bank. The only way to get exposure that would be, I don't know, by a bank bond or maybe have some deposits. This provides direct access to that cohort of lending. We thought it was really attractive and that was a very well performing portfolio for us for many years. I think this will be the same. You can't go and get these lines. If you think about some of what we're partnering up here, the nature of what we're getting exposure to is not widely available. This is co lending. So we're out there with our partners lending together in partnership. We're making credit decisions about what we do and don't want, consistent with our framework of lending and underwriting, and then providing that finance out there. So really, although it's a partnership, the partnership model is quite proprietary and that's what investors get access to. It's something you can't get any other way.

And then on the other side of it, if I'm receiving the money, obviously I'm getting access to funds which I may not have gotten otherwise.

And then on the other side of it, if I'm receiving the money, obviously I'm getting access to funds which I may not have gotten otherwise.

Well, Christian, you're on the ground, so that's exactly right. So we think about this as providing in the middle market. We're providing private equity sponsors with flexible capital available via banks and non bank lenders. In the market. So we're providing a meaningful amount of capital. We have one point seven billion dollars and we're really looking to provide borrowers with flexible capital, a quick turnaround, as well as a collaborative approach to lending.

Well, Christian, you're on the ground, so that's exactly right. So we think about this as providing in the middle market. We're providing private equity sponsors with flexible capital available via banks and non bank lenders. In the market. So we're providing a meaningful amount of capital. We have one point seven billion dollars and we're really looking to provide borrowers with flexible capital, a quick turnaround, as well as a collaborative approach to lending.

I'm just interested co lending. How much do you lend? I mean, I'm sure it's deal by deal, and I'm sure there's all sorts of nuts and bolts on it, but broadly Christian, how much do you lend as a proportion of the total loan?

I'm just interested co lending. How much do you lend? I mean, I'm sure it's deal by deal, and I'm sure there's all sorts of nuts and bolts on it, but broadly Christian, how much do you lend as a proportion of the total loan?

So it really depends generally, we're lending a material portion of the loan alongside Monroe and SMBC. And why we like that is it creates this really nice alignment of interest between our co lending partners. We're all in it together, and this vehicle will lend alongside them, providing them with additional carpital to service private equity sponsors in the US market.

So it really depends generally, we're lending a material portion of the loan alongside Monroe and SMBC. And why we like that is it creates this really nice alignment of interest between our co lending partners. We're all in it together, and this vehicle will lend alongside them, providing them with additional carpital to service private equity sponsors in the US market.

Frank, We're going to see lots more of this in the next ten years.

Frank, We're going to see lots more of this in the next ten years.

I think that this will be really almost paradigm shift in private lending. You've already seen JP Morgan come out globally and say they're going to commit Well, they're committing fifty billion of their balance sheet towards private credit, but they see fifteen billion dollars of co lending opportunities. You've seen other banks talk about it in the order of single digits or tens of billions of dollars of opportunity. This is really significant. And if you just think about the amount of lending that's done out there in the real world by banks, not just in we're doing this for middle market private equityby thing, but the whole spectrum of everything that's on a bank balance sheet. This is a way where asset managers can partner up and access that. It's really exciting.

I think that this will be really almost paradigm shift in private lending. You've already seen JP Morgan come out globally and say they're going to commit Well, they're committing fifty billion of their balance sheet towards private credit, but they see fifteen billion dollars of co lending opportunities. You've seen other banks talk about it in the order of single digits or tens of billions of dollars of opportunity. This is really significant. And if you just think about the amount of lending that's done out there in the real world by banks, not just in we're doing this for middle market private equityby thing, but the whole spectrum of everything that's on a bank balance sheet. This is a way where asset managers can partner up and access that. It's really exciting.

Frank, Christian, thank you for talking to Fear and Greed.

Frank, Christian, thank you for talking to Fear and Greed.

Thanks Sean has been great.

Thanks Sean has been great.

Thanks Sean.

Thanks Sean.

That was Frank Danielli and Christian Sampson from m A Financial are great supporter of this podcast. This is the Fear and Greed Business Interview. Remember this is general information only and you should see professional advice before making investment decisions. Join us every morning for the full episode of Fear and Greed Daily Business years with people who make their own decisions. I'm Sean Ail. Enjoy your day.

That was Frank Danielli and Christian Sampson from m A Financial are great supporter of this podcast. This is the Fear and Greed Business Interview. Remember this is general information only and you should see professional advice before making investment decisions. Join us every morning for the full episode of Fear and Greed Daily Business years with people who make their own decisions. I'm Sean Ail. Enjoy your day.