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UK DIRECT LENDING

Securing yield through long-term lending partnerships.

The Direct Lending strategy aims to consistently outperform for our investors by lending to attractive, growing businesses on terms seeking capital preservation and yield capture.

Patrick Marshall

Head of Private Debt and CLOs

Focused on quality

Access to the stable, low-correlated returns offered by senior-secured loans to middle-market businesses in the UK and Europe.

UK focus, regional scope

Concentrating on the UK, the largest and most creditor-friendly lending market in Europe, while retaining the flexibility to invest across the continent.

Strong origination

A joint-venture agreement with RBS’s UK corporate lending arm, plus the team’s own contacts in the loan market, provides a consistent flow of high-quality investment opportunities.

Experience throughout cycles

The team has an average of 15 years’ experience per member and can successfully structure, execute, monitor and restructure loans.

Inflation protection

The coupon payments of senior-secured bonds move in sync with interest rates, preserving value in inflationary periods and providing a base return when rates are low.

Enduring opportunity

banks continue to withdraw from the business-lending market, enabling direct lenders to partner with mid-market businesses – a shift supported by European governments.

The Hermes Direct Lending Cycle

Strategy Information

  • Target Return: LIBOR plus 6% gross annualised
  • Universe: Senior loans to UK and European mid-market businesses
    − UK exposure: 75%-100%
    − European exposure: 0%-25%
  • Eligible instruments: Senior-secured loans: 75%-100% of portfolio, unitranche loans: 0%-25% of portfolio
  • Targeted leverage: No strategy leverage. Leverage below 5.5x for senior loans Capacity: £750m
  • Base currency: GBP, with hedging on loans denominated in other currencies

Team

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This document has been prepared using information which is confidential and proprietary to The Royal Bank of Scotland plc (“RBS”, “we”, “us” and “our”). This document and any dispute arising under or in connection therewith is to be governed by and construed in accordance with English law.  

This document is being issued to you (the “Recipient” or “you” or “your”) by Hermes Investment Management Limited (“Hermes”) solely in connection with your potential investment in a direct lending fund being established by Hermes (the “Specified Purpose”).

RBS and Hermes (the “Institutions”) are separate institutions each acting on their own behalf and not as agent or for the benefit of any other person. Nothing in this material is intended to, or shall be deemed to: (i) establish or represent any partnership or joint venture between the Institutions; (ii) constitute any Institution as the agent of the other Institution; or (iii) constitute any Institution making or entering into any representation, commitment or assurance of any kind for or on behalf of any other Institution.

Any information in this document which relates to or refers to RBS and/or its Financial Sponsors business (“RBS Confidential Information”) is confidential and must not be disclosed in a manner inconsistent with the Specified Purpose. Where you have entered into a confidentiality agreement with Hermes in respect of this document and/or the RBS Confidential Information you must comply at all times with the terms of any such confidentiality agreement(s) and the use restrictions therein.

This document does not constitute an offer or invitation by RBS in respect of the Specified Purpose or any financing or any other sale or purchase of securities. The RBS Confidential Information is not intended for distribution to, or use by any person or entity in any jurisdiction or country where such distribution or use would be contrary to local law or regulation and must not be reproduced or disclosed (in whole or in part) to any other person without our prior written consent.

The RBS Confidential Information is not and does not purport to be comprehensive and we have no obligation to update it. Any information in this document provided by RBS has not been verified independently. The RBS Confidential Information is provided on a strictly non-reliance basis and should not be relied upon as the basis for an investment decision. In compiling the RBS Confidential Information we have relied upon and assumed, without verification, the accuracy and completeness of all information available to us. No representation or warranty, express or implied, is or will be made and no responsibility or liability is or will be accepted by RBS or any of its affiliates or by any of its respective officers, employees or agents in relation to the accuracy or completeness of any part of this document or any other written or oral information made available to you, your affiliates, connected companies, employees or advisers (and any such liability is expressly disclaimed). In particular, but without prejudice to the generality of the foregoing, no representation or warranty is given as to the achievement or reasonableness of any returns, projections, estimates, valuations or prospects contained in any part of this document or in such other written or oral information.

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This document is provided to you on the basis that you understand that RBS is not providing you with any "investment advice" within the meaning of Article 53 of the FSMA 2000 (Regulated Activities) Order 2001 and as a result, RBS is under no obligation to assess the suitability of the information provided in light of your knowledge and experience, financial situation and/or investment objectives. A consequence of the above is that RBS will not provide you with advice on the merits of buying, selling, subscribing for or underwriting (or exercising rights to acquire, dispose of or underwrite) any particular investment instrument. As such, you acknowledge that you are capable of interpreting the information provided in this document and using that information to take decisions as regards the merits of investing in particular investment instruments.

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Sales Contacts

Douglas Anderson, Director - Consultant Relations
James Lucas, Director - UK Institutional Business Development
Mark Miller, Head of UK & MENA Institutional