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Next Edge CIA Disciplined Growth Portfolio — Next Edge Private Debt Fund — Debt Investor Presentation (September 2024)
32 slides from Next Edge CIA Disciplined Growth Portfolio's debt investor presentation, September 2024
Slide 1: Next Edge Private Debt Fund
THE CASE FOR PRIVATE LENDING Follow Us Next Edge Private Debt Fund (New/Continuing Class Units) September 2024 1
Slide 2: Important Notes
Important Notes The ‘Next Edge Private Debt Fund’ or the ‘Fund’ means the ‘Next Edge Private Debt Fund’. Capitalized terms not defined in this presentation are defined as set forth in the Offering Memorandum of the Fund (the ‘OM’). This communication is not, and under no circumstances is to be const
Slide 3: Cautionary Note Regarding Forward-Looking Statements
Cautionary Note Regarding Forward-Looking Statements The following presentation may contain forward-looking statements. All statements, other than statements of historical fact, that address activities, events or developments that Next Edge Capital Corp., the Credit Advisor or any affiliates thereof
Slide 4: Executive Summary – Private Lending
Executive Summary – Private Lending Next Edge Capital Private Debt Fund Over time, the Private Lending Sector has provided investors with attractive absolute returns and superior risk-adjusted returns. In addition, attributes that investors value heavily such as capital preservation, consistency of
Slide 5: About Next Edge Capital Corp.
About Next Edge Capital Corp. Next Edge Capital Corp. (“Next Edge Capital”) is an investment fund manager and a leader in the structuring and distribution of alternative, private credit and value-added fund products in Canada. The firm is led by an experienced management team that has launched numer
Slide 6: The Case For Private Lending: What Is Private Lending?
The Case For Private Lending WHAT IS PRIVATE LENDING? Private lending can be broadly defined as privately negotiated loans that take place outside of the traditional banking network. There are many different areas of private lending with varying levels of risk/reward. 6
Slide 7: Benefits of Private Lending Investing
The Case For Private lending fund assets under management have increased significantly Private Lending over the past decade. Investors rationale for their attraction to the area are numerous and include: BENEFITS OF PRIVATE LENDING INVESTING Strong historical return and cash flow characteristics 1 r
Slide 8: Why The Excess Return?
The Case For Private Lending Why The Excess Return? Most investors explain the yield premium in private lending as an illiquidity premium to compensate investors for less liquidity. This is one factor, however, we believe there are many more. Some of these may include: Illiquidity premium. Regulator
Slide 9: Asset-backed lending as an investment opportunity
The Case For Private Lending Asset-backed lending can be an attractive investment opportunity as the financing demand for small and middle market borrowers is strong and growing. SEIZING YIELD WITH MORE RISK AVERSE TURNING A MORE CONSERVATIVE THAN CASH ILLIQUIDITY INTO APPROACH FLOW LENDING AN ASSET
Slide 10: Decline in bank lending to smaller and mid-market borrowers
The Case For Private Lending Smaller and mid-market lending has been declining at banks for decades. Asset-backed lending strategies capitalize on the opportunities created by a decline in bank lending and the heightened regulation imposed on them, while the demand for small and middle market busine
Slide 11: Broadly Adopted by Institutional Investors
The Case For Private Lending Broadly Adopted by Institutional Investors Investors in Private Debt by Type (%), 2020* Private Sector Pension Fund 18.30% Foundation 13.30% Public Pension Fund 11% Family Office 10.50% Endowment Plan 9.80% Insurance Company 8.30% Wealth Manager 7% Institutional investor
Slide 12: Capital Stack
The Case For Private Lending HIGHEST SECURITY Capital Stack The graphic displays the relationship between each investment type and its position on the priority payment ladder, this is known as the 1 Senior Secured Bonds “Capital Stack”. The higher up one’s investment is on the capital stack (i.e. Se
Slide 13: About the Fund
Next Edge Private Debt Fund • Focused on deploying privately negotiated lending capital to businesses throughout North America • Loans and financing facilities are generally senior secured, 1st lien loans backed by collateral that fit within one of our primary financing solutions such as Factoring (
Slide 14: Key Relationship Parties
Next Edge Private Debt Fund Key Relationship Parties Garrington Group of Companies Garrington Group of Companies (“Garrington”) offers synergies within a large network of companies. This group has a significant presence in the North American small and medium-sized enterprises (“SME”) lending busines
Slide 15: Key Features
Next Edge Private Debt Fund Key Features Private Loans not Market Priced 1 (Minimal Volatility) 5 Low Interest Rate Sensitivity 2 Attractive Risk/Reward Ratio 6 Low historical Correlation to Equity and Bond Markets Strong and Experienced 3 Management Team 7 Strong Deal Origination Relationships Acro
Slide 16: Investment Philosophy: Four Pillars of Strength
Investment Philosophy Private lending to SME businesses in North America, Four Pillars of Strength primarily in loan sizes under USD $30 million has the potential to provide excellent risk adjusted returns relative to other asset classes WHEN MANAGED APPROPRIATELY. VAST ROBUST AND EFFICIENT ORIGINAT
Slide 17: Loan Origination and Initial Screening
Loan Origination and Initial Screening Robust Origination Platform - established and proprietary network of 2023 industry contacts gives us the ability to access and execute transactions across a diverse array of assets and structures. Garrington has eight business development professionals and twen
Slide 18: Areas of Lending: Factoring
Next Edge Private Debt Fund Areas of Lending Factoring/Receivables Based Financing Security features to the transaction include: • Financing a company via the purchase of • Advance/discount rate to the value of an asset, the receivables, as a means of the receivables purchased advancing the company’
Slide 19: Areas of Lending: Asset-Based Lending
Next Edge Private Debt Fund Areas of Lending Asset-Based Lending (ABL) • Loans to businesses secured by assets that acts as • Third-party specialist appraisers are brought in to collateral for the loan determine the value of assets such as inventory, real estate and equipment • These loans tend to b
Slide 20: Areas of Lending: Lender Finance
Next Edge Private Debt Fund Areas of Lending Lender Finance • Loans provided to non-bank lenders whereby the • Review of key members of the company, past primary collateral/assets backing the transaction financials and go-forward projections, loan pool are the pool of loans/receivables. performance
Slide 21: Areas of Lending: Specialty Finance
Next Edge Private Debt Fund Areas of Lending Specialty Finance • Loans provided to companies based on liquidation values of secured assets, asset pools and verifiable enterprise values • Loan sizes range from $2MM - $30MM • Loans tend to range from 1-3 years • Loans tend to be senior secured, 1st li
Slide 22: Advanced Due Diligence
Advanced Due Diligence Upon term sheet approval and receipt of deposit, on-site and off-site diligence is performed on the borrower and any related parties, including sponsors and guarantors. 1 OPERATIONAL CONTROLS 4 LEGAL & REGULATORY REVIEW • Review company’s business model and • Legal and regulat
Slide 23: Advanced Due Diligence: Monitoring and Risk Management
Advanced Due Diligence Monitoring of the loans, covenants, financial health, and the collateral backing the transaction are key components to low loss rates. Early warning signs allow for our team to be proactive with the borrower, well ahead of there being a major problem, often preventing a situat
Slide 24: Historical Performance
Next Edge Private Debt Fund Historical Performance Only monthly returns to be provided for the first year. Class A21 JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC YTD2 2024 -- -- -- -- -- -- -- -- -- -- -- -- -- Class F21 JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC YTD2 2024 -- -- -- -- -- --
Slide 25: Summary of Terms
Summary of Terms • Class A2 - NEC 541 FundSERV Codes (Interim - For Purchase) • Class F2 - NEC 542 • Class A2 - NEC 551 FundSERV Codes (Final) • Class F2 - NEC 552 Minimum Initial Investment $10,000; for Accredited Investors only Min. Subsequent Investment $5,000; for Accredited Investors only Redem
Slide 26: Appendix
Appendix
Slide 27: Reference Portfolio Breakdown (as of June 28, 2024)
Reference Portfolio Breakdown (as of June 28, 2024) 172 67% 90 AVERAGE TERM IN DAYS $ AVERAGE LOAN-TO-VALUE TOTAL NUMBER WEIGHTED1 RATIO2 OF LOANS3 Loan Portfolio – Breakdown by Country4 Portfolio breakdown by type5 Loan Type Allocation, % Canada 19% Commercial Finance 46.60% Lender Finance 26.50% U
Slide 28: Reference Track Record (as of July 31, 2024)
Reference Track Record (as of July 31, 2024) Class F11 JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC YTD2 2024 0.69% 0.69% 0.71% 0.66% 0.61% 0.58% 0.55% - - - - - 4.58%* 2023 0.65% 0.60% 0.68% 0.64% 0.61% -0.06% 0.61% 0.67% 0.67% 0.68% 0.67% -1.62% 4.88% 2022 0.71% 0.62% 0.49% 0.75% 0.72% 0.66% 0.
Slide 29: Key Next Edge Team Members
Key Next Edge Team Members Robert Anton Cheng Dang Larry Guy David Scobie Erica Axani President and Founding Partner Executive Vice President, Managing Director Chief Operating Officer Chief Risk Officer Finance • Over 30 years of • Over 25 years in the • Over 15 years of • Over 20 years of • Over 2
Slide 30: Key Garrington Management Team Members
Key Garrington Management Team Members Jordan Allen Tammy Kemp Bert Crossin Toreigh Stuart CEO, Garrington Capital, US Chief Credit Officer Head, ABL Underwriting Senior Advisor • Over 30 years experience in • Over 30 years experience in • Over 25 years experience in • Over 25 years experience in as
Slide 31: Key Garrington Management Team Members
Key Garrington Management Team Members Richard Coles Michael Lukjanczuk Matthew Watt General Counsel Managing Director, Finance Head, Factoring Underwriting • Over 20 years of experience • Over the last 15 years working • Over five years in commercial in TCE Capital’s business and with large public
Slide 32: Contact
nextedgecapital.com linkedin.com/company/next-edge-capital twitter.com/NextEdgeCapital NextEdgeCapital 18 King Street, Suite 902 Toronto, ON M5C 1C4 416.775.3600 Toll Free: 1.877.860.1080 info@nextedgecapital.com
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