Keystone’s private credit strategy was born in 2008 during the financial turbulence preceding the Great Recession. We sought to create an investment approach that would capitalize on inefficiencies in the private markets and generate consistent yield, while allowing our investors, and us, to sleep well at night.
Since the inception of Keystone’s private credit effort, our team has grown, our deal resume has swelled, our presence and notoriety in the marketplace has expanded, and our investor base has broadened. But our basic investment tenants have remained.
How We Invest
When evaluating opportunities, Keystone looks for key investment attributes[1] including the following:
- Contractual cash flows—investments that are related to steady streams of income
- Backed by valuable collateral—preferably asset-heavy, not just based on future business prospects
- Self-liquidating—naturally repaying capital rather than needing to be sold
- Unlevered—senior at the asset level and held in an unlevered[2] vehicle
We believe there is a large addressable set of opportunities which met these objectives while generating compelling unlevered returns.
Experience
Keystone has invested in over 250 direct transactions, deploying over $2 billion, across nine profitable private credit funds.[3] We’ve navigated the distressed and dislocated markets of the Great Recession as well as the more frothy and overfunded markets of 2016-2019. In each of these extreme markets as well as in between, we believe that we’ve thrived, sourcing, executing and harvesting attractive yield opportunities in the private credit markets.
Differentiation
Keystone’s approach to private credit investing is highly differentiated. We have observed that the increasing size of funds and banks has created a bifurcation between “haves and have not’s” in the middle market. Mainstream borrowers have been flooded with opportunities to borrow in the pre-COVID-19 environment, while less mainstream credit needs have received less and less capital. In addition, we believe that most credit funds today are focused on either (1) making bank-like loans that often stretch up to seven years in term, (2) buying the subordinated securities of CMBS, RMBS, or other securitizations, or (3) more equity-like investments in uncertain outcomes such as litigation payments or human longevity. Finally, many strategies are typically levered at the fund or asset level—or both. Keystone has made an effort to address less competitive markets where we believe we can generate predictable returns without using significant leverage.[4] Keystone’s private credit effort focuses on five verticals:
- Capital equipment leasing;
- Receivables finance;
- Specialty real estate lending;
- Corporate lending; and
- Stressed and distressed special situations.
We believe these verticals provide a large opportunity for high quality, yield-oriented transactions.
The Market Opportunity Today
Today, portions of the private credit markets are dislocated, even while equity markets rally. We expect dislocation to transition to distress in some cases. These market conditions tend to create even more opportunity than during normalized markets. Keystone seeks to address the significant market opportunities created by credit dislocation in the private markets by providing capital to viable companies at a time when private credit capital is scarce.
We are proud of past achievements and excited about our future as a specialized provider of capital. We don’t expect market conditions to stop changing, but we do believe there will always be a need for smart, nimble, credit capital providers to address interesting opportunities.
To learn more, register for Keystone’s webcast: Attractive Yield Opportunities in the Private Credit Markets.
Keystone will discuss its 250+ transaction history and focus on five key areas of experience:
- Capital equipment leasing
- Receivables finance
- Specialty real estate lending
- Corporate lending
- Stressed and distressed special situations
[1] Not every investment meets every criterion. Targeted strategies are for discussion purposes only. There is no guarantee that targeted strategies will be met and actual attributes may substantially differ from those noted above.
[2] Keystone may utilize a working capital line of credit in an amount up to 33% asset coverage.
[3] Past performance is not indicative of future results. Investment losses may occur, and investors could lose some or all of their investment.
[4] Keystone may utilize a working capital line of credit in an amount up to 33% asset coverage.