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CPPIB partners with KKR, Stone Point for capital markets joint venture

17 Jan 2013

CPPIB Credit Investments, the credit investment subsidiary of institutional investment group Canada Pension Plan Investment Board (CPPIB) has partnered with private equity firms Stone Point Capital and KKR as a joint venture partner and investor in capital markets services company MerchCap Solutions.

Formed in August 2012, MerchCap was formerly known as KKR-SPC Merchant Advisors. It provides principal and agency-based capital markets services to sponsor-backed and corporate mid-market companies.

In addition to the $300m of capital previously committed by Stone Point and KKR, CPPIB Credit will commit an additional $50m of equity to MCS to support the business.

CPPIB has initially earmarked up to $2bn of capital for direct investment at its discretion in middle market debt transactions and other non-traditional corporate lending opportunities arranged for clients of MCS.

Mark Jenkins, head of private debt for CPPIB, will join the board of directors as well as its strategic development and capital allocation committees. The day-to-day origination, execution and underwriting activities will continue to be carried out by KKR’s capital markets employees.

“This investment is an excellent opportunity to expand CPPIB’s private debt portfolio into the middle market, an attractive and underserved market segment,” said Jenkins. “We also believe there are additional underserved areas that we can target by combining our focus with MCS’s structuring and distribution expertise. This platform is well suited to our comparative advantages and internal underwriting capabilities, and we have initially earmarked up to $2bn of additional capital for direct investments in mid-market companies through MCS. We look forward to partnering alongside KKR and Stone Point who are longstanding, well-aligned partners of ours.”

“We are excited to expand our MCS partnership with the addition of CPPIB, an exceptional pension fund with a long investment horizon and deep investment and market expertise that will have clear benefits for MCS’s targeted client base. With CPPIB, our company will be even better suited to helping clients find attractive capital markets solutions,” added Chuck Davis, co-founder of Stone Point.

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