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MGG: Niche Direct Lending

Sweet spots in mid-market

MGG Investment Group (MGG) was co-founded in 2014 by CIO and CEO Kevin Griffin, and President Greg Racz, with seed capital of $200 million from an affiliate of McCourt Global Capital (MG Capital), which is part of the McCourt Group that dates back to 1893. MGG opened to external capital in April 2016 and has so far taken in $600 million of equity. Some of its vehicles use leverage on top and capital managed is now roughly $1 billion, with more total capital deployed in MGG deals as some involve coinvestments. MGG structures and invests in bilateral loans that command a significant yield premium over the loan indices, while arguably being less risky than some other loans, based on various metrics. Griffin has an impressive pedigree: since he started taking on full responsibility for originating loans in 2007, he has not lost money on any deal.

L-R: Kevin Griffin, CIO and CEO, and Greg Racz, President.

Private lending has seen huge growth over the past decade, with assets rising globally from $156 billion in December 2006 to $523 billion in June 2015, according to Preqin. But MGG’s founders and staff chose to specialise in direct lending long before it became a fashionable strategy, attracting ‘tourists’ from multiple hedge funds and private equity, and other asset managers that pursue a range of strategies. The firm is distinguished by a focus on specific market segments and deal structures. MGG lends to the middle market, especially the less competitive lower middle market firms, defined as having EBITDA between $10 million and $40 million, and revenues of at least $50 million. MGG advances between $10 million and $75 million per borrower, and tends to focus on complex or special situations that deter other lenders.

Middle market neglected

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Informing the Hedge Fund Community. With access to some of the industry’s biggest names and an astute and talented group of writers and contributors, The Hedge Fund Journal has established itself as a trusted source of information on the hedge fund industry.