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Tech firm tempts credit investors with supply chain finance offer
June 2021 | Issue 235
Dan Alderson
Deputy editor
Novicap, a fintech company focused on invoice financing, is looking to debt capital market participants — such as credit and structured credit funds, asset managers, pension companies and insurers — as it seeks to raise third-party funding for its credit platform.
Corporate borrowers’ working capital and supply chain needs have emerged as an area of focus during the coronavirus crisis, with solutions required to ease periods of disruption in production and logistics.
Credit fund managers have also been looking to gain access to supply chain finance — along with other alternative investments such as private debt, royalties financing and cryptocurrencies — to improve returns at a time when 60% of bonds yield less than 1%.
Lois Duhourcau, chief financial officer at Novicap, says his firm’s technology makes a difficult-to-access asset class, where invoices can be small, available in a customised and automated format.
“We want to raise a fund that can have higher concentration limits”
Lois Duhourcau, Chief financial officer | Novicap
“We source a wide variety of risk, from investment grade debtors in the 1-3% IRR range, to sub-IG debtors in the 4-10%+ range. In most cases, it pays a premium to public bonds, even of the same issuer, while having a shorter duration and arguably lower risk, with loss rates below 0.5%,” he says.
The firm aims to raise upwards of €100 million to support its move from the SME market into mid-market opportunities where supply chain financing lines are bigger, says Duhourcau.
The credit side of Novicap’s business provides working capital financing. This could be through ‘factoring’, where it buys receivables, or it could be in supply chain finance, where Novicap will provide a confirming or reverse factoring line to mid-size companies to pay suppliers early.
Novicap works with institutional investors through bespoke debt instruments. But the company also plans to engage with securitisation markets as a source of financing.
Duhourcau joined Novicap in April, reporting to founder and chief executive officer Federico Travella. He has worked for 12 years in investing roles in London, including as director at Carlyle Group in its global credit division.
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Global credit funds & CLO's
June 2021 | Issue 235
Published in London & New York.
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