Good afternoon. Thank you for joining us, for those of you on the webcast. Just before I hand over to Andrew Konopelski for this afternoon's teach-in on Bridgepoint's credit strategy, I'd just like to say that we'll hold questions from the webcast and the lines over until the end, and take them in one block so that we make good progress, because we do have an hour slot. I'll hand over to Andrew. Thank you very much. Great. Thank you. As Adam introduced me, my name is Andrew Konopelski. I'm the Managing Partner of Bridgepoint Credit. I will apologize for my voice. I'm getting over a cold, so I'm feeling a little froggy today. We have an hour to get through a fair bit of material. I'm gonna try to get through all three strategies, as well as a bit of what we're doing on ESG. I think the key messages that I hope to leave you with today are, you know, credit is a fairly rapidly growing part of Bridgepoint. You know, Well, I joined in 2010, October 2010, when we merged. Sorry, 2020. When we merged EQT Credit and Bridgepoint Credit. We had about GBP 7 billion (Pound Sterling) of AUM. I think in June, we had about GBP 10.5 billion (Pound Sterling) and that's grown since. A fast-growing part of the firm. You know, we also derive a very unique knowledge advantage from being part of Bridgepoint, which I'll talk about a bit, and how we do credit and how we, how we invest the capital. There is a very strong benefit to being part of an integrated firm, but also an integrated capital, credit business, which we can talk about. I think there's a, there's a high consistency in how we invest those three strategies. While I'll talk about them individually, there are some overarching themes, that we can cover. Maybe just on slide two, I'm not going to introduce Bridgepoint to you other than to say that, you know, credit today is, you know, roughly 30%. You know, it's about 1/3 of the total AUM invested across the three strategies we're going to talk about. Over on slide three, maybe we lead into that. While there are three strategies, we very much invest as a single team with different leadership on top of each strategy, if you will. Really, credit is a continuum. You know, we invest in corporate cash flow credit. The boxes are really there because they represent different risk rewards that our LPs are looking for. Maybe if I talk you through them very briefly. You know, Syndicated Debt is currently our CLO strategy. We have just over a billion euros in three CLOs, with the fourth one being warehoused. As you'll know, probably from other managers, CLOs are really focused on broadly syndicated loans, very diversified portfolios. We own about 140-150 different credits today, and we do that through kind of CLO technology, where we, as Bridgepoint, are holding the retention capital through a vehicle, which we can talk a bit more about. Direct Lending is I'd say the core of the platform. It's about GBP 7 billion (Pound Sterling) of the AUM that we're managing today. This is a classic unitranche type strategy where we are supporting primarily European financial sponsors to make acquisitions. You know, typically their initial acquisition of a company, we're very often the sole lender. We are negotiating the documentation in that, and we are looking for 7%-9% unlevered returns. Okay, in fairness, that was the target return when we launched the fund. The world has moved on a little bit in terms of where Euribor is, so probably a little bit north of that. Classic first lien, secured unitranche, sleep at night type credit is what we're aiming for there. Credit opportunities is actually the first strategy we began investing back in 2008 when we founded the platform. This is looking at slightly higher risk, higher return, let's say mid-teens type, target returns, and working with companies that have either challenged access to capital, need some form of slightly more complicated structured solution, or investing in secondary market opportunities, you know, where loans have traded off due to headwinds in the individual industries or in the overall macro environment like we're seeing right now. We are currently raising for our third vintage of Bridgepoint Direct Lending, and our fourth vintage of Credit Opportunities that are both in the market. The benefit, and I'm gonna talk about t he benefit of having this platform is really that these three strategies work quite well together, and they provide us with a very high degree of relevance, such that when we're talking to financial sponsors, to entrepreneurs, we can provide a range of solutions across our different strategies. You can have a single conversation, you can provide the single solution. Certainly in terms of sourcing, we're talking to 150 financial sponsors across Europe. We deal with most of them on a fairly regular basis, but it feeds the whole platform in terms of having those conversations. There's obviously a knowledge angle with over 220 credits that we can share across, and a wide degree of skill sets. Not every credit goes exactly to plan, having teams that deal with slightly trickier situations, whether it be restructurings or not, it's quite useful to have it all on one platform. Slide four is probably one of the key ones. Bridgepoint's a very powerful organization in terms of the knowledge advantage that it brings to credit, there are three planks to that. You know, the first resides in the organization itself. You know, almost 200 investment professionals, 35 years of track record and of knowledge and memory, 10 local offices out there in the local communities. It's very powerful for us because we look at similar mid-market businesses to get access to those networks, to get access to that knowledge. We can internalize that into our own due diligence, really this is all about making better investment decisions. Where can you bring knowledge to bear to make the best investment decisions you can? The firm, being part of an integrated firm that does share, that has a collegiality and that has, I'd say, an openness and a willingness to help other business lines, very, very powerful. One of our, I'm gonna say unique attributes, because I appreciate a lot of people can put this on a page, but I'm not sure it works quite the same way, is what we kind of think about as our industrial network. We have over 300, what we call industrial advisors, ex-CEOs, ex-CFOs, that are kind of around the organization, many of whom are contracted with us that help us on our due diligence and we think bring an angle. Because if you look at my CV, I am a financial person. I've worked for a bank, I've worked for a hedge fund, I've worked for an investment manager. I've never actually run a business other than this one. It's quite powerful when you can put our financial knowledge together with the operational knowledge of those individuals to get a better view of the companies you're lending to and really to protect your downside. Obviously tapping into the sector teams. We also reach into the portfolio companies that Bridgepoint owns through Bridgepoint Europe, but also Bridgepoint Development Capital for a bit more granular knowledge. Very, very powerful overall, and you'll hear me talk about it a bit as we go through because it's been a real hallmark of what we do and how we do it over the past 14 years. In terms of team, we're about 60 investment professionals, 11 partners, quite an experienced team, but also one that's worked together for quite a long time. Quite valuable from the combination of how do you challenge one another, but how do you support one another? We are located in eight offices, all of which overlap with Bridgepoint. Again, comes back to the value of a local network working side by side, sharing knowledge. Six of those eight offices are investment offices. Luxembourg is where we have our GP and our Head of Credit Investor Relations sits in Madrid. But a very international team, which you'll all be aware is what you need to operate successfully in Europe, says the American. To know how to navigate different countries, different cultures, but also speak the languages is what gets you into those local communities and gets you access to deal flow. With that, maybe if we start with Direct Lending, and we turn over to slide seven, please. I'm guessing that most people know what Direct Lending is. I don't know you all, but I think it's probably pretty well trodden at this point in time. In terms of how we look to do it, and I mentioned sleep at night up front and that's really what this is. You know, you're looking after your downside. You're not looking to necessarily push the investment return by taking more risk. That kind of defeats the purpose of building a well-diversified first lien stretch senior stroke unitranche portfolio. We are focused very squarely in the middle market. You know, we define that as roughly EUR 10 million (European Euro)- EUR 75 million (European Euro) of EBITDA. You'll see the average of our current portfolio is EUR 25 million (European Euro) of EBITDA, so EUR 25 million (European Euro)-EUR 30 million (European Euro) of EBITDA is roughly the average we're kind of looking at. Most of them are clustered quite closely around that. That actually overlaps very nicely with where Bridgepoint as a firm focuses. Again, coming back to using knowledge, using access, it's quite powerful that we actually overlap in terms of our focus. 7%-9% unlevered IRRs. Again, another overlap with the firm is just the types of businesses we're looking for. We're obviously looking for very resilient businesses. You'll see we have a very strong focus on healthcare, TMT, and business services, again, tapping into, I think, some of our strongest sector teams internally. Those same kind of high EBITDA margin businesses Bridgepoint is well known for. Our average EBITDA margin, about 30%. Very important in times like this in terms of being able to pass through any inflation that you see coming your way, whether it be labor, whether it be other input costs. Usually high margins indicate a certain market position where you can put those back through. ESG, very important to what we do across the platform. I'll talk about that a bit at the end. As I also mentioned, we tend to try to be the sole lender in these transactions. It's really about being able to structure a deal to make sure the documentation is robust. That's where you get a lot of your downside protection from. Not every credit is gonna go perfectly to plan, but if you have a well-structured document and you have a team that knows where they need to be putting emphasis when negotiating with the sponsor, with the entrepreneur, it does give you early warning signals and it gives you a chance to try to remediate the credit if it's gone wrong. Maybe over on slide eight, just in terms of, you know, how we're trying to do this and, you know, Direct Lending is a bit of a flow business, right? The objective is to see every transaction in the market, to screen them down, and to make sure that you're well-positioned to do the deals that you want to do, and then hopefully to position yourself to get the last look. To work with the sponsors you want on the assets you want and get paid what you want for it. That's the golden triangle. I mentioned the three sectors we really focus on quite heavily being healthcare, technology, and services, where I think we have a very good long track record, quite a lot of internal knowledge we can use the firm. We avoid cyclical businesses for a reason. It's very in vogue to say that right now, but if you go back four or five years, it was not the same for everybody. Somebody's been lending to all those industrial businesses and consumer-facing. There's nothing wrong with those businesses. We need them in our economy, but they do tend to be more volatile. You don't always sleep well at night if you've lent to a lot of consumer-facing or industrial businesses. This strategy is not really intended to do that, although we do have a smattering in there. You know, we've stayed away from retail, consumer discretionary, heavy industrials. I mentioned knowledge angles, and I'm gonna continue to bang on it. Really this is about the kind of knowledge bank slide that I talked to. You wanna get away from being a desktop lender. The whole idea is what else do you bring for your LPs, but how else can you judge your risk? You're looking for people that can actually embed themselves in your process and provide you with advice. The best advice they can give you is that, "Andrew, there are things changing in this industry. You may not see them, but I live in this industry, and I can tell you all about them. I would suggest that you avoid this credit." In a portfolio like this, where you actually make your alpha is avoiding losses. You are unlikely to go out and find that one deal that's gonna deliver 2x the type return that somebody else is making, but you can do it by just prudent management. Obviously, with a robust structure. This comes back to documentation. You know, to give you a few statistics, the average loan to value, and we're gonna take the value in context here, right? The market has moved a little bit on us in the past 12 months. It was less than 40% when we made the loans in our most recent fund. That just gives you a nice bit of headroom so that if the market does move, you still have a fair bit of proper cash equity value behind you to provide you with a buffer. That also goes for cash flow conversion. The average interest cover in our loans prior to LIBOR rising, right, I'm gonna put a caveat again, was about 2.8 x. That provides you with a very nice buffer because we all realized that interest rates were at some point going to rise. You don't know when it's gonna happen, you're insulating yourself against future events. Today, that's obviously come down, we still have all cash flow positive businesses and again, robust structures. Floating rate is very positive in that it provides incremental return for our LPs and obviously for the firm where we're an investor or, have made a GP commit. You have to make sure that the increase in the interest that you're earning doesn't then become a negative if you have greater loss rates that wipe that out. That's the balance you're trying to find. Slide nine just gives you a sense of what we've done the, you know, the last three funds. You can see the fund size on the left-hand side, BDL being Bridgepoint Direct Lending. First fund, 2015, second fund, 2018, third fund, 2023. Okay, actually, we started investing this last year, so let's call it 21. Scaling up the funds, but you can see a consistency in the middle in terms of diversification by sector. I talked about it, but you can kind of see it written down on the page. Then on the right-hand side, I think our bias is written pretty clearly in terms of what we like to invest in and where we think we have an angle versus where we don't. This has left us, I think, in very, very good stead coming into the period that lies ahead. I'm not a macroeconomist, so I'm not gonna sit here and prognosticate about what next year is going to look like, but it's gonna be a little bit bumpy, I think, in the European economy. I believe that our portfolios are pretty well bedded in given that we've had a pretty defensive mindset for the period that we've been building them. There are a few statistics on slide 10 just in terms of the latest fund. If you're interested, it is investing. You know, these are fees on invested capital businesses. We are, I'd say, you know, on kind of linear investment pace, which is what we set out to do. There's no rush to invest this capital. We are not asset gatherers. You know, we are investment managers. 24 investments already in the fund, all investments that we would have made had we known where the world was headed, you know, because these investments have been made over the past 15 months. About GBP 1.6 billion (Pound Sterling) committed. Again, high EBITDA margin, low LTV, a good spread across Europe, so there's no single country risk. I think one thing I'm quite, not pleased about, but I think one thing we've always been very focused on is not to over-index to the UK. Yes, our headquarters is in London. Yes, we live in the UK, you know, about half the team does. We have a very good spread across Europe using all those local offices to drive deal flow, which I think just doesn't insulate us, but it does mean that you're not taking any individual country risk, as you kinda look forward in terms of your portfolio performance, which I think is quite important for portfolio construction overall. All sponsor-backed businesses and an average of GBP 25 million (Pound Sterling) of EBITDA. Look, it's a boring strategy, but it's meant to be. You know what? The intention is to set out and do exactly what you tell your LPs you're going to do, and that's what ultimately gives you the license to operate and the reason that it's been growing so quickly as a strategy, having started only in 2015 and now being about EUR 7 billion (European Euro) of AUM. Maybe if we turn to maybe the slightly higher risk, higher return strategy in Credit Opportunities, and I'm on slide 12. I do not need to tell you what the market backdrop looks like. What I will say, and it's a little bit perverse, but this is the backdrop we love to see in Credit Opportunities. Anytime you have volatility, anytime you have uncertainty, anytime the market is slightly on tilt, it creates opportunity. Creates opportunity when the banks aren't extending as much of their balance sheet as they had historically because it provides an opportunity for private capital to step in. We're benefiting from Direct Lending as well. We're also benefiting from, I'd say, the higher creativity structured end that we can provide through Credit Opportunities. When secondary markets fall, risk premium rise, it provides a very nice opportunity for this strategy. I think we're actually seeing probably the best market that we've seen since the GFC for certain. But it's really one where both primary and secondary investment opportunities are both really humming, which is nice because the way that you wanna invest every credit strategy is on a relative value basis. If you can stretch out all the investment opportunities before you and pick your A-star ones, and there's enough to go around that you can build your entire portfolio from your very best ideas, it's halcyon days. Maybe, you know, what do we do in this strategy? What do we focus on? Again, using a very similar, I think, fundamental due diligence approach that we do in Direct Lending. Really trying to dig into companies as deeply as we can using that industrial advisor network. We're looking for very similar types of companies. You know, in both strategies, the term we use is kind of, you know, businesses that have a real reason to exist. If you, if you took the company out of its value chain, its customers, its suppliers would miss it. The benefit, if that's the case, is that that company will always find a buyer. That is your downside protection, because in this, in this strategy, while we're looking for downside protection, we're also looking for upside optionality. How do you deliver mid-teens type returns? You have to take some risk. You need something that looks like a bit of an equity kicker, whether that's an actual equity kicker through, say, warrants or options. It can actually be from, you know, buying things at a, at a discount to par and then pulling them back. We can talk a bit more about that, but you need a bit of upside while still protecting your downside and making sure that your capital is preserved. It's a very flexible strategy, with the intention of being able to kind of pivot between, say, primary and secondary markets, to find the best relative risk reward at any given point in time. As the markets move, you try to move with it, but it's all still focused on corporate cash flow credit. You know, there's no style drift. We're not going into things where we don't have a knowledge advantage. We tend not to do inanimate objects, for instance. We don't do rigs, we don't do ships, we don't do NPLs. This is, you know, companies that have a living, breathing heart to them that you actually can understand the fundamentals. Maybe on slide 14, if I try to use this diagram, which may or may not be successful, to explain what it is we do, but I mentioned that we invest in both primary and secondary markets. You know, secondary is probably pretty easy to understand. You know, we're buying loans and bonds at a discount to par. They might be a bit bumpy along the way, but we generally expect to get par back. You know, there may be some negotiations with sponsors, but it's not a loan to own fund, right? We are not ultimately looking to own the businesses that we're lending to. We're looking to maximize the return out of them. We tend to invest in, you know, businesses that are, y ou know, we've invested in some recently that are quite recession resilient, but have traded down, on the back of the general, you know, macro situation from outflows from high yield and loan funds that have created an interesting buying opportunity. We started to look at more macro-impacted names, maybe where input costs have started to weigh on margins and some investors that maybe don't have as in-depth knowledge on the sector or the company have decided to sell out and rotate into things that they do understand. It provides a nice opportunity, to kind of buy into that. On the bespoke primary side, I jokingly sometimes call this Direct Lending plus plus. You're lending money directly to a company to provide a solution, but you're doing it in a situation that can provide you with greater return potential than the 7%-9% we're looking for in Direct Lending. You know, so what does that look like? You know, it tends to be either maybe what's called hybrid or growth capital, where you're lending to a business where the upside potential for the equity holder is so great that they're willing to pay some of those returns away. This is gonna be typically businesses that are high growth but can't tap the capital markets, and you're looking to structure some form of hybrid solution, usually firstly and secured, that gives you good downside protection, but then also provides them with the optionality to go out and grow their business the way they want when they can't go to their local bank or they can't do another equity funding round. It can be solution capital. Think sponsors that maybe don't have enough capital to do the whole transaction, so they're looking for a solution that stretches across senior, junior, and maybe some form of structured equity. You're helping them structure a holistic financing solution. You get paid very nicely if you can find solutions for people. We also haven't done much of this yet, but you're gonna find more rescue capital coming down. There has been a bit of dislocation capital. I'm thinking of stuff that's come off the banks. You know, they're rather long on some assets. That's not our normal stock in trade, but it has provided some interesting opportunities. You put all that together, and you have an awful lot of investment types, in this type of market where you can build quite attractive portfolios. Maybe to take a look at that portfolio. Slide 15. This is everything we've done since the beginning of 2020, which is a decent time period, I think, to see what the latest market looks like. You can see if we start top left, you know, by seniority, about 70% has been secured, first lien, second lien, and then you have a portion of bonds, which is the subordinated portion here, and then there are some preferred equity, common equity, most of which is structured in a way. While it might be common equity, it tends to be a bit more convert, you know, where we get some form of downside protection, and then you give away a portion of the return, and then you get a kicker on the upside to try to generate those kind of mid-teens plus type returns. You know, by geography, this is the one strategy where we do invest a little bit in North America, but 80% of it is kind of core Europe. You'll notice if you look at the names, it's largely Northern Europe. Tend to be the geographies, well, at least in the past, that have had maybe the strongest economies, but they also tend to have the legal systems where you can judge the workout. If something goes wrong, there's a clearer path, and you can price in that path if you need to. So quite a bit in the Nordics, quite a bit in Germany. You can see the UK is actually a bit underweight, although that probably picks up a little bit given where we are in this country. By sector, you'll see the core sectors of Bridgepoint writ large. Again, technology, healthcare, business services, overweight. Looking for the same types of businesses that we look at in Direct Lending and across the platform, just ones that are facing a different type of challenge. I think the best way sometimes to describe this strategy is on slide 16, which is where do you make your money? You know, how do you make it? You know, although we talk about things like equity and equity upside, it is still a fundamental credit strategy. You can see that, you know, 80% of the return that we've generated since inception has come from credit-related elements of the investments. About 50% of the total return has come from interest, you know, 2/3 of that interest cash, 1/3 of that interest PIK. There's a pull-to-par component, which is buying those attractive assets at a discount to par and getting paid back par in a few years' time. Then you can see that the equity kicker or the equity-like upside through conversion, et cetera, is about 20% of the overall return. This is kinda what we mean when we say downside protection, which you get from the credit-focused elements, and then you get that upside optionality which puts a little bit of extra MOIC into the fund. I think I've spoken to all these terms on slide 17, all these figures. I mean, the one that I think is quite powerful. Yeah, it's great to have a nice realized IRR since inception. It's the loss rates I think really come through. This is the same in Direct Lending. We haven't had any losses in Direct Lending. I would expect that. In this strategy where we're delivering higher returns, the loss rate's been exceptionally low. Again, that comes down to how you use an organization like Bridgepoint to understand the risks you're taking. The last strategy, our Syndicated Debt or CLO strategy, there's not that much to say about it, I think, other than maybe how we invest it, because we are investing the firm's capital here, because Bridgepoint have committed to the balance sheet to the originator vehicle in which we are, in which we're holding the retention piece, either horizontal or vertical. Issued three CLOs to date. This has been a fairly fallow year. The market's been, as you may have seen, it's been a little tricky. One, because the issuance of new syndicated loans since Russia's invasion of Ukraine, at the end of February has been quite meager, so the supply hasn't really been there. The arbitrage between the liabilities and the assets hasn't quite worked out to be optimal to want to issue a CLO. I think this all comes back to the point that we are not asset gatherers. We There's no pressure provided to get out and just issue it. You know, we want those revenues. I think it's important that we do take, I think, a very systematic approach in that we are trying to optimize returns both for our investors but also for the firm as we think about when the right windows are. We do have a warehouse that is currently partly ramped. It's only GBP 30 million (Pound Sterling) invested, which has been quite positive from the standpoint that loans have come off this year. They're at a much more attractive price point now than they were in, say, January, February. We've taken a very deliberate slow approach to putting any risk into it. Maybe the thing to do is to turn over to slide, I'm gonna skip to slide 20. The interesting thing that I find with CLOs, and let's go to slide 24, is that it's a very, very transparent market. You know, every quarter, actually every month if you wanted, you can get statistics on every CLO in Europe and the U.S., and you can compare yourself. In, in terms of benchmarking, it's one of absolutely the best, certainly from a managerial standpoint, but also from the team standpoint. I think the way we invest this, I actually probably could have introduced that first, but it's actually written on these pages pretty well, which is we're focused on those same high-quality, resilient businesses. What you would expect to see from our CLOs is what you see on this page, which is we actually have the highest average portfolio price in Europe, which is just telling you about the quality of a portfolio. Again, you don't need to shoot the lights out on every asset you're trying to put in here because the leverage does most of the work for you if you have a robust portfolio and you minimize losses. You know, the equity NAV, so the net asset value of the equity, we're second in Europe, you know, which is both first quartile. It tells you about the quality of the portfolio. The last one, which I keep asking John to change, MVOC, is market value over collateralization. Again, it's a good thing. You want to be in the first quartile. This tells you about the quality of the portfolios that we're building and the type of reputation and the types of, you know, what we wanna be known for in the market. The next on slide 23 will show you flip side, which is about the bad stuff in the portfolio, which is the CCC-rated, you know, the higher-risk names. Again, we're first quartile. Our holdings of CCC or lower-rated assets is quite small. Again, we've deliberately gone towards core investments in the same types of industries that you've heard me talk about for the last half an hour. Trying to build a very strong, robust portfolio that can come through any market environment unscathed with as low a default as possible. If we want to flip back to slide 23, you'll see the statistics. Again, it's pie charts with a large number of wedges on it because this is a much more diversified portfolio. Again, you know, average LTV 41%, average senior leverage 5x, you know, average value cover, obviously the converse of LTV, 60%. Nice buffers, nice cushions built in. We have a pretty strong bias in this as well. I think it's a strategy, it's a program that's started quite well. We'll look to do, you know, in a normal market, we'll look to do about two CLOs a year. This has not been a normal market this year. Maybe with that, I won't belabor this, but I do wanna highlight it because it is something that I think is very important to us, which is. I'm on slide 25 now in the ESG section. There's obviously been a big focus from our investors, there's been a big focus from the firm, both in terms of, you know, sustainability, DE&I, ESG, whatever you wanna call it. We've had a big push for the past five or so years. Six months ago, we hired our first credit-focused ESG specialist to help us kind of kick on. We had very positive UNPRI ratings. We've also had LPs share with us two of the individual assessments they've had done by consultants during their due diligence process for our latest funds. We score top in Europe in terms of our approach. We're trying to bring a lot of this to bear in our portfolios. I think there are a number of different aspects to this. Maybe if we go to slide 26, I'll just give you a real high level on how we think about this. In my mind, it's quite simple why we do this. There are two main reasons. One is, it's about risk. I think businesses that fall on the wrong side of what we consider to be positive ESG principles tend to be more subject to governmental regulation, maybe increased taxes. They tend to come up against a bit more buffer. A lot of them are quite profitable, and a lot of them do very, very well, but ultimately, they do have a bit more volatility in terms of their outcomes, we find. The other, which I think is equally as important, is we're looking to build portfolios that our LPs, but also our team, can be proud of. 'Cause I think it's become a very important factor for retention in terms of people being proud of what they do and how we do it. We tend to assess companies based upon, two things. You know, one is kind of their solutions, what they do, how they do it. Are they supporting some of the UN SDGs or not? Then we look at their practices internally. Again, that comes down to risk. You know, if you tell me that a company has no cybersecurity protection and that they score very poorly on that, I'm gonna say, "No, thank you," because it could potentially be a risk, and we shouldn't be lending to that type of company. We're not the equity holder, so we can't go in and change these policies. We can try to convince, we can point things out, and we can ask for them to make some remediation, but we can't actually control them. We tend to score things and monitor them. The other thing we're looking to do is, which I think quite a few are taking up, which is great, which is on slide 27, is just incentivization. You know, a lot of this is about raising the dialogue with companies and some of the smaller sponsors. Not every sponsor has the breadth or the size, the scale that Bridgepoint does, to be able to have a dedicated five-person sustainability ESG team, and have all the playbooks that go with it. They just don't. If you have a fund that's a billion in size, and that's your second fund, you probably haven't gotten to that point yet in terms of building out your internal architecture. If we can bring some of that to some of these sponsors, we can raise the dialogue with CEOs and CFOs in terms of trying to promote some of the things that we believe are important as a firm, we think it impacts positively on the whole industry. One of the ways we've been doing that is with margin ratchets. Some of them I think have been quite positive and quite innovative. We work with one company, which is company one in the U.K., that has a lot of ex-service members that are often prone to, you know, mental health issues. We've agreed with the company that they will run a Mental First Aider program to try to support their employees. We kinda set a margin ratchet based upon, Mental Health First Aid, which is actually something that we as a firm are taking very seriously, but it's also a way to kinda work with the company to incentivize them to take actions which we think are positive for their company, but also for their employees. Anyways, it's a nice way, I think, to try to bring ESG to life a little bit for some of the companies that we invest in. We could spend all day talking about that, I won't. Maybe if I, if I wrap up, I think. Just on slide 29, you know, I think you should always ask yourself, "Why do you exist?" You know, we ask why do companies exist. We should ask ourselves, you know, what do we provide to our LPs, and how do we differentiate ourselves? I think that's what we've tried to put down on slide 29, what do we bring to corporate credit investing in Europe? You know, hopefully you see that we have a similar thematic investing style to the firm. You know, we're reasonably targeted in terms of what we do and how we do it. That's held us in very good stead. It's also the best way to use the knowledge from across the organization. We have a very collaborative and very strong sourcing angle. You know, we've pushed into those local offices, which gives us a huge competitive advantage to see all that deal flow so that we can pick the best ones that are coming through the system. I think the way we really differentiate is on that due diligence. I don't think there's another sponsor in Europe on the credit side that has access to the resources and knowledge that we do, and the way they use them. What makes that work is the firm culture. The sharing of knowledge only works if people are willing to and they want to. I think we also bring that ESG focus, and we bring a very strong both debt and equity toolkit, which is very important. It's great to put money out, but It's only when you get it back in that it actually has a positive impact on your fund returns and on your LP cash flows. You gotta be able to get it out and get it back. I think we're pretty well positioned as we sit here today. We've now been, as a combined credit business, just over two years in Bridgepoint, and it's going, I think it's going phenomenally well, and I feel like we're going from strength to strength. That's a lot from me. What, how do you wanna do questions? Can we start with questions in the room for the benefit of those online, whoever is asking the question. Afternoon. Thanks for doing this. Not sure if this is working, but I'll try anyway. It's Andrew Coombs from Citi. I guess my first question, just actually coming back to the point you made at the end there, two years with Bridgepoint. I mean, you were talking there about culture and due diligence being your real KPI. How have things changed versus your previous owner to moving to Bridgepoint? What are the major changes that have happened as part of your business? That'd be my first question. I've got a second one after that. Yep. It's interesting because the organizations, and I'd say the, you know, access to information and such is similar. I think the biggest change has been, I'd say senior level support. I'd say just, you know, the general collaboration of the organization has really helped us push on. You know, it's the fact that we're, you know, roughly 1/3 of the AUM, I think puts us in a slightly different category than we were at EQT. I think also as being a pretty material acquisition, which was made during the time of COVID lockdowns, it was also, I think, a very strong statement to the firm. You know, I think it's. We've talked about how we capital from dial. We've gone public, you know, for a reason in terms of building a balance sheet and to be able to do transactions like this. That was a very positive message, I think, to people internally. The way we were embraced positively, that's how you get culture and information flowing. Look, it's nice to be wanted. Fundraising and deployment dynamics, there's no real step change between those. I mean, the, we've grown significantly since we've been here. And again, I think that's the positive step, which is, you know, the positive momentum comes from a number of different places. You know, the support's been fantastic. You know, I mean, fundraising is just a, it's a baseline of support, right? It was one of the things that we kind of looked into when we were, when we were joining, right? You know, the firm, we shared a joint ambition for credit, which was quite powerful in terms of how we're going forward, so. My second question would just be, is there any overlap in your corporate portfolio with the private equity business? Is there any potential for conflict of interest? Very, very, very little. In the CLO, there is some. For full transparency, 'cause it's all out there anyways, Bridgepoint are one of the named sponsors. It's probably the sponsor three, something like that. If you're talking about small parts of large syndicated deals that are actually tradable, there's no potential for conflict there. Then in our Direct Lending business, we don't lend to Bridgepoint businesses, not because we don't like them, but because we want to be the sole lender, and being the sole lender in an equity-owned business doesn't make sense. I think what we found over the years, we found this at EQT as well, the deal flow is so significant that you don't need to do those couple transactions. Hopefully it works. Yeah, it's Arnaud Giblat from BNP Paribas Exane. I've got three questions, please. Can you talk? You hopefully gave some numbers in terms of coverage, covenants, and loan to value. Mm-hmm. If we focus in maybe on the lowest decile, the worst performing part of your portfolio, could you provide some stats there? Are there any risks there? Lowest decile. I mean, there are always businesses that are not performing exactly as you thought they might. Right? The question becomes, does that impair your value? I need to speak for the different strategies 'cause you can take different remediation. In the CLO business, you can sell them if you don't like the direction they're going. In Direct Lending, you're in that, really what you're looking to do is, you know, you establish a dialogue with management teams and with the sponsor to make sure that you're getting the information that you need to assess what's actually happening in the business, to think about what other steps you might wanna take. You can also use it to leverage better economics to reflect the higher risk that you might see in the outcome. I'd actually have to go away and pull some statistics. You know, in our Direct Lending business, we have had one partial debt for equity swap where a portion of our debt was converted. That was that was going back about two years now. That was ironically one of our only cyclical businesses. Coming into COVID, they had a difficult time. It's an auto parts maker. You know, generally it's in very, very good health. There are underperformers in terms of, you know, where you would want them to be. I think with this macro backdrop, that's gonna happen. I think it's more about at what point does it get concerning that something has fundamentally changed in the market outlook or in the way the company was doing business, where you feel like the business model might be broken. There are no broken business models. Even the one that we had to do a partial debt for equity swap on, it's just because it's cyclical, and it went through a bit of a swoon during COVID. We took the necessary action. It was quite consensual. We'll get our money back. We're gonna make a very nice return out of that, I suspect. Thank you. Maybe just framing it as more broadly, where would you see the default rate generally in the market going? Yeah. How you position versus that? It's a good question. I was actually reading some research on that the other day. I don't actually have a view in terms of, you know, the overall default rate. I mean, I have a view on our portfolio and whether we should be on that or not, because it depends on which. If you talk about defaults, there are two ways to talk about it. One is, if you talk about it from a CLO context, you're really talking about where you've had an interest non-payment, so you've actually had a cash flow default. We can also talk about it because 90%+ which we didn't talk about, 95% of our Direct Lending loans, for instance, have maintenance covenants. You know, you will have some in the next few years that they breach a maintenance covenant, but those are usually set at, you know, somewhere around 60% LTV. There's still a lot of value left if you breach just a maintenance covenant. We, and we will see some. You know, I think in the, in the latest estimate I saw in Syndicated Debt was, you know, next year could rise or in 2024 could rise to about 3% or thereabouts. You know, then it comes down to recoveries and such. I would certainly expect us to be inside that, partly because the selectivity, if you take out what we think are the most volatile segments, being consumer retail and a lot of the industrial, by definition, you should have a slightly more stable, higher value portfolio. Finally, on deployment investments, you've talked about a linear pace of deployment. What's the outlook there? I mean, obviously, fewer deals, but more opportunities. Yes. It's been a good year, partly because the bank market has been largely shut. Any sponsor that was looking to raise capital has largely turned to Direct Lending. Even then, it wasn't linear within the year because the end of Q1, early Q2 was quite quiet because of what was happening in Ukraine. No, I think the outlook. It's funny because the banks' deployment of balance sheet tends to dovetail reasonably well with the level of M&A activity. You know, I think as we see banks maybe become a little bit more active, I would expect M&A activity to pick up. I think we've almost had this buffer where M&A activity has been declining a bit in the second half of this year. Because the banks aren't in, we've actually taken share. Some of that share. I'm thinking Direct Lending now. Some of that share will be given back, but you'd expect it to be compensated with a bit more M&A. I do think that the long-term trends are very clear. Are we ever gonna end up in a U.S.-style situation where it's 90% to funds and 10% to banks? No, I don't think so. Private debt has been taking share quite dramatically for the last, well, decade, and I think that will continue, and then we'll find a stasis because I think the days of large bank underwrites are probably, at least for mid-sized companies, are coming to an end. The other thing we've seen is a mentality shift in the sponsor community in Europe. If you go back even five years, you almost had to convince sponsors sometimes to line you up against the bank solution and talk about the differences. Like, "Why would you do this versus that? Because you're gonna pay more for our debt." I think now every sponsor is looking to private debt as a potential solution, and they're making that call on day one, which just means that the acceptance is there, which is partly what's driving the growth. Sorry, last one. If you can also talk about forward pricing in Direct Lending and in the opportunities. Yeah. Direct Lending, we've seen in this year. If we go Q1 to now, you've seen an uplift of about 75-100 basis points. That's probably ticking up a little bit higher, and it depends a little bit where you, where you take your average from. Plus LIBOR, right? The all-in cost, or I'm gonna flip it around. The all-in return to us has increased quite dramatically. If we think about three-year swap rates being just under, just about 3%, you're actually talking about 4% higher return for our LPs going forward than the beginning of the year. It's a fairly material increase for the borrowers. It's a very nice return for our LPs, so long as it's not compensated by greater defaults and losses. The entire book is floating, right? The entire Direct Lending book is floating. Credit Opportunities owns a little bit of fixed rates. We can buy bonds as well, but it's... I think we looked at the other day, it's about 80% floating, and some of those bonds have been bought quite recently. We can... I mean, the risk premia in Credit Opportunities is a little bit more volatile in terms of... It's also subject to certain technical factors. I mean, loans have rallied about 5-6 points in the past three weeks because the CLO bid has come back, but there's been no supply. Now it's overpriced. The risk premia has stepped out quite significantly, and you're seeing all-in returns, you know, 8%-10% for unlevered decent risk. Okay. Some comes inside that. If you have to issue a new loan today, it's gonna come, you know, LIBOR plus 500 to 550 and a 95 OID. It's quite expensive to borrow via the Syndicated Debt market, partly because the CLO market hasn't really ramped back up nor has the M&A market. It's all on tilt still a little bit. Ladies and gentlemen, we will now take questions from those dialed in. If you are dialed into the call and would like to ask a question, please signal by pressing star one on your telephone keypad. We'll pause for a moment to assemble the queue. There are no questions on the conference line. I will hand back to the room. Thanks. Can I just ask, why is it that you only do sponsor back deals in the Direct Lending fund? It's I think there are a few reasons. I mean, the non-sponsor space is not quite as developed in Europe. If I think about the non-sponsor space quite generally, if you look at Europe, you're gonna have entrepreneur-led or family-led type businesses. Family-led businesses are trickier for various reasons, one of which is often corporate governance. It's also very often the family's name is above the door, so therefore, if you ever need to take remedial action, that can be quite challenging for various reasons. We do some slightly more entrepreneur-led ones, but not in the ARR-type financing mindset, but more like the, it's still largely owned by the entrepreneurs. They professionalize, they've brought in some external investors. They still own a majority. While there is no sponsor behind them, those are still small percentages, partly because of just where the opportunity set is, partly because when you have a sponsor behind you get two things. You tend to get a bit more robust access to information up front, you get a second pair of eyes looking at it, and you have somebody that tends to have additional capital that they can put to work to protect that position in a downturn. And you expect that the company will be professionalized in a way which then builds value for you. It's, you know, I think if you're, if you're trying to do sleep-at-night credit, it's the way to go in terms of protecting you. Thank you. Just on, do you guys ever sort of force the portfolio companies taking the credit to hedge out the rate risk or just let the sponsor? It's a very interesting discussion point. It used to be back when we were, back in the early 2000s, you would put a hedging letter in place, and they'd have to hedge 2/3 with the bank that was underwriting it, which was a nice little money spinner for the banks that were underwriting the debt. That then went away. It is now back on the table. We've recently gone out to all of our companies to assess their level of hedging. You know, on the Syndicated Debt portfolio, we found that about 70%. Okay, 2/3 responded to our request for information, and of those 2/3, about 70%-75% had hedged, some with caps, some with swaps. On the Direct Lending side, it's not been as high. In fact, it's quite a bit lower. Interestingly, it's a slightly lower impact for Direct Lending because your initial margin's higher. let's just say, I mean, to state the obvious, you have a 6% margin, and LIBOR goes from zero to three, that's a 50% uplift. Yeah. Whereas if you're borrowing at 350 basis points over and you add 3%, for a Syndicated Debt, you almost doubled it. We're glad to see the Syndicated Debt businesses. Yeah. A lot of the Direct Lending ones have not. In new deals that we've been doing over the past few months, we have started having more direct conversations about their intentions and why or why not. Is there any issues with companies having kind of ineffective hedges going on? We have not found anybody that's put on the wrong hedge, if that makes sense, or something that either doesn't work or actually creates the liability when they thought it was gonna be an asset sort of thing. You, I'm sure we will find that in some of the Credit Opportunities ones, because occasionally you find a company that just has like a very long-dated interest rate or FX swap that goes way out of the money and causes problems, but. Thank you. Just a final question. I appreciate you don't have much exposure to Bridgepoint portfolio companies, but is there any other sponsors that you kind of over-index to or, and including EQT from. We have some EQT. We've been lending to the EQT for a long time, so we're not over-indexed because it's only been the last two years that we've really been. No, I mean, we have lent to 61. I actually checked the number this morning because I thought someone. 61 sponsors in Direct Lending, it's reasonably well diversified. There are some that we have done multiple deals with and that we're actually somewhat important to as a lender as well. There's a mutual respect that comes with that type of position, in terms of, one, access to them, access to information, then also the level of dialogue you have. You know, you kind of know each other, and there's a. You tend to get the best out of one another, if that makes sense. Yeah. I'd rather not name them, if you don't mind, because I'm not sure how they would feel about that. Sounds good. Actually, sorry, one more thing. Just I don't think I saw in there that kind of how you guys stack up in terms of fund performance and overall in terms of quartiles and things like that. Yep. I don't think we put them in. Okay. Yeah. We weren't sure if that was the best thing to put in. It's a very good question because how do you measure that? It's not just basically at zero. The more risk, the higher the performance. Yeah. Exactly. Which is why I'm looking forward to our returns coming, seeing our competitors' returns in the next year or two. No, I think jokes aside, these types of periods tend to... There's been a clustering effect in terms of returns, definitely in Direct Lending, because you could take almost any risk you wanted, and companies looked okay. I think it's only when you start to see a bit of volatility that you start to find out if the strategy you've employed or what people say they're doing is actually what they're doing. I'm actually hoping for a bit of dispersion. Interestingly, in Direct Lending, we have never set out to be a top quartile fund. Which may sound strange and perverse, but in order to be a top quartile fund when interest rates were zero, you were taking a lot of risk. You were doing holdco facilities, you were doing second liens, you were doing non-sponsored transactions, you were doing slightly squirrelly or highly cyclical ones that the banks didn't want to touch. You had to push the risk. The question is risk rewards, right? I mean, it's w hich is why you need some form of volatility in the market to prove the downside protection. I mean, I think you can actually look at what we invest in and what we don't, and you can probably get a decent sense of the level of stability you should get from a 30% margin, 35% LTV, you know, fairly resilient sector set type portfolio. Look, the economy's big. Somebody else is doing the industrials and the retail consumer names. I'm not you know, we have a sense of who, but. It will shake out. Again, you don't wish. You don't wish ill upon the rest of the industry, because you don't want LPs to kind of look at it and say, "Well, I don't wanna touch that," because we don't know what those guys are doing, you know. It's. I actually think the. If we're talking about Direct Lending, I think it's actually gonna come through very, very well. I think it's gonna come through very well because you realize very quickly access to information and the ability to have any form of remedial dialogue is immediate, and it's just. I don't know if you've ever tried to do a bank restructuring where you have a table like this and you have 20 people sat around it trying to come to a consensus view. Oh, it's like pulling teeth. When you have a one-on-one conversation, you can sit down and just, you can have a grown-up chat about, "This is what's happening. This is what we propose to do. This is what we need. This is what we need." You can get to things very, very quickly. Which actually lets a company get back to doing business the way it should be doing business, rather than management teams getting sucked into the stress of restructuring discussions and lawyers and accountants, and it's just, ugh, mind-numbing. Which is why I think that, Direct Lending is actually very well-placed, especially given, I think, the nice premium that we have in some of these loans that we've taken into this period. I just wanna ask one about, competition, like, in the market. Mm. What are you seeing today? I mean, a bunch of traditional asset managers have moved into Direct Lending. Mm. Let's say. Are you seeing more competition from new entrants and things, or are you competing against the same other lenders that you have been over the last 10 years or so? It tends to be about the same. New people come. Some people get bought, get rebadged. It tends to be more or less the same. You know, th ere aren't a whole lot of new entrants other than a few of the U.S. guys that have come in, put teams on the ground, which takes a bit of time to ramp up or have acquired. I think the only real trend we've seen recently is I think They're doing slightly smaller tickets now. On the slightly larger transactions, you often see them kind of getting clubbed into a couple people, which I think people's risk tolerance has maybe diminished just a little bit. Just another one on debt maturity profile. What does that look like across the portfolio in Direct Lending? Typically, in the past, has it been when maturities have come to an end, the sponsors have typically exited, and now you're seeing less exits, so how will that look like as maturities come up? Yeah. In Direct Lending, we tend to think of these things. I mean, it's almost the classic kind of private equity life cycle. What's the average hold period of an equity deal? Four or five years? You normally find some form of refi opportunity at year three. We actually tend to think. When you have fees, upfront fees, we tend to mentally amortize them to three years. You tend to find that in hotter markets, maybe it's a little less. In cooler markets, it's a little longer. You very rarely ever get to maturity. Ironically, if you do get to maturity, you've just made a very nice money on cash, unless the company's distressed, then you're gonna have to take some form of remedial action. Yeah, they tend. Most of these businesses, because they're cash flow positive, tend to de-lever reasonably well. The sponsor's gonna want to refi you into either cheaper bank finance, or they're gonna recap you, at which point you have an opportunity to get out. In Credit Opportunities, it's basically the Syndicated Debt wall. You know, it depends on where you're looking, but it's actually advantageous very often to invest slightly shorter, especially if you're investing in bonds. You take less duration risk, but you also have a catalyst point where you can get your money back or have a tough conversation. Slightly different approach. One last question. Yes. Yeah, I saw PIK was a big part of your return profile. Yeah. Do you have any PIK toggles? That was in Credit Opportunities. Yeah. We do have a few in Direct Lending. You know, do we have any PIK toggles? We don't have any PIK toggles in Credit Ops. We do have a few PIKs. You know, you have a few where you've done subordinated, paying kind instruments and/or you've taken some cash, some PIK. Keep in mind, that's a historic, 14-year view, that slide you're talking about, which is slide. Yeah. Slide 16. That's a historic view. In Direct Lending, you occasionally have one that has a portion of the interest that can be picked in exchange for a higher coupon, and they can usually only pick it for, say, a quarter here or a quarter there, not usually consecutive quarters. They could do it, like, twice. It's just to help with the... I mean, in a zero interest rate world, it was never used. In a slightly higher interest rate world, it might be used once or twice for... to meet net working capital needs, something like that, if a company's a little bit tight or they need to make an investment, CapEx or something. Yeah. Actually, I'm not, I'm trying to think we've ever I'm sure we've seen it. The only time we've seen it in the past couple years has been very acquisitive high growth companies that use, like, every penny to acquire other businesses in their industry, and they decide to use your pennies as well. I have a very dim view of PIK toggles in this current market 'cause I don't think you should be borrowing money as such that you need to use our interest to meet your cash flow. It just means you should borrow less money. Little things like fixed charge coverage ratios, oh, they're back in vogue now. Who would've thought cash flow would be important? Just a very quick one. I mean, you talked about BDL offering LPs making 400 basis points extra, all else held equal. What does that mean for demand for BDL versus BCO? Are you seeing any change in mindset? Fractionally, but maybe not the way you think, is that we've actually seen people become much more interested in Credit Opportunities. In a benign world where you have 0 interest rates and there's no trouble on the horizon. I mean, where we sat last December, the world was good. We were coming out of COVID, it was opening back up, growth rates were coming back, the labor force was getting back, shipping rates were coming back down, supply chains were, you know, still a little bit wonky, but they were. We came into 2021 thinking there's probably trouble somewhere out there, or 2022. Probably trouble somewhere out there, but it doesn't look like it's imminent. Putin did something, you know, well, we know what he did, but... In that environment last December, Credit Opportunities was not in vogue because the question was, where are you going to find your returns in a really benign world where we probably have zero interest rates for the next three years? When the world's on tilt, everybody's like, "I want some of that." That's the type of environment where you can buy things, especially in the secondary market, at a very nice, at a very nice price. It's usually very good risk reward because, I mean, to be blunt, if you like the types of companies and type of equity that you can invest in, you should love the debt. If the debt's paying you 15%, 17%, why not? Yeah. I think you find it's the one thing about Direct Lending tends to be more programmatic, right? Direct Lending will be more subject to similar trends as private equity. You know, I as a pension fund, I'm going to have four managers. I'm gonna deploy GBP 150 (Pound Sterling) into three tickets this year. I'm gonna use a consultant. That's you know, very often their programs, and they build programs. Credit opportunities, almost in the name, tends to be a bit more opportunistic. When people smell it, they come for it, and then they might decide not to do it for a vintage, then they come back. Thanks very much. Good. Thanks. Thank you all.