This week we chat with Michael Ewald. Michael is a Managing Director, the head of the Private Credit Group and Portfolio Manager for Bain Capital Credit’s Middle Market Opportunities and Senior Direct Lending fund strategies. Bain Capital Credit, founded as Sankaty Advisors in 1998, is a leading global credit specialist with over $30 billion in assets under management and has more than 230 employees operating from a network of seven offices around the world.

The Lead Left: Michael, tell us what you see are the current market conditions?

Michael Ewald: Our business is about 80% from private equity sponsored companies, and 20% non-sponsored. It’s a good mix, but the focus is primarily sponsored borrowers. There are several reasons for this. First, it’s an efficient way for us to source deals. There are over 200,000 middle market companies in the U.S. alone, so unless you’re a bank with deposit-taking and fee generation capabilities, that’s a tough market to cover. Also, having sponsors with the funds to back-up the companies, to take them through speed bumps and provide additional capital for acquisitions, is extremely helpful. Finally, sponsors tend to have high-powered operating capabilities, particularly in the finance and process management functions, to help professionalize these businesses.

We also see opportunities in the unsponsored space. We like companies with particular niches. For example, we financed a business that has specific brands selling into both CVS and Duane Read with little variability year over year. That business has about $70 million in EBITDA, so it’s a sizable company and its customers would care if it went away.