International investors are clamouring to deploy capital in Australasia even as the global economy teeters on the edge of recession, according to Steven Holden, Neu Capital NZ director.
Holden said many of the 450 plus underlying private investors linked to the Neu network were keen to find debt or equity deals in the often-overlooked Australian and NZ mid-markets.
“Australia and NZ are viewed as safe and a good place to invest,” he said.
Founded in Australia but with offices in UK, South Africa and NZ, Neu is a technology-enhanced investor ‘matchmaking’ service, bringing private institutional money in touch with businesses seeking debt or equity of between $10 million to $200 million.
The underlying investors range from high net worth individuals to family offices, endowments, credit funds and non-bank lenders but they all share an interest in sourcing bespoke deals.
Neu (stands for ‘neutral’) has already placed about $3 billion in Australasia, Holden said, with a “conservative” estimate of $6 billion of latent capital targeting NZ alone.
Supply more than demand is the main hindrance (aside from pesky Overseas Investment Office rules) blocking the flow of investor capital this way, he said.
The group struck an agreement with consultancy firm Grant Thornton in NZ late in March, mirroring a similar deal made with the Australian arm last year, to broaden its distribution reach.
Under the deal, Grant Thornton will introduce candidate businesses to the Neu network. Holden said Neu expected to notch up similar distribution partnerships in NZ soon.
“We want to alert mid-market CEOs, CFOs and financial controllers to the large pool of private capital available for investment into established businesses,” Holden said in a release.
Neu has seven NZ mandates in train with seven more close to signing on the dotted line, he said.
Currently, Neu investors are favouring debt over equity deals with the number of refinancing arrangements expected to jump dramatically as the COVID-19 crisis distorts capital markets.
Holden said while banks and governments have been more accommodating this time around compared to the GFC, many good businesses could still struggle to source capital in the weeks and months ahead.
Larger companies would have a longer runway of support from banks but the mid-tier corporate field Neu operates in could feel the liquidity squeeze much earlier.
“There are already some pending receiverships in NZ,” he said. “We’ve just done a distressed debt deal and we expect many more sales ahead.”
About half of the Neu investor network is Australian-based with the remainder scattered across Europe, Asia and the US. Holden said the investors value Neu for its ability to source appropriate investments.
“We don’t broadcast to the whole network but only offer deals to the right investors,” he said. Each offer might only land on the desks of, say, 20 investors but it would be closely-aligned with their criteria.
The firm also gains efficiencies through its in-house technology, Holden said.
Before joining Neu last April, he was a director at Bancorp – a role he took up after returning to NZ from an offshore career (mostly in the UK) that included stints with Macquarie, GE Capital, Babcock & Brown, and Sirius Capital Partners.