Polaris Flexible Capital

Polaris Flexible Capital I, is an independent closed-end investment fund, which focusses on investments within the junior tiers of the capital structure and minority equity positions.

The fund applies a flexible investment approach and are able to tailor bespoke investments solutions in order to accommodate the specific needs of the companies we partner with.

The investment strategy consists of three main components

1.

Junior loan / Mezzanine / Preferred equity

2.

Minority equity

3.

Opportunistic listed credit opportunities

Video presentation of Polaris Flexible Capital.
In Danish

Tailored financing made possible by applying a Flexible investment strategy

Investment focus across the capital structure

PFC will target investment opportunities across the capital structure by applying a solution-oriented investment approach
Strategy is to tailor bespoke investment solutions that best suit the specific needs and include value protective attributes to optimize overall risk / return profile

Core focus

Junior financing

Characteristics

Junior tiers of the capital structure, including contractual or structurally subordinated capital tailored to the specific situation
Contractually agreed return either in the form of cash or rolled-up interest
Selective equity-based return participation (e.g., via warrants) in order to leverage on due diligence and knowledge and to optimize overall return

Value to the companies we partner with

Capital structure tailored to the specific situation
Optimizing capital flexibility and enhancing maneuverability
Facilitating expansion while preserving liquidity for growth
Consolidation of ownership (enabling buy-out of minority shareholders)
Allowing for new bank financing by providing increased capital cushion

Core focus

Minority equity

Characteristics

Non-control equity investments
Clear alignment of objectives with main/other shareholders
Pre-defined exit mechanics in order to ensure liquidity within fund term
Could include put-optionality to protect value of investment in the event of negative deviations from business plan

Value to the companies we partner with

Cooperation with Polaris as a knowledge-driven investor with focus on value creation through operational improvements
Access to network and expertise within execution of transformational changes and M&A-driven growth
Strenghtening capital structure
Facilitating successions without financially compromizing the company

Opportunistic

Listed credit opportunities

Characteristics

Leveraging on PFC’s general knowledge about credit markets
Ability to pursue special-situation listed credit opportunities
Typically related to dislocations related to single sector / company-specific events

Rationale

Ability to extract value from temporary capital dislocations within credit markets and to leverage on the knowledge and insights from the bilateral investments
The liquid markets make it possible to act speedily as opportunities arise e.g., temporary credit market dislocations
Broaden investment scope which complements the bilateral investments

Management team

The investment team responsible for the fund is Jesper Langmack (Partner & Head of Polaris Flexible Capital) and Kent Brovn Arp (Partner, Polaris Flexible Capital).

The two partners have made investments within the focus of the fund for a long period and has worked closely together before forming Polaris Flexible Capital. The team will be expanded during 2022.

The fund held first close in January 2022 and is currently actively fund raising.

Typical situations...

where PFC can financially facilitate successful corporate development

Growth / transformation

Capital for strategic repositioning
Financing of large and transformative acquisitions
Refinancing allowing for capital structure optimization and consolidation of shareholder base
Continued organic and acquisitive development of mature mid-market companies

Sponsor-led acquisitions

Leveraged Buy-Out transactions led by experienced sponsors
Bolt-on acquisitions to current platforms
Re-capitalizations of low-leveraged companies or re-financing of over-leveraged companies
Management-led transactions

Special situations

(incl. pre-IPO placements)

Successions, equity release, and reshaping of shareholder structure
Liquidity for key business stakeholders
Positions from forced sellers
Re-shaping of ownership structures, e.g. family-owned businesses and other key stakeholders
Companies preparing for IPO

Key Investment Criteria

The fund will have a Nordic investment focus and will be looking to make investments with fits the below listed investment characteristic.

Size

Company size (Enterprise Value) in excess of DKK 200m
PFC investment size ranging from DKK 50 – 200m

Sector / Geography

Sector-agnostic approach - Focus on portfolio diversification across sectors
Nordic investment focus, likely majority in Denmark / Sweden

Credit / investment story

Clearly defined and expressed strategy. Positive operational cash flow
Likely to include expansion, acquisitions, or other strategic transformation

Owner commitment

Proven capabilities and sector-anchored experience
Ability and willingness to financially and managerially support investments
Counterparty diversification

Investment horizon

Tailored to fit the need of the specific situation and typically up to 7 year
Target hold period of 2 - 5 years

Sustainability

Within mandate (exclusion criteria)
Reputable investment partner and adequate governance
Annual sustainability review and update

Target return

Risk-adjusted approach to evaluate return reflecting transaction-specific factors
Focus on downside-protective characteristics and selective upside participation

Polaris Flexible Capital