CPPIB subsidiary commits to middle-market debt company

CPPIB Credit Investments, a subsidiary of the C$170.1 billion ($172.6 billion) Canada Pension Plan Investment Board, Toronto, is committing $50 million to MerchCap Solutions, a Stone Point Capital and KKR & Co.-backed firm that provides capital market services for middle-market companies, confirmed a spokeswoman for the Canadian fund.

CPPIB Credit Investments has earmarked up to $2 billion total to invest in middle-market debt transactions.

Alternative investment firms Stone Point Capital and KKR formed MerchCap, formerly known as KKR-SPC Merchant Advisors, in August with a combined $300 million capital commitment. MerchCap provides principal and agency-based capital markets services to private equity-backed and corporate midmarket companies and makes investments in those companies, according to the joint news release.

“It allows us to expand our private debt portfolio by targeting a relatively underserved market segment — the middle-market corporate segment,” said the CPPIB spokeswoman, who declined to be identified.

“With MerchCap, we are focused on middle-market and sponsor-backed companies that have historically been underserved by the banks. The need for capital is especially acute today because large banks have had to reduce principal capital to adapt” to new regulatory requirements, said Craig Farr, global head of capital markets at KKR, in an e-mail.

MerchCap was sole arranger, book runner and syndication agent on $147 million of debt financing that supported Madison Dearborn Partners’ acquisition of Things Remembered Inc. in March.