The White House has chosen Chicago’s Monroe Capital to raise a $1 billion private credit fund devoted to funneling money into the U.S. automotive supply chain.
The Drive Forward Fund will raise money from institutional investors and receive additional capital from U.S. Small Business Administration loans, Monroe Capital’s chairman and CEO, Theodore Koenig, said.
“This is an underserved market from a financing standpoint,” Koenig told Crain’s in an interview. “There is a ton of demand. We have got the EV industry, autonomous driving. We have got batteries. We have got all kinds of software.”
Koenig said the automotive supply chain is a trillion-dollar industry, representing 5% of the U.S. GDP. He added the White House reached out to them when developing the program.
The investment comes at a time when growth in EV sales is flattening out, with concerns about a lack of chargers and high vehicle costs causing consumers to dial back on their plans to ditch cars powered by internal combustion engines. Major automakers such as Ford, General Motors and Volvo have pumped the brakes on EV development as consumer uptake has slowed.
The Biden administration has set a goal of having 50% of all new vehicle sales be electric by 2030. The president’s signature Inflation Reduction Act added and expanded tax credits for purchases of new and used EVs, included incentives to electrify heavy-duty vehicles like school buses, and supported the development of charging infrastructure.
“There is a lot of opportunity here,” Koenig said. “Most of these companies are smaller companies that are in the supply chain.”
Monroe Capital has previously raised two funds that received support from the Small Business Administration, which provides loans at below-market rates. The firm received the Small Business Investment Company of the Year award in 2015 for a fund that invested in 33 companies.
The Drive Forward Fund will have an advisory council made up of automotive industry experts, including representatives from the Alliance for Automotive Innovation, a trade group formed in 2020 to develop clean, safe and smart transportation.
“A successful transformation to automotive electrification in the United States requires a cutting-edge automotive supply chain that keeps the country competitive and underpins our economic and national security,” the group's president and CEO, John Bozzella, said in a statement.
“The automotive supply chain is made up of hundreds of companies — many small and medium-sized businesses," Bozzella said. The fund "is an option for smaller auto businesses to access private money to modernize and support the production of the vehicles of today — and tomorrow.”
Monroe will begin raising money from institutional investors immediately, including auto industry sources such as original equipment manufacturers and pension funds, and hopes to issue loans from the fund by the end of the year.
The company, which has about $20 billion in assets under management, plans to issue market-rate loans ranging from $5 million to $50 million from the fund. The average loan size was forecast between $20 million and $30 million, with terms ranging from three to seven years.
“I think one of the big missions here is to provide stability to these companies that are in this Midwest area that are big-time important factors in the supply chain and ultimately ensuring these companies remain community anchors,” said Alex Parmacek, managing director and Monroe’s portfolio manager for the fund.
The fund also will evaluate growth opportunities to invest in battery component manufacturing and materials recycling.
