Further information on Nordic Credit Partners's ESG work:
In accordance with FI 01.1-2.
- The choice of strategy builds on Nordic Credit Partners' values as set forth in the ESG Investment Policy.
- The ESG Investment policy is owned by the CEO and board, thus the accountability also falls on the named.
- There are two PMs, out of which one is responisble for the implementation of the policy.
Implementation of ESG policy:
- During the reporting period an internal and external screening have applied.
- As stated in the additional information to the investment process below, monitoring of current investments is conducted on a quarterly basis where potential key issues would be reviewed and discussed in the investment committee
- Screening of holding companies for norms violations as well as particular sectors, done on biannual basis.
- In the event of sector involvement or business conduct issues, found either pre- or post investment, Nordic Credit Partners would evaluate available information to build an understanding of severeness and thereafter potentially contact the company for their view. Depending on understanding of issue, Nordic Credit Partners would choose to either refrain from investment, engage with the company to reach desireable results, or divest.
Further background to investment due diligence process:
All potential investments are evaluated in a tailored and thorough due diligence process for typically lasting for 2-4 weeks and including:
- Business and market review focused on business model, quality of operations, customers, management, ownership, competitive landscape as well as industry and market structure.
- Financial review focused on historic and forecasted financial performance, current trading, quality of earnings, cash flows, debt service capacity, downside risk and sensitivity analysis.
- ESG - NCP use both negative exclusion and positive impact criteria in their ESG due diligence. If a new investment opportunity does not meet the ESG minimum thresholds, an investment will not be made, regardless of its financial attractiveness.
- Valuation and investment returns.
- Structure and documentation.
Due diligence is conducted using a wide range of data sources including company materials and financial reports, third-party industry and market reports, public filings, credit and equity research industry experts.
Further background to investment process:
- Phase 1: Pre-sounding/information collection, incl. teaser information from underwriter(s), corporate financial reporting, 1to1 meetings with management, etc.
- Phase 2: If PMs are still interested, in-depth DD process of above mentoned materials, and internally conducted screening, analyst views, contact with network of industrial advisors (one per sector - knowledge of sector and company often including management.
- Phase 3: Memo to the board incl. recommendation / conclusions, discussion between PMs and board, sign off from all individuals are needed.
- Phase 4: Investment recorded and reported back to the board.
• Secondary market:
- PMs find potential suitable investments.
- Phase 1-4 above apply with some differences in research sources.
- Maintaining shadow portfolio of high quality potential issuers/issuers with currently unsatisfactory risk-return balance.
- Investment committee network referrals.
- Industrial partner network referrals.
- Referrals from shareholders, financial sponsors, market intelligence, consultants and banks.
- Preliminary investment committee discussion.
- Thorough due diligence conducted by the CEO and PM, the investment committee, advisers and industrial partners.
- Strict price discipline and timing flexibility provides for entry at best available market price.
- Final investment committee discussion.
- Investment committee approval.
- Quarterly investment reviews.
- Ad-hoc investment committee meetings possible at short notice.
- Key issues reviewed and discussed in investment committee.
- Investments will normally be exited when bonds are repaid/refinanced without involvement from the investment committee.
- Refinancing opportunities treated as a ‘new deal’ (back to step 1 “Origination”).
- Investment committee always involved in potential restructurings.