Guggenheim Investments Registers BDC Targeting Middle Market Debt

Guggenheim Investments, a U.S.-based asset manager with over $249 billion in assets under management, has filed a registration statement with the U.S. Securities and Exchange Commission for the Guggenheim Investments Private Credit Fund, a new closed-end management investment company electing to be regulated as a business development company.

While the fund is not yet effective, the registration details Guggenheim’s strategy to capitalize on the growing private credit market.

The fund aims to generate current income and, to a lesser extent, long-term capital appreciation for investors and will be externally managed by Guggenheim Private Investments LLC, an affiliate of the parent firm, Guggenheim Partners LLC.

The core of the strategy involves investing at least 80% of its total assets in private credit investments. Its primary focus will be on highly negotiated debt investments in middle market (borrowers with EBITDA less than $75 million) and upper-middle market companies (borrowers with EBITDA between $75 million and $250 million).

The portfolio will primarily consist of privately originated and negotiated loans, mainly first lien and senior secured loans. It will also invest in subordinated or mezzanine debt; unitranche debt; and structured products, such as collateralized debt obligations, collateralized loan obligations, structured notes, and credit-linked notes. Additionally, the BDC may invest in equity, private investment funds, or derivatives.

The fund strategy includes an allocation to more liquid credit investments, such as broadly syndicated loans and corporate bonds. These investments are intended to maintain liquidity for the fund’s share repurchase program and manage cash prior to investing subscription proceeds.

It will also opportunistically acquire secondaries investments, including interests in credit-oriented private equity vehicles, which may be acquired at a discount.

Guggenheim’s investment philosophy emphasizes loss avoidance and risk-adjusted returns, backed by a team of over 224 investment professionals. The debt investment strategy prioritizes flexibility and a focus on floating interest rate instruments, with a strong preference for senior secured and unitranche loans.

Classes, Launch Condition, and Fees

The BDC will offer three classes of common shares – Class S, Class D, and Class I – with differing shareholder servicing and/or distribution fees.

The fund has registered $2.5 billion in common shares and intends to conduct a continuous offering. However, the initial offering proceeds will remain in an interest-bearing escrow account until the fund receives purchase orders totaling at least $100 million (excluding shares purchased by affiliates) and the board of trustees authorizes the release of the funds. As noted in the prospectus, the BDC may not commence operations unless the minimum escrow condition is met and authorized by the Board.

The minimum initial investment for common shares is $2,500. During the escrow period, the per share purchase price is set at $25.00.

While the fund itself will not charge upfront sales loads on any of the three classes, investors may be subject to transaction or other fees charged directly by the financial intermediary or selling agent through which they purchase shares:

Selling agents may charge upfront placement fees or brokerage commissions. These charges are subject to a maximum cap on net asset value:

• Class S: Up to a 3.5% cap on NAV;
• Class D: Up to a 1.5% cap on NAV; and
• Class I: Selling agents will not charge these transaction or placement fees.

Assuming a constant NAV per share of $25.00, it expects that a one-time investment in 400 shares of each class of common shares (representing an aggregate NAV of $10,000 for each class) would be subject to the following annual shareholder servicing and/or distribution fees: Class S: $85; Class D: $25; Class I: $0.

Management and income incentive fees, as well as other expenses, have yet to be disclosed.

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