EverBank builds syndication desk, aims to offer new products

EverBank’s fund finance arm is hitting its stride just over six months since it began lending operations and despite a slow fundraising environment, and is building a syndication desk and looking to offer new products.

The lender revealed in late April that its portfolio is now comprised of 28 facilities, with 19 of them being subscription lines. It also includes five NAV loans and four hybrid facilities.

By dollar amount, EverBank has backed $2 billion in facilities commitments and $1.3 billion in outstanding loans.

The bank has completed 28 facility transactions involving 21 GPs. And the division now has 18 full-time staffers.

The business is headed by fund finance luminaries Jeff Johnston and Mike Mascia. It made itself available to sponsors last fall, not long after the bank completed its carveout from TIAA.

EverBank was one of several lenders that entered fund finance following the US regional banking crisis last spring, which led to the failures of two players in the market and the rescue sale of another.

And despite a tepid fundraising environment, Mascia said the bank has beat its own expectations in growth, though he noted much of its activity in the first quarter this year was in areas insulated from fundraising cycles, such as refinancings.

Mascia added that EverBank has had strong deposit growth, which funds its lending.

EverBank has worked with GPs of varying sizes, including both multi-asset and single-asset sponsors, he said. And it has been involved in asset classes including buyouts, private credit, secondaries and GP stakes.

Looking ahead

EverBank plans to add more products, with much of its roadmap set for the coming two quarters.

“We’re never going to out-JPMorgan JPMorgan, from a whole-size or cost-of-funds perspective. We’re focused on the more challenging, the more complex transactions”

Mike Mascia

The lender’s planned offerings include liquidity facilities for collateralized fund obligations. Mascia explained that facilities can be used by the SPVs that hold the underlying fund interests to meet those funds’ capital calls or for “other liquidity needs” that arise.

Mascia noted that it will partner with private credit funds to offer attractive funding costs to borrowers through a blended-cost approach.

The bank revealed that it plans to offer management fee lines as a standalone debt product. And the lender is currently doing beta testing for a new treasury management system that it will offer to GPs. It’s eyeing an early 2025 launch for this offering.

Meanwhile, it’s also building a syndication and distribution desk, and plans to start syndicating as soon as this month.

Cautious start, ambitious plans

Mascia said that the bank started out as a participant in sub line originations from other lenders before financing both sub lines and NAV facilities entirely with its own balance sheet. But syndication will be a major next step as the lender works on larger facilities.

Acting in a participatory role was a key part of the platform’s cautious entry.

“We wanted to make sure we don’t get out ahead of our skis,” he added. “We always want to make sure we can deliver a good borrower experience”

Mike Mascia

“We started off with some subscription facility participations to make sure that all of our operational capabilities were working to onboard some clients to demonstrate our ability to execute to some clients,” Mascia said.

“We wanted to make sure we don’t get out ahead of our skis,” he added. “We always want to make sure we can deliver a good borrower experience.”

The bank’s modus operandi is in providing bespoke facilities to sponsors, with an eye towards trickier deals.

“We’re never going to out-JPMorgan JPMorgan, from a whole-size or cost-of-funds perspective,” Mascia noted. “We’re focused on the more challenging, the more complex transactions.”

Among such transactions is a sub line for a continuation fund – still a nascent practice in the market, Mascia said. The LP base for the deal includes a sizable contingent of secondaries funds.

And EverBank provided a NAV loan to a private credit fund, with the proceeds for supporting the fund’s own NAV lending to a buyout vehicle. This is known as back leverage, and it gives funds added lending firepower, Mascia explained.

Back leverage can be used by a private credit fund in different ways.

“It can either make a bigger loan or offer a lower cost of capital to its borrower on a blended basis,” Mascia said.

And he noted that lending sponsors can get higher fund returns via the difference in interest rates between the back leverage and their loans issued.

EverBank also has payment priority ahead of the buyout NAV lender, meaning cashflows from the buyout GP’s repayments go to it first.