Discipline You Can Count: The Numbers Behind Our Underwriting

 

 

It’s one thing to say a lending platform is disciplined. It’s another to show what that discipline actually looks like in the numbers. On a recent webinar introducing Garrington Private Credit to the US market, our President and Chief Credit Officer, Tammy Kemp, and our Executive Vice President and Chief Risk Officer, Erica Axani, walked through the specifics behind our approach, from the top of the funnel to the current state of the portfolio.

 

 

A funnel built to say no

 

 

Sourcing comes first, and Garrington sees a high volume of opportunities by design. As Erica explained, “We typically see between 50 and 150 potential transactions per month, and we close about four to six of those. That is a very big decline rate. We want to see a lot of transactions so that we can pick and choose only those that are really going to fit our criteria.”

 

 

That decline rate isn’t a byproduct of being selective. It’s the mechanism.

 

 

 

A wide funnel means the deals that make it through have been chosen, not settled for.

 

 

 

Loan-to-value, held in a range

 

 

Once a transaction is under consideration, collateral value drives how much Garrington is willing to lend against it. Tammy described the target range directly: “Historically, we’re sitting in the 50 to 65 percent range. So, if an asset is worth a million dollars, we’re lending $500 to $700,000… Right now, we’re about 55%, so relatively low.”

 

 

That range holds regardless of market conditions. Asked whether current loss rates or advance rates were elevated compared to history, Tammy was clear: “They are not. Not chasing because of a trend, not doing things differently because of trends, being prudent and thoughtful, and the approach has to really be grounded in the value of those assets.”

 

 

Leverage, used deliberately

 

 

Leverage is part of running any lending platform efficiently, and Garrington uses it, but within a defined boundary. “We target about 0.5 times leverage for our portfolio,” Tammy said. “We’ve seen other funds in the market, they’re at 0.75, some of them as high as 1.5 debt to equity. That is a little bit uncomfortable for us. Right now we’re sitting a little below that target, at about 0.44 times.”

 

 

The comparison matters. A fund levered at 1.5x debt to equity is carrying three times the leverage Garrington targets, on top of loans that may not carry the same tangible asset backing.

 

 

PIK, used sparingly and monitored closely

 

 

Payment-in-kind structures let a borrower defer cash interest, and Garrington treats them as an exception rather than a default tool. Tammy was candid about the discipline behind that: “identify a problem and work to resolve it, rather than deferring payment and assuming the collateral will simply be worth more down the road. Historically, PIK exposure has stayed under 5% of the portfolio, with reserves added deliberately whenever a longer-term issue is identified.”

 

 

The portfolio today

 

 

Put together, the current snapshot reflects the same targets applied in practice. Tammy laid it out plainly: “We target about 80 to 120 individual loans. We’re currently sitting at about 95… Currently, the portfolio is 100% senior secured… our target loan to value ratio is 50% to 70%, and we’re currently sitting at about 56%.” Average portfolio duration sits at approximately seven months, against a target range of six to nine, keeping the loan book aligned with the fund’s monthly liquidity terms.

 

 

None of these figures are the result of a single good year. They’re the output of a repeatable process, applied consistently across a large enough set of loans that the discipline shows up in the averages, not just in individual deals.

 

 

No predictions. No complexity. Just disciplined underwriting against real collateral.