Arif Bhalwani is the CEO of Toronto-based alternative capital provider Third Eye Capital. He is a leading advocate for private credit as a permanent piece of the economic fabric, envisioning a partnership model between private capital and banks to further support small and midsize enterprises (SMEs).
What do you see as the ideal role for private credit in the Canadian economy?
Arif Bhalwani: Private credit fills an efficiency gap in our economy. As compared to the U.S. in particular, there is less access to credit outside of the Big-6 banks, who continue to dominate lending in this country. With higher-than-normal borrowing costs and tight financial conditions lingering, there will continue to be demand from borrowers with complex financing needs who were overlooked by traditional banks.
Private credit firms like Third Eye Capital, with expertise across different sectors and value-added services bundled with capital, create transformations in businesses where we feel the value is intrinsic. As corporate insolvency numbers continue to rise, firms like ours with distressed and restructuring experience will provide much-needed services in shoring up certain sectors as cracks appear.
Many analysts are nervous about private markets, pointing out that deal activity in private equity has slowed significantly. What are your forecasts for private markets in the coming year?
Arif Bhalwani: I think it’s clear why deal activity has slowed – there was so much uncertainty over borrowing rates and pending regulations for the new year. Dealmakers have much more clarity now, and lucky for them, firms like ours have more dry powder than usual. There is eagerness for deals to be made, so I’m optimistic about private markets.
How does your firm stand out amongst your competitors?
Arif Bhalwani: We have a team that digs deeper for value within industries and within businesses. We’re invested in our partner companies’ success as much as our own because we’ve put all we have into turning things around with them. We’re a team of passionate entrepreneurs and operators who want to find ways to make a business succeed. We’ve all been in positions where capital partners are the most vital components of a business’s success, and we know the difference it makes when those partnerships are true collaborations, with meaningful commitments made by every party to see the vision through. We find value where the big banks don’t, and in doing so, we create value for our investment partners.
What is your approach to risk management as a private lender?
Arif Bhalwani: Risk management and due diligence are part of the living, breathing algorithm at the center of our firm’s success. The work to perfect that process is what ensures our long-term success and the performance of our portfolio. Our team has seen all manner of economic hardships and has found ways to get through them. We also have confidence in our underwriting and our ability to find great opportunities with the right balance between risk and reward.
What’s the future for Third Eye Capital?
Arif Bhalwani: We plan to continue to set the pace for private credit in Canada in terms of forming fruitful partnerships with businesses in transition. I’ve called this era the Reformation Age for private credit because managers, like the Lutheran reformers, are drastically changing their beliefs and their practices. With so many businesses in need of restructuring, firms like ours will have to develop the skills suited for that, and for forming turnaround strategies. Our firm has been turning businesses around successfully for more than two decades, so I’m confident in our ability to remain industry leaders.
