Meridian Credit Partners Strictly Private & Confidential
Section 04
Strategy &
Investable Universe
Where we lend, why the band is under-competed, and the five principles that turn boring first-lien credit into income you can count on.
$5–25M
EBITDA Band
~90%
First Lien
40%
Avg Loan-to-Value
S+575
Weighted Spread
US Lower Middle Market
Direct Lending
The Investable Universe

$5–25M EBITDA. First-lien. Sponsor and non-sponsor.

Company size. Profitable US businesses generating $5–25M of EBITDA. Large enough to be resilient, small enough to be under-banked.
Position. First-lien senior secured, ~90% of the book. Unitranche where we want to own the whole capital structure.
Sponsorship. Both sponsor-backed lower-MM private equity and non-sponsor owner-operators, where our sourcing edge earns wider spreads.
Sectors. Business and industrial services, healthcare services, specialty distribution, niche manufacturing, logistics.
Hold size. $8–15M per loan, 25–35 borrowers, so no single credit can sink the fund.
Universe at a glance
200k+
US firms in band
$5–25M
EBITDA target
~90%
First-lien share
40%
Avg loan-to-value
First-lienFloating rateCovenanted SponsorNon-sponsorCash-flow + asset
Meridian Credit Partners · Fund II02 / 06
Why This Band

The banks left. The income did not.

01 · Bank retreat
Regulation pulled banks upmarket
Post-crisis capital rules and consolidation pushed banks out of sub-$25M EBITDA lending. Non-bank direct lenders now fund the businesses banks used to serve.
02 · Under-competed
Fewer lenders per deal
The lower middle market sees far fewer lenders at the table than the crowded upper market. That scarcity is what lets us hold real covenants and wider spreads.
03 · Better terms
Wider spreads, tighter docs
Weighted spreads of SOFR + 575 with maintenance covenants, call protection, and genuine lender control. Terms the upper market has given away.
The opportunity is not exotic. It is boring, senior, secured credit, priced better than it has been in a decade because the natural lender walked away.
S+575
Weighted spread
Meridian Credit Partners · Fund II03 / 06
The Strategy

Get paid to wait. Sit first in line if we are wrong.

1Income first. Every loan is underwritten to a current cash yield. The fund distributes quarterly from quarter one of the investment period, not on an exit years away.
2Senior and secured. First-lien on the business, ~40% loan-to-value, with covenants that give us a seat at the table before a problem becomes a loss.
3Floating rate. Spreads set over SOFR at a weighted S+575, so income rises with rates. No duration bet, no reaching for yield.
4Diversified by design. 25–35 loans, $8–15M each, spread across five defensive sectors. No borrower is more than ~5% of the fund.
5Own the downside. Every credit is modeled to a stress case and a recovery before it funds. A dedicated workouts partner runs any position that drifts.
Meridian Credit Partners · Fund II04 / 06
Sector Map & Position in the Capital Structure

Defensive sectors, first in line to be repaid.

Sector mix (target)
Business & industrial services 26%
Healthcare services 22%
Specialty distribution 20%
Niche manufacturing 18%
Logistics & transport 14%
~90%
First-lien share
40%
Avg loan-to-value
Position
Roughly 90% first-lien, with unitranche where we want to own the whole capital structure. First in line on the assets and cash flows of every borrower.
Defensive, cash-generative sectors with hard or contracted revenue. No cyclical commodity exposure, no single-technology risk.
Meridian Credit Partners · Fund II05 / 06
What We Do Not Do

The discipline is in the no.

No early-stage. We lend to profitable businesses with real EBITDA, not to growth stories that need the next round to survive.
No commodity exposure. No cyclical, price-taking businesses whose cash flows swing with a spot market we cannot control.
No single-technology risk. No borrower whose entire value rests on one product or platform staying ahead of the field.
No second-lien-heavy book. We stay first in line at ~90% first-lien. We do not reach down the capital structure for a few extra points of spread.
No covenant-lite. Every loan carries maintenance covenants and call protection. If we cannot hold the documents, we do not do the deal.
Why it matters
Saying no to 96% of what we see is the single biggest driver of Fund I's zero-loss record. Selectivity is the product.
Meridian Credit Partners · Fund II06 / 06