Asia Mezzanine Capital Group has provided $25 million out of its Asia Strategic Capital Fund in mezzanine capital to Chinese steel part manufacturer, Anhui YingLui Group. One of the firm's LPs also invested $15 million in the deal, which was led by Asia Mezzanine.
Anhui YingLui Group is headquartered in Hefei, in China’s Anhui Province, and designs and manufactures precision casted and machined steel component parts for the construction, mining and energy industries. International clients of the company include Caterpillar, Emerson, Tyco, Joy Global, Schlumberger and Nabors Industries.
CDH Investments and China Everbright Investment Management are substantial minority shareholders of the company. The LP with which Asia Mezzanine co-invested was not named.
The $40 million of mezzanine capital will be used to refinance debt and expand production capacity at the firm.
According to market sources, Anhui YingLui – like many Chinese companies – had expected to go public this year and, with that ambition thwarted, had been forced to look for alternative sources of funding.
With the IPO market effectively closed and senior debt priced a lot more aggressively, mezzanine firms are expecting to see demand for their product pick up this year.
A spokesman from Asia Mezzanine confirmed this trend, saying there would be a lot of companies in Asia with expansion or consolidation capital requirements. Opportunities are greatest where bank liquidity has tightened the most and there is no access to the public equity market, he said.
LPs too are becoming more interested in investing mezzanine funds, the spokesman continued, as their attitude towards risk/return ratios has turned more conservative in the current economic climate.
Earlier this week, the UK-backed CDC Group committed $30 million to Kendall Court Mezzanine (Asia) Bristol Fund. The fund is targeting $150 million and will focus on mezzanine, growth capital and buyouts in small to medium enterprises in Southeast Asia.
CDC’s pan-Asia portfolio director, Brian Lim, said at the time that mezzanine financing fits “profile of the predominately family-run businesses in Asia”.