Brooks Houghton closes $200m mezz fund

The US debt provider’s oversubscribed second fund includes $170m from new investors.

New York-based short-term mezzanine provider Brooks, Houghton Interim Funding has closed its second fund on $200 million (€153 million).

BHC Interim Funding II, LP, provide US companies with bridge and interim capital in the form of subordinated debt or mezzanine securities for periods of between six and 36 months. According to Geoffrey Bradshaw-Mack, a partner with placement agent Far Hills Group, which assisted with the fundraising, Brooks Houghton’s investments provide companies with additional time before major financing events, such as securing long-term capital. The firm will typically invest between $5 million to $25 million of capital in established, US-based companies with revenues between $20 million to $300 million.

According to Bradshaw-Mack, Brooks Houghton had a fundraising pre-launch back in July 2002, with a first close occurring in the summer of 2003. The final close came last September, and was left open until January to allow any remaining capital to flow in. The second vehicle was originally targeting $150 million.

Bradshaw-Mack said that most of the Brooks Houghton’s original investors returned for the second round, though they only accounted for approximately $30 million of the fund’s $200 million total, the rest coming from new investors. He added the fund’s backers include traditional limited partners, such as insurance companies, corporate pension funds, funds of funds and family offices, and represent a ‘healthy mix’ of both US and European investors.

Though Brooks Houghton has been around as a merchant bank since 1989, the firm raised its first short-term mezzanine fund in 1999. That inaugural $30 million fund was heavily backed by US commercial lender Finova, which has since gone bankrupt.

Brooks Houghton is the first firm of the year to raise a fund in the mezzanine space, though its strategy does not adhere to traditional mezzanine strategies. The last large mezzanine fund of any sort raised in the US was Caltius Capital Management’s Caltius Partners III, which closed on $300 million last July. Bradshaw-Mack said that Caltius and Brooks Houghton ended up sharing many LPs in their new funds.