Duchess III closes on €450m

Duke Street Capital Debt Management, the debt investor formerly owned by Duke Street Capital, has closed its third CDO fund.

Duke Street Capital Debt Management (DSCDM) has announced the close of Duchess III, the firm’s third collaterised debt obligation fund (CDO), on €450 million ($543 million).

The fund, which is already 65 percent invested, is the first raised under the auspices of Babson Capital Management, which acquired the DSCDM business from private equity investor Duke Street Capital in March this year.

The fund will focus on the leveraged finance market, with a target to commit 80 percent of its capital to senior secured loans and the remaining 20 percent dedicated to mezzanine funds, according to a statement.

In an interview, DSCDM chief executive  Ian Hazelton said: “Investor appetite at the AAA investment grade end was overwhelming. We wanted a proper syndication and the fund attracted a widespread group of banks.”

Hazelton confirmed that the fund had attracted mostly European investors with some interest from Australasia and one equity investor from the US. Hazelton said that the firm was expecting the fund to be “fully ramped up before the end of the year.”

Following the close of the fund, DSCDM now has total funds under management of €2 billion. Its maiden CDO fund Duchess I was initially closed in June 2001 on €750 million and was increased to €1 billion following a tap issue in February 2002. Duchess II closed in April 2003 at €550 million.

Duke Street Capital, DSCDM's founder and former parent, is understood to have received around €60 million from the divestment of DSCDM to Babson in March. Duke Street continues to own a share of the performance of DSCDM's funds.

Duke Street Capital itself is currently investing Duke Street Capital V, a European mid-market private equity fund. Last month it acquired French-headquartered marine company Navimo for an undisclosed sum. The firm has also recently appointed four new operating partners to focus on investments in the leisure and support services.