Hutton Collins, the UK-based mezzanine finance firm set up last year by Graham Hutton and Matthew Collins, has admitted that a lack of appetite among LPs is likely to impact on its current fundraising programme.
The company, set up in February last year by the two former Morgan Grenfell bankers, originally aimed to raise as much as E600m for investment in large European buyouts.
However, in an interview with Bloomberg, Hutton said the E500m was likely to be unachievable in the current market. “I would be happy to close the fund at E250m,” he told Bloomberg. “It's very tough to persuade investors to make a decision. Everyone is extremely cautious.”
The firm, which participated in a number of last year’s large LBOs, including the E1.9bn buyout of Télédiffusion de France and the E1.2bn transaction to acquire UK bookmaker Coral, both led by Charterhouse Development Capital, has so far raised E160m. Investors in the fund include HBOS, Northwestern Mutual Life Insurance and Abbey National, which has agreed to commit up to E150m to the fund.
Alongside Bank of Scotland, Hutton Collins is working on the debt package for the PizzaExpress offer from TDR Capital and Capricorn announced yesterday, which values the business at £278m.
Hutton Collins is not the only company to face difficulties in the current depressed market. Last week, Guy Hands confirmed that the first independent fund launched by Terra Firma Capital Partners was likely to raise only E2bn of the original E3bn target. However, the past twelve months has seen two mezzanine specialists close successful fundraising rounds. In June of last year, GSC Partners closed its European mezzanine fund on E1bn, whilst in January, Indigo Capital raised E475m for its fourth fund, comfortably exceeding the E400m target.
A total of E3.2bn of mezzanine financing was invested in European transactions last year, according to data from Mezzanine Management. Although 24 per cent down on the previous year, the total was boosted by a strong second half, when E2.2bn was provided to help fund European buyouts, comparable with the 2001 high water mark of E2.4bn invested in the first half of the year.
Despite the difficulties, Hutton told Bloomberg he hoped to have built up a portfolio of investments prior to the fund’s final close in September. “This will help us build a track record so we can go out and a raise a second fund when times are easier.”