Intermediate Capital Group has held a first close on €1.1 billion for its fifth European fund, which is targeting €2 billion for mezzanine investments in Europe.
ICG has provided a quarter of the fund’s targeted capital in the form of a €500 million co-investment, according to a statement from the firm. Investors in ICG Europe Fund V include re-ups and new limited partners, with commitments coming from Europe, North America, the Middle East and Asia, including insurance companies, sovereign wealth funds, public and corporate pension plans, funds of funds, family offices and banks.
The firm’s strategy, which includes credit and minority investments in addition to mezzanine, typically focuses on deals with enterprise values between €250 million to €1 billion. ICG has already completed its first investment with the fifth European fund, having supported the buyout of business intelligence provider Bureau van Dijk.
Mezzanine strategies have become increasingly popular as financing for private equity deals has dried up. Several firms, including Kohlberg Kravis Roberts and The Carlyle Group, have raised mezzanine-specific funds to capitalise on investor demand for the asset class, which boasts a return profile in the high teens amid weak credit markets and lower risk than straight equity investments
“The events of the summer have further highlighted the imbalance between supply and demand for credit which will remain a feature of the European credit markets for the foreseeable future. This imbalance is placing considerable stress on credit markets and therefore presents considerable opportunities for specialist lenders to generate high returns by acquiring debt at attractive discounts in a distressed market, providing recovery finance to existing buyouts and offering reliable financing solutions for new transactions,” ICG’s chief executive officer Christophe Evain said in a statement.
In addition to its mezzanine business, the firm has also raised a real estate fund through a partnership with its affiliate Longbow Real Estate Capital recently, holding a final close for Longbow UK Real Estate Debt Investments II on £242 million. ICG’s investment committee committed £50 million to the fund. ICG acquired a majority stake in Longbow in Decmeber.
ICG was founded in 1989 and controls around €12 billion in third party capital and proprietary funds.