ICG races to €2.5bn hard-cap

Intermediate Capital Group has closed its new fund three months ahead of schedule, having increased its investor base in the US and Asia Pacific.

UK-listed Intermediate Capital Group (ICG) has reached the hard-cap of €2.5 billion on its new fund, exceeding its original target of €2 billion, according to a statement. 

ICG Europe V, the firm’s latest European mezzanine and senior equity fund, held a first close on €1 billion at the end of September 2011. The firm anticipated that the fundraising would take up to two years, but the vehicle has closed three months ahead of schedule.

Bernoit Durteste, head of European mezzanine at ICG, told Private Equity International that this has been ICG’s most successful fundraising, suggesting that the reasons for this are “partly due to macroeconomic factors, and partly ICG-specific … Investors across the world have identified an opportunity in Europe stemming from the market dislocation and the structural lack of debt, particularly in the mid-market space,” he said. Moreover, the fact that investors have been putting an emphasis on credit strategies “fell right into our backyard”, he added.

The success of the fundraising was also due to ICG’s 20-year-plus track record in Europe, according to Durteste.  “We have a wide local network with people on the ground in the various countries; so the ability to source transactions was also a significant advantage. When the market has been dislocated, there’s no longer a very active liquid organised market that you can take advantage of. Therefore you need to have the resources to go out and find your own transactions.”

With the target to generate subordinated debt type returns, we have a wide mandate and a lot of freedom in structuring the financing as we best see fit given the situations

Bernoit Durteste

ICG has also succeeded in diversifying its investor base. “In Fund V we roughly have a third from Europe, a third from the US and a third from Asia Pacific,” Durteste said. In Fund IV, more than 80 percent of the investors were European.

The perception of US investors towards Europe has changed over the years, according to Dureste.  Although the difficulties in Europe made many of them cautious, he said, “at the same time, many investors very quickly realised this was creating opportunities and… that [investing in] subordinated debt type products was actually a very attractive way of taking advantage of the market situation.”

ICG Europe Fund V is already nearly a quarter deployed, having made three investments before the end of last year. ICG supported the management-led buyout of ATPI, a UK-based travel company; two others, in the UK and Scandinavia, are still in the process of completion and have not been made public yet. The firm expects to do 5 to 10 further investments this year from Fund V.

There is no specific allocation to geographies within Europe, ICG said. “Obviously we had in-depth discussions on the European situation and about country-specific situations, but investors did not ask us to cap our investment level in specific geographies. With the target to generate subordinated debt type returns, we have a wide mandate and a lot of freedom in structuring the financing as we best see fit given the situation,” Durteste added.

Credit Suisse, Citi Placement, Eaton Partners, Private Fund Group acted as placement agents for the fundraising of ICG’s fund V, in addition to the firm’s own distribution team. 

ICG said its fundraising success also reflected a rise in assets under management. ICG’s AUM has risen 7 percent since the end of September to €12.9 billion, according to a separate interim management statement. It is now 13 percent up since the start of the financial year.

The company’s portfolio performance was broadly resilient despite the continued economic slowdown, but realisations remained at a low level. A total of £40 million of principal repayments have been received in the quarter to 31 December 2012, bringing its year-to-date total to £91 million, the firm said.