ICG raises more than €1bn for LBO debt

The firm’s ‘recovery fund’ will target the more than €240bn in European buyout-related debt that will need to be repaid or refinanced in the next two to six years.

Intermediate Capital Group has raised €843 million in third party funds for the ICG Recovery Fund, surpassing the €750 million it was expected to raise by March. The fund had raised €544 million as of 30 September 2009.

Counting an unspecified balance sheet investment from the London-listed firm, the fund surpassed its $1 billion target, a spokeswoman confirmed. Lazard’s private fund advisory group was the fund’s lead placement agent.

We are not looking for turnaround situations, distress or ‘lend to own'.

Benoit Durteste

Already 30 percent deployed, the recovery fund will target existing LBO situations or companies that are constrained by their debt levels, said Benoit Durteste, fund manager of the ICG Recovery Fund.

“We are pursuing what we believe to be somewhat of a unique strategy in Europe in the sense that we are not looking for turnaround situations, distress or ‘lend to own’ [situations],” he said in a phone interview. “We are focusing on solid companies,” Durteste said, noting that most LBOs are structured around good companies but have had their growth strategies constrained by their debt obligations.

“We can come in and provide new financings,” he said, often helping to “unlock some difficult discussions” between lenders and sponsors. The fund will participate in the balance sheet restructurings in various ways, including the purchase of minority equity positions and the issuance of mezzanine debt as well as via the secondary acquisition of senior loans.

“It’s very much a consensual approach,” Durteste said. “We have 20-plus years experience in the local market in Europe. We’re clearly leveraging that and our relationships with the management teams … most of the LBOs [that will now need refinancing] we know or we’ve been involved with in some way.”

To prevent a conflict of interest, the recovery fund will not invest in companies in which ICG’s mezzanine fund has invested. “We may do this strategy [for companies in which] we’ve already invested, but we would use the existing mezzanine fund,” Durteste said.

Not many conflicts are anticipated he said, because ICG did not participate in financing many of the secondary and tertiary LBOs that were done in 2006 and 2007. “We’ve always been a rather conservative institution,” he said, noting that leverage levels and valuations were, for the most part, too high in 2006 and 2007 to interest the firm. “Therefore we’re in a very good position now to come in and provide a neutral view because we’re not trying to come in and salvage a transaction.”

Earlier this year, PEI spoke with ICG chairman Tom Attwood and chief executive Christophe Evain. At the time, Attwood noted that more than €240 billion in European buyout-related debt will need to be repaid or refinanced in the next two to six years, creating a wealth of deal flow.

Click here to read the full article, in which they discuss opportunities on the horizon for the mezzanine finance sector, as well as how ICG has confronted the most volatile market environment in its history.