Morgan Stanley credit fund is 40% invested

The bank’s $956m mezzanine vehicle has completed its tenth investment in about two years.

Morgan Stanley Credit Partners has completed its tenth investment from its debut mezzanine vehicle, providing a $38 million loan to back Talisman Capital Partners’ acquisition of Englewood Tire Wholesale.

Morgan Stanley Credit Partners closed its first dedicated mezzanine fund in January 2011 on $956 million and has been investing the fund since January 2010. The transaction with Talisman brings the fund to approximately 40 percent invested, putting it on track to be fully deployed by the end of its five-year investment period.

“We think that the 2012-2014 timeline should be attractive because we believe there will be significant refinancing demand for mid-market companies,” managing director and head of Morgan Stanley Credit Partners Hank D’Alessandro told Private Equity International.
“The large-cap non-investment grade companies have largely addressed the refinancing overhang over the last couple years, [but] the mid-market companies have not. We think that, coupled with significant uninvested private equity will make a very attractive environment for mezzanine,” he added.

Morgan Stanley’s mezzanine fund targets buyouts, refinancings and recapitalisations in North America and Europe, and aims to make investments of between $20 million and $50 million. The fund may also take direct equity positions and co-investments.

Morgan Stanley Credit Partners was established by D’Alessandro in 2009 within Morgan Stanley’s merchant banking division.

Other firms that have been active making mezzanine investments include The Blackstone Group’s debt affiliate GSO Capital Partners, which recently closed on roughly $2.1 billion for its second GSO Capital Opportunities Fund. In October, Intermediate Capital Group held a first close on €1.1 billion for its fifth European fund, which is targeting €2 billion for mezzanine investments in Europe.