NM Rothschild acquires ABN Amro mezz portfolio

The UK investment bank has acquired a portfolio of mezzanine investments from ABN Amro as it seeks to increase its participation in the European market.

As part of its ongoing attempts to wind down its mezzanine operations, ABN Amro Capital has disposed of a portfolio of mezzanine investments, selling them to UK investment banking group NM Rothschild.


The firms have declined to comment on the size of the portfolio, both in terms of value and volume. The investments were originally made by its ABN AMRO Causeway Mezzanine Partnership, an institutionally subscribed fund advised by ABN AMRO Capital which closed in 1998, and include both UK and continental European interests.


The deal came about following the appointment in January this year of John Sealy, former director of ABN Amro’s now defunct mezzanine unit, as head of mezzanine finance at Rothschild. “Rothschild made an approach to ABN Amro earlier this year to acquire part of its mezzanine portfolio which was approved and completed earlier this month,” said Sealy.


Rothschild is looking to make headway in the UK small-cap market, underwriting mezzanine of between £2m and £10m. “We are also planning to increase our involvement in mid-market deals in the £20m to £100m bracket, where we will work alongside other underwriters.” The mezzanine unit will work with Rothschild’s existing senior debt team.


Rothschild has an established presence in the debt markets through its offices in London, Birmingham, Leeds, and Manchester. In the last year, it has financed 24 leveraged transactions. These include arranging and underwriting £48m of senior and mezzanine debt for Parkdean Holidays, and a further £38m of senior debt to help finance the recent buyout of Extec Industries.


“There is quite a bit going on at present in the UK small-cap market, particularly in and around London,” added Sealy. “For the past couple of years, mezzanine has started to feature more consistently in deals below the more established big ticket buy-in buyout market.” Rothschild has no immediate plans to launch a third party mezzanine product.


A total of E3.2bn of mezzanine financing was deployed in European transactions last year. Although 24 per cent down on the previous year, the total volume 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. The average size of mezzanine in private equity transactions is approximately E38m.


ABN Amro continues to retrench towards an exclusive focus on private equity funding. Last month Close Brothers Growth Capital, the debt and equity finance unit of Close Brothers, hired Barrie Moore, former managing director at ABN Amro Mezzanine, as a director.


Both Moore and Sealey left ABN Amro last year after the bank announced it would close its mezzanine operations in February 2002. The decision came despite the bank raising a third party fund, the Second ABN AMRO Mezzanine Partnership LP fund, which closed on $150m in October 2001.