Nomura, ICG team up for Japan mezz fund

ICG has reopened a Tokyo office and each firm will commit about $100m to the joint venture. 

Nomura Holdings and Intermediate Capital Group have partnered to raise a mezzanine debt fund focused on the Japanese market, according to a company statement. The vehicle has not been officially launched, but is expected to during 2014.

Each firm has committed JPY 10 billion (€73 million; $99 million) to the joint venture as an initial commitment, which will allow the fund to start investing straight away after the launch.

The firms did not disclose the full target amount, but will tap institutional investors to make up the rest of the vehicle, which can be expected to reach much higher than the firms’ committed capital, a source close to the matter told Private Equity International.  

ICG typically makes a GP commitment of about 20 percent to its vehicles.

While declining to comment on the specifics of the fund, Hong Kong-based ICG managing director Chris Heine explained, “Investors are looking for yield and in particular in Japan, where there are vast amount of institutional funds looking for yield, the mezzanine market represents an opportunity for them to tap that yield.”

“They are willing to accept lower returns if they get yield and lower risk. They’re not all trying to get the 2x and 25 percent IRR that the buyout guys are aiming to achieve,” he added.

ICG has now reopened an office in Tokyo, where director Tomohiko Kikuta will lead its efforts. Kikuta, together with professionals from Nomura, initially will staff the proposed GP entity, Heine said. The firm had closed down its Tokyo office during the financial crisis.

Nomura is also a significant addition to the partnership.

“Nomura as an investment bank has been involved in many M&A transactions that have taken place in Japan that have needed mezzanine,” Heine said. “Nomura is a large, prestigious, investment bank – a global bank based in Asia, so it is very exciting, not just for the Japan opportunity but if we can do other things with Nomura in Asia.”

ICG has ramped up its efforts in the region, in October hiring Nyree Hu in its distribution team in Hong Kong to bolster the firm’s Asia Pacific fundraising capabilities, PEI reported earlier.

Intermediate Capital Group is a UK-based mezzanine firm founded in 1989. The firm currently has over €12 billion of assets in proprietary capital and third party funds and has offices in London, Paris, Madrid, Singapore, Stockholm, Frankfurt, Amsterdam, Hong Kong, Sydney, Tokyo and New York, according to the firm.