Partners Group raises $553m for European mezz

Partners Group has surpassed the $500 million target for its latest European mezzanine “programme”, collecting $553 million in commitments.

“The mezzanine asset class held up very well throughout the cycle when compared to other asset classes and proved to be less volatile during the downturn,” René Biner, partner and head of private finance, said in a statement.

The firm refers to the recent fund as a “programme”, a spokesperson explained, because it has a more flexible structure than a typical fund due to Partners' “relative value approach”, which allows the mezzanine programme to adjust its target allocations according to market conditions.

At present, the fund plans to invest 80 percent to 100 percent of its capital in direct European mezzanine investments, but these numbers could change depending on opportunities, the spokesman said. He declined to discuss how long the fundraising took, but said no placement agent was used.

The mezzanine asset class held up very well throughout the cycle when compared to other asset classes and proved to be less volatile during the downturn. René Biner

The statement noted mezzanine investing presents an attractive risk/reward profile. “Interest margins above EURIBOR are at historically high levels, while the average equity contribution in the first quarter of 2010 remained close to record highs both in Europe and in the United States at around 50 percent,” the company said.”High equity contributions convert into lower risk for mezzanine investors since mezzanine capital ranks higher in the capital structure in case of default.”

In 2007, Partners raised $447 million for a global mezzanine fund, while in 2005 it raised €265 million for a European mezzanine fund.

Partners has made 15 European mezzanine investments since launching the strategy. Some of its most recent investments include two secondary buyouts agreed at the end of 2009: German academic publisher Springer, which Candover and Cinven sold to EQT and GIC, and UK retailer Pets at Home, which Kohlberg Kravis Roberts purchased from Bridgepoint.

The firm said the European mezzanine portfolio is diversified across “defensive” industries including healthcare, telecoms, publishing utilities, oil and gas and retail.