A WINDOW OPENS

Happy days are here again. Following the devastation wreaked by the credit crunch and amid the carnage of freefalling stock markets as fear of a US recession spreads, mezzanine funds are celebrating. This is their kind of market.

During the go-go times of the last several years, mezzanine was forced to take a backseat to cheaper second-lien financing. But now that cheap and easy debt has itself been forced onto the sidelines, mezzanine is once again back in fashion. More expensive it may be – but that's a secondary consideration when few other liquidity options exist.

Keen to exploit mezzanine's sudden reversal in fortunes is Argos Soditic, the Swiss buyout firm which has just launched its first sponsorless mezzanine fund with a €150 million target ($217 million). The firm has previously launched five private equity funds, the latest of which closed on €275 million in 2006.

Head of the new mezzanine fund Olivier Bossan, former managing director of IDI Mezzanine, said there were few independent mezzanine funds in Europe but the high and stable returns such funds offer meant Argos Soditic expected more entrants to the space before long.

Meanwhile, London-based mezzanine manager Intermediate Capital Group (ICG) in January announced a £175 million (€232 million; $342 million) discounted rights issue. According to ICG managing director Tom Attwood, the rights issue “will provide us with substantial resources to take advantage of the opportunities that will result from the bursting of the credit bubble”.

Attwood added: “The dramatic reversal in debt markets is only beginning to unfold. The leveraged buyout market is suffering an acute shortage of liquidity. As a result, mezzanine investors, such as ICG, with access to permanent capital, are seeing very attractive opportunities on great terms.”

Come on in, the water's lovely: at least, it is for some – even as the waves crash around their heads.

BVCA HIGHLIGHTS ECONOMIC IMPORTANCE OF PRIVATE EQUITY
More than 70 percent of investment in UK private equity has been from overseas, according to a report by the British Private Equity and Venture Capital Association. More than £11 billion ($21.4 billion; €14.8 billion) has been annually invested in UK funds from overseas during the six years from 2001 to 2006, the report said. Of this, nearly 50 percent was invested in the UK. The private equity industry has raised more than £95 billion in this period. BVCA chief executive Simon Walker said: “[The report] confirms something that many of us have known for some time: we are part of the economic mainstream. In these uncertain economic times private equity has, more than ever, a critically important role to play in making the economy more productive and helping to stimulate economic growth.” The BVCA will be hoping the report will help convince the industry's vocal critics in politics, across the unions and in the media that private equity has a positive effect on the UK economy. Private equity firms generated £5.4 billion of fee income for the UK financial services industry or 12 percent of the total 2006 annual turnover. This is equivalent to £580,000 per executive working on private equity related mandates.

LISTING FOR SWISS VENTURE FIRM
Swiss venture capital investor HBM BioVentures plans to list on the SWX Swiss Exchange raising an undisclosed sum, the firm said in a statement. HBM had net assets of CHF1.1 billion ($1 billion; €682 million) corresponding to a net asset value per share of CHF101.93 at the end of December 2007. The firm recently sold Agensys after three months, making a greater than four times return on its $7.5 million investment in the company's latest $15.9 million funding round. The firm made a profit of CHF31 million from the deal, it said in a statement. Swiss bank UBS is global coordinator and sole bookrunner of the offering, while Merrill Lynch International, Sal Oppenheim & Cie and Neue Zürcher Bank are co-lead managers. The group will test the demand for venture stock following floats by large buyout firms like Kohlberg Kravis Roberts and Apollo Management and sales of management company stakes by Blackstone Group and Fortress.

PRIVATE EQUITY ROLE VALUED, SURVEY FINDS
Almost 90 percent of UK entrepreneurs at small to medium-sized companies have a good relationship with private equity and venture capital firms, according to a survey published by UK mid-market private equity firm Bowmark Capital. The entrepreneurs said 71 percent of private equity backers had set realistic targets for their companies, while 58 percent said buyout firms provided useful guidance on strategy. Of the 172 executives from a mix of private equity-backed businesses and independent businesses surveyed, more than half believed private equity investment would deliver the best growth for entrepreneurial companies, against 12 percent who felt that a stock exchange listing was a more effective path to growth. The private equity responses were compiled from around 70 entrepreneurs at companies with up to 500 staff and revenues of between £10 million (€13.4 million; $19.6 million) and £100 million a year.

CO-INVESTMENT FIRM BACKS GREENHILL
Parallel Private Equity, a mid-market co-investment firm, has made a fresh commitment to Greenhill Capital Partners Europe, an affiliate of the boutique investment bank, of £70 million (€94 million; $137 million) over five years. Parallel said it demonstrated its appetite for UK and European mid-market buyouts. Parallel Private Equity looks to capture the advantages of both direct investments in terms of costs and focus and the risk diversification and administration advantages of a pooled vehicle. It raises annual pools of institutional money, which include some long-term commitments allowing it to make investments over several years. To date Parallel has invested over £1.2 billion on behalf of its investors in 317 companies and over £1.7 billion has been returned from 219 realisations. Greenhill invests in mid-market companies located primarily in the UK and Europe. It generally makes controlling or influential minority investments in companies with enterprise values of £25 million to £250 million.

EURONEXT FUND PUTS CASH OUT
Conversus Capital has made three new fund commitments worth $28.2 million (€19 million), grown its portfolio value since listing on Euronext in July and closed its first-ever secondary portfolio, details of which are still to come. The publicly traded fund of funds had estimated portfolio net asset value of approximately $2 billion, or $27.95 per unit, as of 31 December 2007. The number reflects an 11.8 percent growth since the fund went public in July, but is a slight decrease of $0.01 per unit from the end of November. The net asset value per unit at yearend incorporates a $0.125 per unit distribution paid 17 December, representing roughly a 2 percent annual yield. The firm has not yet released details regarding the secondary portfolio it closed, but did say it had committed $28.2 million of fresh capital to three funds: Asia Alternatives Capital Partners II, a pan-Asian private equity fund led by former Hellman & Friedman director Melissa Ma; Bruckmann, Rosser, Sherrill & Co III, a private equity fund run by a New York-based Citi Venture Capital spin-out; and Index Ventures Growth I, a European venture fund that backs technology and biotech companies in Europe, Israel and the US.

GERMANY'S VENTIZZ CLOSES ON E 450M
Ventizz Capital Partners has held the final close of its fourth mid-market buyout fund on €450 million ($651.2 million) after six months fundraising. The close was above Ventizz's initial €350 million target and 50 percent oversubscribed. The fund will focus on companies in the German speaking economies with revenues of between €10 million and €100 million. The fund invests in high-tech businesses including semiconductors, electronic manufacturing, renewables, information technology and medicine. Helmut Vorndran, chief executive of the firm, said: “Our LPs included HarbourVest and several Ivy League universities. HarbourVest is backing us for the third time and has one of the largest stakes in the fund.” In 2005, Ventizz closed its second fund on €60 million for investment in venture capital and its third fund in 2006 on €125 million.