Terra Firma inks first ‘support capital’ deal

The firm has provided a loan of circa €40m to Equistone-owned SportGroup in its debut direct lending deal.

Private equity firm Terra Firma has made its first ‘support capital’ investment, the firm said in a statement on Wednesday, providing finance to a manufacturing company owned by Equistone Partners Europe.

‘Support capital’ refers to finance provided to private equity-owned business that do not have the financial headroom to finance their growth plans for further operational improvement, as Justin King, vice-chairman of Terra Firma, told PEI last year.

The support capital strategy is being led by Andrew Géczy, who joined Terra Firma last year as chief executive. Peter Miholich, a veteran of credit investing from Nomura, had been brought in to spearhead the initiative but is understood to have since left the firm as part of a restructuring after Géczy's appointment. 

The first investment is in SportGroup, a German manufacturer of artificial sports pitches, which was acquired by Equistone in June 2015. The investment in SportGroup will be used to “further increase SportGroup’s international reach,” said Michael Bork, a senior partner in Equistone’s Munich office. 

The size of the investment, which is in the form of a loan, is understood to be around €40 million and to have been made using Terra Firma's balance sheet capital, according to a market source. Neither Terra Firma nor Equistone were available to give further detail about the size and structure of the investment.

“Terra Firma Support Capital provides privately owned businesses with interim capital in a structured way,” according to Miholich’s LinkedIn profile. “The capital allows the owners to maximise value ahead of an exit [and] combines structured equity and credit experience with the operational expertise of Terra Firma to deliver a differentiated offering to private equity sponsors and private businesses.”

“You see this huge field of play – GPs across the whole of Europe – where they have businesses which they don’t yet want to sell because they see a significant value creation opportunity, but have no ability to support the execution of the business plan,” King told PEI last year.

Support Capital will provide the finance that sits between pure debt and pure equity, King said. “You might call it ‘last in – first out’ equity, or ‘first-call’ debt.”

Update adds details of Peter Miholich's departure and the size of the investment.