Bloomberg News

ICG in Advanced Talks for $2.8 Billion Mezzanine Loan Fund

July 19, 2011

(Updates with investments in second paragraph.)

July 19 (Bloomberg) -- Intermediate Capital Group Plc, a provider of debt for leveraged buyouts, said talks with investors in a new 2 billion-euro ($2.8 billion) European fund are at an advanced stage as assets under management remained flat in the three months to June 30.

ICG made 33 million pounds ($53 million) of new investments since March 31, including 21 million pounds of mezzanine and equity in support of the acquisition of U.S.-based Cogent Healthcare by Hospitalists Management Group, the London-based firm said today in an interim management statement. Assets under management were steady at 10.4 billion pounds.

“We are seeing a healthy pipeline of exits and new investments,” Chief Executive Officer Christophe Evain said in the statement. The firm is “in advanced discussions with a number of existing and new investors regarding the first closing of ICG Europe Fund V.”

The new fund targets mezzanine loans used by companies with limited access to mainstream capital markets as a “wall of debt” comes due within the next three years, Evain said. Mezzanine funds may help fill a gap left by collateralized loan obligations nearing the end of their reinvestment periods, according to ICG, which first detailed its plans in November.

Capital gains from the sale of investments amounted to 8 million pounds, including the asset disposals of Souriau and Au Bon Pain. It expects capital gains to be higher in the second quarter as assets with higher equity components are sold.

“Transactions are taking longer to complete in the current volatile environment,” Evain said.

Repayments

Shares fell 0.25 percent to 277 pence as of 9 a.m. in London. The stock has dropped 17 percent this year, giving the firm a market value of 1.1 billion pounds.

Repayments agreed since the year-end totaled 151 million pounds, including 21 million pounds of “rolled-up interest,” the company said. The European high-yield bond fund returned 1.37 percent over the period and there have been no defaults in its loan portfolio.

Mezzanine loans are a type of debt used to fund leveraged buyouts, ranking behind senior debt and sometimes offered with equity stakes. A CLO buys leveraged loans and uses the interest payments as collateral for sales of new debt.

--Editors: Cecile Gutscher, Andrew Reierson

To contact the reporters on this story: Stephen Morris in London at smorris39@bloomberg.net; Tim Farrand at tfarrand@bloomberg.net

To contact the editor responsible for this story: Faris Khan at fkhan33@bloomberg.net.


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