Private Equity Mezzanine Fundraising Slowing – August 2014

by Luke Goldsmith

  • 15 Aug 2014
  • PD

According to Preqin’s Funds in Market online service only 16 mezzanine funds have held a final close so far in 2014. This means there is a long way to go if mezzanine fundraising is to match the 43 funds raised in 2013, and even further to match the record year of 2008 when 49 funds reached a final close and raised in excess of $31bn. 

By comparing current data with the same time last year there is further evidence that appetite for mezzanine vehicles is slowing. By August 2013, 19 mezzanine funds had reached a final close raising more than $8bn compared to the $7bn amassed so far in this calendar year. The last two years also differ in the amount of capital being targeted. This time last year over $19bn in capital was being targeted by mezzanine funds whereas only $13bn is currently being targeted, although this may be a reflection of the recovery in the US economy and the fact that low interest rates have made the high-yield and leveraged loan markets more attractive. 

Despite this drop it still seems as though North America-focused funds remain the most common of all mezzanine funds. Out of the 16 funds to have reached a final close so far this year, 13 are focused on North America. These funds managed to raise $6bn in total capital commitments, 83% of the overall capital raised by mezzanine funds in 2014. The last time North America -focused funds did not raise the highest amount of capital was in 2009 when Europe-focused funds dominated the market. 

The largest mezzanine vehicle to close in 2014 is the Summit Partners Credit Fund II. The fund collected $1bn in July and focuses on recapitalizations, rescue financings, bridge loans, distressed situations & debtor-in-possession financing in the US. Oaktree Mezzanine Fund IV is the largest fund on the road; the US-focused vehicle is looking to build a diversified portfolio comprised primarily of mezzanine and other junior debt, including second lien and unitranche debt, and equity investments.

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