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AEA Investors hits $350 million for latest mezz fund

Tapping institutional LP demand for higher yields, AEA has passed the halfway mark for its third mezzanine fund.

New York-based asset manager AEA Investors has secured nearly $350 million in commitments for its third mezzanine debt fund according to filings by the Securities and Exchange Commission (SEC), which has a target of $600 million.

Dubbed AEA Mezzanine Fund III LP, the fund is targeted at US pension funds and insurance companies.

Overall, the firm’s mezzanine funds have approximately $900 million of capital under management. Its first debt fund was launched in 2005, specialising in mid-market mezzanine debt investments. After the asset manager closed its first mezzanine debt fund in 2008, it subsequently began to fundraising for its second debt vehicle just six months later.

“We view mezzanine debt investing as highly complementary to private equity investing,” the firm said in a statement. “Our mezz funds invest in a broad range of transactions, including acquisitions, recapitalizations, refinancing and growth opportunities.”

The fund has an equity cushion and invests across a portfolio of investments of between $10 million to $40 million for mezzanine debt and $1 million to $5 million for equity co-investments.

2013 will see more lenders and mezzanine funds partially replace the void left by retreating mainstream banks, the firm said.

US mid-market mezzanine debt has remained robust, and current yields on core mezzanine loans – mezzanine financing backed by solid assets with strong cash flows – are between 7 and 10 percent, according to data from asset manager BlackRock.