Babson closes second Asia mezz fund at $177m

The Gateway Mezzanine Fund II will consider investments in Australia, New Zealand, Hong Kong, Singapore, Korea and Japan, and focus on sponsored deals.  

Babson Capital, the Charlotte, N.C.-headquartered asset management firm, has closed its Gateway Mezzanine Fund II on $177 million. The first fund closed in 2012 on about $100 million. Both funds invest in the AsiaPacific region, and can invest in Australia, New Zealand, Hong Kong, Singapore, Korea and Japan. Most of the deals will focus on private equity sponsor-backed transactions.

“We see some unique opportunities in the developed Asia Pacific region. Specifically, this is a region where capital markets are generally less developed than in the US or Europe and the financing landscape has traditionally been dominated by the large banks,” Adam Wheeler, Babson’s Sydney-based managing director and portfolio manager on the fund, told PDI. “As banking regulation globally has become more stringent in the wake of the global financial crisis, developed Asia markets have been greatly impacted. As a result, we’ve seen the presence of banks recede in certain parts of the market, and this has opened up opportunities for non-bank lenders like Babson to fill the financing gap,” he added.

Babson’s strategy tends to focus on the small and mid-cap companies in the region, where Wheeler says he has seen less competition from other providers, as banks have retrenched and other capital providers have also been less active. “Some of the hedge funds and credit funds that were previously active in the space are either pulling back or exiting the market altogether,” he said.

The mezzanine fund recently received commitments from two US public pension funds: the Virginia Retirement System and the San Antonio Fire & Police Pension Fund.