UK credit specialist Beechbrook Capital is “cautiously optimistic” about the opportunities to source and complete deals as it begins deploying capital from its third European-focused fund, which held a first close on Wednesday
Paul Shea, managing director at Beechbrook, said that while the exact implications of Brexit remain unclear, a slowdown in growth is expected, which may lead to banks further retrenching from the market.
“This could mean more opportunities for private debt managers, and at lower leverage levels. We focus on the lower mid-market, where the main influences are micro rather than macro. Our policy is to maintain our strict credit disciplines and select only high quality investments so we are cautiously optimistic,” Shea told PDI.
Beechbrook Capital Private Debt Fund III was launched in May and has raised more than €100 million. It is eyeing up a final close target of between €200 million and €250 million by 2017. The firm is expecting to hold an interim close later this year.
The fund is a successor to the firm’s mezzanine-focused fund, which is now fully invested, but operates an expanding strategy of senior, mezzanine and unitranche investments. “The fund provides flexible solutions in the capital structure depending on the opportunity,” Shea said.
Confirming the exact amount that has been raised is difficult, Shea said, as a number of commitments are contingent on how much the fund raises, but he said the fund cleared the €100 million mark. For instance, a fund’s investment requirement could mean that it is restricted from contributing more than 20 percent to the overall fund amount, meaning additional capital raised by the fund could mean the investment is increased.
Investors to the fund include the British Business Bank Investments, the investment arm of the bank, which contributed €20 million to the fund, and committed to the firm’s predecessor fund. The European Investment Fund (EIF) was confirmed as investing in the fund, although Shea declined to disclose the amount. The rest of the firm’s investor base comprises European pension funds and insurance companies.
The fund’s investment period is four years and completes ticket sizes of between €5 million and €15 million to support acquisitions, refinancing and expansion in companies with a turnover ranging from €10 million and €100 million. The fund is sector agnostic, although it favours investments in cashflow asset-lite businesses such as financial services based in Western and Northern Europe and avoids asset-based transactions.
The firm’s other vehicle, Beechbrook Capital UK SME Credit Fund, a fund which targets lending to sponsorless vehicles is expected to reach a final close of £200 million (€238 million; $267 million) by the end of the year.