Beechbrook completes loan and closes UK fund – exclusive

The £10.4m debt financing is among the six transactions completed in the UK SME fund, Beechbrook’s sponsorless strategy which has raised £150m at final close.

Beechbrook Capital has completed a £10.4 million ($13.1 million; €12.2 million) loan to UK specialist engineering company 2Excel Aviation and reached a final close of its sponsorless strategy after raising £150 million from institutional investors.

2Excel Aviation is a UK-headquartered company established in 2005, which provides assistance on aviation issues.

The agreement was finalised in December 2016, according to Companies House documents.

The transaction was completed with funds used from the Beechbrook Capital UK SME Fund, which has so far invested 30 percent of the committed capital across six transactions. The firm also confirmed it has provided a debt facility to Cloud Direct, a cloud management service.

Loan sizes ranges between £3 million and £15 million and the duration of the loans is between three and five years. The strategy predominantly targets senior loans, but also completes subordinated loan investments.

Paul Shea, co-founder of Beechbrook told PDI: “Deployment is going well for our new strategy. Not many firms are targeting the SME sponsorless area of the market, which allows us to find many opportunities to invest capital on a good risk-adjusted return basis.”

Beechbrook targets gross returns between 10 and 12 percent. Between 18 and 20 transactions are expected to be completed once the fund is fully invested.

Shea said that the fund is hitting its target return, but did not specify what the blended average is.

Increasingly, debt funds are managing sponsorless strategies as mid-market companies struggling to access financing from banks look to alternative sources of capital. But with many companies unaware of the benefits of private debt, managers are in the process of informing companies.

“We’re running an education process and it requires us to knock on doors and meet people face to face. There are an estimated 40,000 UK SMEs in Beechbrook’s target size range and with reduced provision of long-term loans from banks, there is a space for alternative lenders. We have a long pipeline, but the conversion rate is low because we are highly selective,” Shea said.

Investors in the fund include pension funds and insurance companies, as well as government entities British Business Bank and European Investment Fund.

Catherine Lewis La Torre, chief executive of the BBB, said: “In line with our aim to support diverse debt finance markets, we are pleased to be participating in the latest round of Beechbrook’s UK SME Credit fund.”

In addition to closing the fund, Beechbrook has announced it will open an office in Manchester in order to tap into opportunities in northern England. It is expected to be open in the second half of the year.