London-headquartered private debt fund manager Beechbrook Capital has held a first close for its second debt fund after one year on the road, having garnered €67 million in commitments on its way to a €100 million target.
Beechbrook has further pledges totalling €25 million ahead of additional closes later this year, the firm said in a statement.
The specialist Northern European-focused debt fund management business was launched by ex-MetLife managing director Paul Shea and ex-Mizhuho Corprorate Bank mezzanine and syndicated loan head Nick Fenn in 2008. It provides debt financing to small and medium sized businesses (SME) with an enterprise value of €10 million to €100 million across a range of industries in the UK and Northern Europe.
“The value preposition in investment in SMEs is strong, and the provision for capital particularly in Northern Europe means there is a lot of unsatisfied demand for fresh debt and equity,” Shea told Private Debt Investor.
“We take a flexible approach to pricing our investments, adapting the different components of our returns to the investee profile,” he explained.
Commitments to Beechbrook Mezzanine II came from six institutional investors, including the European Investment Fund (EIF), which invested €22 million, and the UK Treasury via its Business Finance Partnership (BFP) scheme, which invested €17 million.
The EIF’s investment is split into two tranches: an initial commitment of €22 million which can be increased to €40 million once Beechbrook hits at least €80 million in total commitments, Shea added.
Though the fund is relatively small, Shea said the firm has already built a long pipeline of potential transactions, and expects to deploy “at least half of the funds raised by the end of the year,” according to Shea.
It is understood to have provided commitments to four primary transactions this year: a mezzanine loan to fund NBGI’s buyout of McCambridge Cakes; a mezzanine loan to help finance Infinity’s roll-out strategy for its investment in Goldshield; a unitranche loan fund Baird Capital’s buyout of the SR Group; and a unitranche loan to support the buyout by a consortium of private investors of the UK division of Sitex Orbis.
“The scarcity of traditional finance is reflected in the excellent deal flow we are currently seeing,” Shea said. “There is very little competition from other providers – and there is demand on both sides: the LPs and SMEs we are providing funding to.”