Connection Capital invests €3m in Beechbrook II

The UK arranger has made a €3 million investment on behalf of its private clients in the €151 million Beechbrook Mezzanine II fund.

London-headquartered Connection Capital, a private client investment business, has invested around €3 million in Beechbrook Mezzanine II, which held a final close in July at €151 million.

It is Connection’s first investment in a mezzanine fund, the firm’s founding partner Claire Madden, told Private Debt Investor. Previously Connection has invested on a deal by deal basis in private equity and mezzanine financing on behalf of its clients.

Connection arranged the Beechbrook investment for a pool of private investors who generally wouldn’t be able to access the fund. 

“We can give them access to institutional type funds… because we can collate investments and invest like a nominee,” Madden said. Usually you need a very large cheque book or to go in via a fund of fund, she explained. Typically between 40 and 60 investors are pooled together to make one deal, which is made in multiples of £25,000. The firm’s clients are mostly UK-based individuals.

Madden said in a statement: “Our clients have an appetite to invest in alternative assets which are too difficult or too expensive to access,  rather than operate a costly fund of funds model. We give our clients the opportunity to invest across a variety of fund types on a deal by deal basis.” 

“We know the [Beechbrook] team very well having looked at our own private equity deals with them,” Madden told PDI. “We think they’ve got an interesting niche relative to an uncrowded market which enables them to drive pretty good deal terms,” she said.

In addition, Madden sees the investment as relatively low risk given Beechbrook often does deals with very little, if any, senior debt ahead of them, she said. “It offers attractive yield on the debt element and has equity upside,” she added.

Beechbrook Mezzanine II, managed by London-headquartered Beechbrook Capital, surpassed its hard cap of €150 million in July this year. It invests in European private equity backed companies with enterprise values of between €10 million and €100 million, with a particular focus on the lower mid-market, and is currently one-third invested.

In March this year, Connection exited its first mezzanine investment. The £2.725 million secured high yield four year term loan was made in June 2010 and represented a net return of 1.5 times investment at an average interest of 12.5 percent, equating to £4 million.