Ethos launches first mezz fund since acquisition

South African-headquartered private equity firm Ethos Capital has launched its first mezzanine-focused fund following the acquisition of Mezzanine Partners in the summer.

It is the third incarnation of the junior debt strategy and is targeting a final total of between $150 million and $200 million. The firm’s strategy will include investments across a number of instruments, including second lien loans, convertible loans, PIK notes and preference shares.

Ethos intends to have its own skin in the game alongside investors in the vehicle having stated that it will put in up to R500 million ($36 million; €34.5 million). The firm is open to increasing its commitment, although it will not exceed more than a third of the total capital raised at final close.

A representative from the firm was not available to comment before publication.

Previous incarnations of the mezzanine strategy were raised by Mezzanine Partners, a South-African investment firm Ethos acquired in July. Mezzanine Partners 2 and Mezzanine Partners 1 funds raised R560 million and R443 million, while a separate fund titled Credit Partners 1 raised R450 million.

Increasingly, South African debt funds are seizing on opportunities to provide financing in the African continent. As the World Bank estimates there to be a $360 billion credit gap in the region, firms such as Investec and Vantage Capital are raising bigger and bigger funds.

Ovamba Solutions, a provider of financing for West African small and medium-sized enterprises, has established partnerships with UK and Japanese peer-to-peer lenders CrowdCredit and Courtyard Capital.