Exclusive: HEGCF holds second close at €93m

The European growth debt fund, managed by the US-based Harbert Management Corporation and chaired by Raymond Harbert (pictured), has reached almost half of its €200m target.

The European arm of investment firm Harbert Management Corporation (HMC) has held a second close on €93 million for Harbert European Growth Capital Fund (HEGCF), its debut growth debt fund in Europe, a source close to the situation said.

Investors include a UK-based multi-family office, a European public pension and a European government investment programme. It’s understood that the fund will be marketed in the US next, the source said.

HEGCF lends to companies operating in the lower end of the SME technology and life sciences market in Western and Northern Europe, offering low loan to value senior secured debt and equity, with equity comprised of warranties. The sector is said to have very little competition, as a result of bank retrenchment.

“There is very limited competition for this fund in general, and almost none from the banking sector. Most of these firms are not primarily selling into their domestic markets so there are limited local receivables for local banks to lend against. There is also an issue of scale for the banks,” the source said.

The firm launched HEGCF early last year with an HMC partnership commitment of €25 million. The fund, which is targeting €200 million, held a first close at €45 million at the end of 2013. A final close is expected by the end of the year, the source said.

HEGCF has committed €26 million to nine loan facilities so far in the UK, Ireland, France, Germany, Sweden and Italy. 

The fund's investment strategy focuses on companies that possess very little debt if any, revenues between €5 to €30 million and EBITDA in the region of €2 to €5 million. The average loan size at present is €3.5 million but that is expected to rise as the fund matures.

Loans contracted have returns in the region of between 11.5 and 14 percent, upfront fees of 0.5 to 1.5 percent, and an equity component.

In response to a request seeking comment, Raymond Harbert, chairman and chief executive of Harbert Management Corporation, said: “We view the European private debt markets as being particularly attractive for our and our investors’ capital and we are delighted to see the Fund off to such a strong start.”

Johan Kampe, co-head and senior managing director of HEGCF, added: “The loans closed on and strength of the deal pipeline point to particularly favourable conditions for our strategy, serving the many and geographically dispersed innovative growth companies across Europe”.