ICG and Nomura launch mezz JV

The partnership will be seeded with ¥20bn of initial capital from the pair, as well as soliciting investment from institutional investors.

ICG has partnered with Nomura to launch a joint venture focused on mezzanine investments in Japan.

The 50:50 partnership will be managed by a local team. Each party will allocate ¥10 billion ($99 million; €74 million) to the venture as initial seed capital, which will be topped up with commitments from institutional investors, the firms said in a statement. ICG typically makes a GP commitment of about 20 percent to its vehicles.

“Any future funds structured as a result of the agreement will be jointly seeded, distributed and co-managed between Nomura and ICG,” they added.

The pair predicts demand for mezzanine financing will rise as the Japanese government's economic initiatives take effect.

Koji Nagai, chief executive of Nomura Group, said: “This initiative with ICG, one of the world’s leading mezzanine specialists, demonstrates Nomura’s commitment to enhancing our client service capabilities. Mezzanine instruments have gained traction in recent years as financing for corporate actions such as consolidations and mergers and acquisitions. Partnering with ICG positions us well to contribute to the further expansion of the mezzanine market in Japan.”

ICG chief executive Christophe Evain added: “This agreement will bring Japanese institutional investors the opportunity to access mezzanine via a fund structure. Nomura’s depth of market coverage and relationships, combined with ICG’s specialist knowledge of credit fund structuring, investing and managing united with our joint distribution expertise should contribute significantly to the institutional credit investing landscape in Japan.”

While declining to comment on the specifics of the fund, Hong Kong-based ICG managing director Chris Heine explained, “Investors are looking for yield and in particular in Japan, where there are vast amount of institutional funds looking for yield, the mezzanine market represents an opportunity for them to tap that yield.

“They are willing to accept lower returns if they get yield and lower risk. They’re not all trying to get the 2x and 25 percent IRR that the buyout guys are aiming to achieve,” he added.

ICG has now reopened an office in Tokyo (having closed it during the financial crisis), where director Tomohiko Kikuta will lead its efforts. Kikuta, together with professionals from Nomura, initially will staff the proposed GP entity, Heine said. The firm had closed down its Tokyo office during the financial crisis.

Nomura is also a significant addition to the partnership, Heine said. 

“Nomura as an investment bank has been involved in many M&A transactions that have taken place in Japan that have needed mezzanine,” Heine said. “Nomura is a large, prestigious, investment bank – a global bank based in Asia, so it is very exciting, not just for the Japan opportunity but if we can do other things with Nomura in Asia.”

ICG has ramped up its efforts in the region, in October hiring Nyree Hu in its distribution team in Hong Kong to bolster the firm’s Asia Pacific fundraising capabilities.