ICG looks for €4bn to invest in sub debt

The London-based firm is looking to deploy the capital into companies with €100m-€1.5bn of enterprise value.

Intermediate Capital Group is upping its latest mezzanine debt fund’s target by one-third from its predecessor, with an investment mandate that includes both private equity-sponsored and non-sponsored businesses.

The London-based firm is seeking €4 billion for its ICG Europe Fund VII, some €500 million of which will come from the mid-market lender, according to Pennsylvania Public School Employees’ Retirement System investor documents. In addition, each investment professional will be expected to invest €12 million to €15 million. A first close for the Europe-focused vehicle is expected next month. PSERS committed €150 million to Fund VII.

An ICG representative declined to comment.

Fund V, a 2011-vintage vehicle that raised $2.5 billion, posted a 12.3 percent net internal rate of return and a 1.35x multiple on capital, as of 30 September, the documents showed. Fund VI, which was launched in 2015 and collected €3 billion, reported a 52.6 percent net IRR and a 1.26x multiple on capital.

The fund has five-year investment and harvest periods and will not use leverage at the fund level. ICG anticipates the vehicle will invest in 15 to 25 companies. It will target family-owned businesses as well as leveraged buyouts. It will also make opportunistic investments in businesses that are performing well but find themselves “impeded by their capital structure”, the papers read.

The vehicle may invest in some senior debt and some equity as well. The fund’s investments will be mainly euro-denominated commitments but could also be in other Western European currencies, the documents showed. ICG will hedge its currency exposure with fixed forwards or swap arrangements.

In a statement last month, ICG said it increased its fundraising goal on a rolling three-year basis from €4 billion to €6 billion. The firm pulled in €5.2 billion last year for its ICG Senior Debt Partners Fund III. The firm manages €27.2 billion across private credit, real estate, private equity and structured credit.