ICG raises £175m to seize credit squeeze opportunity

The specialist investment firm’s loan book grew by 16.5 percent as it helped banks reduce their balance sheet exposure to transactions underwritten before the problems in the credit market became apparent.

Intermediate Capital Group, the mezzanine manager, is to raise £175 million ($342.3 million; €231.7 million) through a discounted rights issue.

The specialist debt provider will issue up to 15,669,842 shares at £11.50 per share, equivalent to 22.2 percent of existing share capital or 18.2 percent taking into account the rights issue.

The two for nine rights issue is a discount of 27.4 percent to the company’s share price which was unchanged at 10.36 GMT.

Tom Attwood, managing director of Intermediate Capital Group, said: “The dramatic reversal in debt markets is only beginning to unfold. The leveraged buyout market is suffering an acute shortage of liquidity. As a result, mezzanine investors, such as ICG, with access to permanent capital, are seeing very attractive opportunities on great terms.”

“The funds raised, along with further debt and third-party funds, will provide us with substantial resources to take advantage of the opportunities that will result from the bursting of the credit bubble.”

During the three months to 31 December 2007 ICG’s loan and investment book grew by 16.5 percent.

ICG said it had invested £566 million across 10 investments during the quarter and it had retained £319 million of this on its balance sheet – this compared to the six months to 30 September 2007 where it invested £898 million across 21 transactions.

In the last quarter 40 percent of the acquisitions were unsyndicated loans sold by banks. Banks have had to sell assets at a discount in order to reduce their balance sheet exposure to transactions underwritten before the problems in the credit market became apparent.

ICG said its core mid-market segment was reopening in Europe and North America and the mid-market continued to experience good growth in the Asia Pacific region. Mezzanine debt was increasingly playing a central part in successful leveraged buyout financings, it said.

But growing risk to the wider economy could lead to higher default rates, ICG said.