Ironwood raises more than $160m for junior debt

The vehicle is seeking $400m, an increase from its predecessor fund, which closed on $307m.

Ironwood Capital is nearing the halfway point for its latest mezzanine vehicle, according to a Securities and Exchange Commission regulatory filing.

The Avon, Connecticut-based firm has locked down $163.89 million toward Ironwood Mezzanine Fund IV, the document showed.

The vehicle has a $400 million target, according to February 2017 meeting minutes from the Connecticut Investment Advisory Council, which made a $50 million commitment to the fund. Fund IV will be lending into lower mid-market businesses located in secondary and tertiary geographic areas – cities outside the marquee markets such as New York, Chicago and Boston.

Connecticut’s IAC, which manages the state’s pension funds, also contributed to Fund III ($50 million), which raised $307 million and closed in March 2013. The Prudential Foundation committed ($15 million) to that fund.

The junior debt provider invests in companies with $20 million-$200 million of revenue and $3 million-$15 million of EBITDA with margins of 10 percent or higher, according to its website. The firm is industry agnostic, though it does focus on business service models, environmental services companies and precision manufacturing businesses.

Mezzanine debt has become popular among managers, according to PDI data. The strategy makes up a plurality of the capital across all types of private credit vehicles being raised, with subordinated debt vehicles seeking $89 billion of the $242 billion being targeted among private debt strategies. Senior debt funds are aiming to raise the second most at $73 billion.