Mezzanine Management breaks hard cap to raise €261m

The Central and Eastern European mezzanine firm has tapped investor demand to invest in the hybrid form of debt as the credit crunch has pushed it centre stage.

Mezzanine Management Central Europe, the Central and Eastern European mezzanine firm, has held the final close on €261 million ($412.6 million) of its second mezzanine fund for the region above its “hard cap” of €250 million, according to a statement.

The fundraising follows the first ever mezzanine fund dedicated to the region, which raised €115 million in 2003.

The firm has made 19 investments totalling more than €200 million and it has realised five investments.

Mezzanine is back in vogue following the credit crunch as one-stop financings provided by the banking market have disappeared, giving independent suppliers an opportunity to participate in more deals.

Mezzanine Management had to return to investors to ask them for the ability to raise its hard cap, according to Franz Hoerhager, a director at Mezzanine Management. He said: “The reason why people gave us that much money is because we had a rather successful first fund with 12 investments and we have already exited five of them.”

Existing investors the EBRD, the Central and Eastern European development bank, Metropolitan Life, an insurance company, and Raiffeisen Private Equity, the captive arm of the Austrian bank, have re-upped their commitments. The firm also attracted investments from new limited partners such as Caisse de Dépôts, the French bank, AXA Private Equity, the captive arm of the financial services firm, and HBoS, the UK bank.

The firm will provide leverage to mid-market companies in the new EU member states, including Poland, Hungary and the Czech and Slovak Republic, both alongside and independently of private equity houses.

The fund will also target investments in “second wave” EU accession countries such as Bulgaria and Romania and it will also selectively invest in the Ukraine and Russia.

Hoerhager said: “The region does not seem to be affected in a big way by the credit crisis. I think we will see a slow down in the economic growth, coming down from 7 percent but going to 4 percent, while the Eurozone will be going down from 3 percent to 1 percent.” He said the change would be dampener on overgrowth in the CEE, helping control inflation.

The firm has already made investments from the fund in seven companies totalling €70 million, in Poland, Hungary, Serbia, Bulgaria, Slovakia and Russia.

Mezzanine Management has offices across Central Europe in Vienna, Warsaw and Budapest. It opened an office in Bucharest in the summer of 2007 and it plans to open an office in Kiev later this year.

Darby Overseas Investments, the private equity arm of Franklin Templeton Investments, closed a rival central and Eastern European mezzanine fund on €248 million ($340 million) last year.