Muzinich Italian fund hits €286m – exclusive

The debt fund invests in growing mid-market companies and is expected to reach a final close by October. It has a target IRR of between 6% and 7%.

New York-headquartered investment firm Muzinich has raised €286 million for its Italian-focused private debt vehicle, surpassing the firm’s initial target of €200 million.

A final close of the fund, titled Italian Private Debt Fund, is due in October.

The fund targets investments in the Italian mid-market, arranging ticket sizes in the range of €10 million and €20 million to firms with an annual revenue of between €50 million and €500 million.

The fund’s IRR target is between 6 percent and 7 percent and it has so far deployed €123 million – investing at a rate of €30 million to €40 million every six months. It follows a first close in March 2014 of €156 million and another interim close was held last year after raising €200 million.

Deals completed target growing companies, which have been unable to access debt financing from the country’s banks. Often such funds are deployed to assist in acquisitions, geographical expansions and shareholder transitions and the firm stays clear of distressed situations. The fund does not target any specific industries.

Recent developments in the Italian market have created opportunities for private debt fund investment. Following the global financial crisis, Italy opened up a bond market for unlisted companies hoping that mid-market and small and medium-sized enterprises can access new sources of capital. But due to the small size of the bonds, it was credit funds who were the most interested in providing the financing. Credit funds were seeking additional flexibility in structuring transactions as direct lending but until this year such transactions were restricted to Italian credit funds. 

Earlier this year, the government relaxed these restrictions allowing international private debt funds to originate loans in the country; however such regulations contained a number of restrictions on credit funds activities. While providing news streams of capital for companies at the lower end of the market, Muzinich stresses it is not in competition with the banks.

Filomena Cocco, a director at Muzinich, said: “Our strategy is a complementary one to many of the banks operating in the Italian market. The key point is here is that we are not competing, but offering an alternative source of flexible financing for mid-market companies that could otherwise not have access to funding from the capital markets.”