Muzinich reaches £185m first close on UK fund

The lower mid-market lender is targeting £350m for the debut UK vehicle and has brought in more than half its target.

Muzinich has reached a first close of £185 million ($262 million; €240 million) on its maiden UK Private Debt Fund.
The US-headquartered lender brought the British Business Bank, four UK pension funds and two banks into its debut lower mid-market UK-focused lending fund, which is targeting £350 million. 

The UK’s largest pension fund, Strathclyde Pension Fund and Greater Manchester Pension Fund were two of the pension funds that came in as cornerstone investors. Strathclyde committed £20 million, as previously reported. 

The pensions were joined by British Business Bank Investments Limited, the investment arm of the state-controlled government, which committed £30 million to the 10-year closed-ended fund. 

Muzinich is on course to reach a final close on the UK fund in the next 12-18 months, PDI understands.

Manchester-based Marc Shirman and London-based Kirsten Bode are co-heads of Muzinich’s debut UK debt fund. The vehicle has not yet closed on any deals but has a pipeline of five to six transactions, Shirman, who opened the firm’s Manchester office in October last year, told PDI

The new vehicle will focus on lower mid-market borrowers in the UK, lending across the capital structure from senior secured debt through to subordinated debt and equity. The fund will be capped at 10 percent equity but otherwise the weightings are flexible. 

The blended returns will depend on the ultimate make-up of the portfolio, said Shirman, declining to comment on net IRR targets. 

The fund will lend to corporates, both sponsored and unsponsored with EBITDA of £3 million-£20 million. It will make loans of up to £30 million flying under the radar of the more competitive end of the mid-market, Shirman added. 

“We made an early commitment to support the development of the fund and are delighted that Muzinich has achieved such a successful first close. Its investment in a team at the heart of the Northern Powerhouse not only fits with our aim of developing new and diverse sources of debt finance for UK small and medium-­-sized companies but also gives Muzinich an edge in securing attractive lending opportunities beyond the South East,” said Peter Wilson, the chief executive of British Business Bank Investments Limited.

The US-headquartered mid-market lender has launched separate lower mid-market debt funds in several European countries. It held a first close of €90 million on its French fund in July. It is also fundraising for its Iberian and Italian debt funds. 

Muzinich & Co manages around $24 billion across several corporate credit strategies. In addition to Manchester, it has offices in New York, London, Paris, Cologne, Madrid, Milan and Zurich.