Rothschild Merchant Banking has closed its European mid-market direct lending fund above target at €655 million.
The fund, Five Arrows Direct Lending (FADL), had an initial target of €400 million and raised capital from insurance companies, pension funds, family offices and high net worth individuals.
FADL provides debt financing for European mid-market companies through senior-secured unitranche facilities. Rothschild said it will aim to address the financing gap faced by mid-sized companies as European banks have reduced lending capacity.
The fund will support sponsored private equity transactions, but will also back family and entrepreneur businesses directly to finance acquisitions, expansion capital, refinancing and shareholder reorganisation.
FADL is managed by Martin Hook and Edouard Veber with a team split across London, Paris and Luxembourg.
Rothschild said the fund has already committed 40 percent of its capital across seven transactions. Rothchild said the “fund aims to provide returns in line with the markets we invest in.”
It will compliment Five Arrows Credit Solutions, also managed by Hook and Veber, which is a high-yielding junior debt fund closed in May 2014 with €415 million of commitments. This fund is close to being fully invested and is delivering returns in line with its mandate.
The firm said the combination of its focused investment strategy and the value-add of the wider Rothschild network made it an attractive proposition for institutional investors.