TANEO hits target with novel note-based FoF

TANEO, the New Economy Development Fund launched last year in conjunction with the Greek government, has raised E105m in the international debt markets.

The notes, which have a ten-year life, benefit from a credit rating of 'A' from both Standard & Poor’s and Fitch. They offer a floating interest rate and a share of profits from TANEO investments. The Greek government is guaranteeing the capital and interest on the notes.

TANEO chief executive, George Kintis, said in a statement: “The response to the notes issue has been tremendous.  Using the debt markets to finance venture capital in this way is a real innovation. The vision and support of the Greek government, the European Commission and our partners has been vital. The funding raised will now be put to use in supporting the best teams in, or entering, the venture capital sector in Greece.”

TANEO's investment programme will be advised by Westport Private Equity, a UK-based investment advisor and fund of funds manager. The government has taken a E45m stake in preference shares in the fund in addition to the E105m raised from institutions.

The Greek government, which is keen to boost the country’s venture capital market, used a “groundbreaking” method to raise the capital, according to Rory Earley, who worked on the transaction for Westport. “This is a landmark fundraising. The Greek government was keen to kick start the country’s venture capital market, but wanted to avoid investing soft money in local funds, which provide a poor incentive to achieve strong returns,” Earley said.

The TANEO fund of funds vehicle will commit capital to some ten new and recently launched venture capital funds operating in the Greek market. It will provide up to 50 per cent of each fund’s overall total.

The details of investors in the fund have not been disclosed, although a spokesperson said there had been significant hedge fund interest in the sale. Around 25 per cent of investors were Greek-based, 50 per cent originated in the UK, while the remainder came from continental Europe. The fund will be invested over a three to four year period, and there are plans to undertake another fundraising in the future.

The joint arrangers for the notes issue were Deutsche Bank, EFG Telesis Finance and NBG International. Legal Advisors to the transaction were Clifford Chance, Dracopoulos & Vassalakis and Deucalion Rediadis & Sons.

Westport was appointed through a competitive tender in February 2003. The firm had previously worked with the UK government on a fundraising for the UK High Technology Fund, which raised over £100m.

According to Earley, during the two years since the fund’s launch, TANEO has seen sufficient opportunities in the Greek market to invest the fund fully. “They felt they could invest a greater sum than the E150m raised, but decided to be prudent with the first fund.”

Earley also indicated that the way the transaction was funded could be applied elsewhere in Europe. “This type of financing could be advantageous, both for underdeveloped venture capital markets in the EU, but also for the EU accession countries.”