Toscafund launches £110m debt fund

The firm is targeting the North West of England where it says SMEs are underserved in terms of financing.

UK-based fund manager Toscafund is set to hold a first close this week on its first private debt fund. The fund will extend financing to small- to medium-sized enterprises (SMEs) in the North of England.

Toscafund, which oversees a number of private equity funds and a commercial property fund, is seeking to raise £110 million (€150.9 million; $167.6 million) for the Tosca Debt Capital Fund (TDCF) by January 2016. The manager declined to comment on the size of the first close.

The firm has appointed Toscafund partners, Gary Davison and Richard Williams, to run the vehicle, in two newly created roles.

Based in Manchester, the TDCF plans to extend loans of between £5 million and £15 million. The firm will offer debt structures with cash preservation features to support buyouts and acquisitions, growth / development capital raising and refinancing / enhancement of existing facilities, it said.

Davison was formerly a capital and debt advisory partner at Ernst and Young, while Williams was formerly a principal on the same team.

The firm said that there is around 507,000 SMEs in the North West of England, based on a BIS report in May, and that the region has been enjoying impressive growth in recent years.

Davison commented: “We recognised that there is a significant opportunity for a private debt provider to fill this void, especially in the regional SME market where ambitious businesses are stunted due to a lack of access to alternative debt capital. For SMEs embarking on a transaction of any sort, relationships and geographical proximity are crucial as a typical deal will take numerous meetings to close.”

Martin Hughes, founder of Toscafund, added: “I worked closely with Gary and was very impressed with his advice and support on debt structures during the successful £670m MBO of Daisy Group. We see this as an excellent opportunity to work with seasoned, experienced investment partners to deploy assets into the regional SME market, which has significant growth potential and is seriously under-serviced at present. In Gary and Richard we have found the perfect partners to utilise their skills and relationships to build a successful business out of Manchester.”

Established in 2000, Toscafund is a multi-asset fund manager with £4 billion of assets.