We are pleased to announce the completion of our investment in mezzanine fund, Beechbrook Private Debt III, Beechbrook Capital’s third fund.
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Investment Date: August 2016
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Commitment Size: €3m
Although we expected this investment opportunity to be popular with our clients, demand was higher than expected as private investors are increasingly reviewing their portfolio spread in light of the volatility following the UK’s EU referendum.
The fund provides secured debt finance which supplements a private equity firm’s own equity funding to support both new buy-outs and provide follow-on funding for existing investee companies. The rate of return for providers of this mezzanine funding is higher than traditional debt, and there is often the opportunity to also participate in the ‘equity upside’ of deals.
Beechbrook’s investment strategy aims to create a diversified portfolio of investments across a range of industry sectors, each characterised by substantial equity cushions, modest leverage, attractive risk-adjusted returns and high running yield. It’s focus is businesses with enterprise values of €10m - €100m in Northern and Western Europe, currently an underserved sector of the market, as larger credit funds seek to deploy capital in larger tickets and banks have largely vacated this space.
We believe that current turbulent conditions could also provide even more opportunities to maximise the potential of the Beechbrook fund. This is because while private equity firms are keen to take advantage of downward price adjustments of investment target businesses, bank lending remains constrained – leaving an opening for alternative debt providers to step in on favourable terms.
Institutional investors in its funds include the European Investment Bank and the British Business Bank, as well as various European pension funds, insurance companies and family offices.
Connection Capital clients previously backed Beechbrook’s second fund in 2014 which has been successful to date with first distributions being made within 13 months of closing.
"This was a highly appealing investment prospect for our private investor clients, both because of the strength of the opportunity itself and in terms of the role this kind of asset can play in a diversified portfolio." Claire Madden, Managing Partner