Brookside Closes Mezz Fund, First Deal –

Even before it received its SBIC license, Brookside Pecks Capital Partners, a mezzanine fund, was working on a deal for Portal Publications, Ltd., the largest U.S. publisher and distributor of wall art.

While the fund closed in June 2001 with $33 million from about 50 investors, Brookside Pecks did not receive its SBIC license until late August 2002. With SBIC matching funds ($85 million), the fund has a total of $118 million. The deal for Portal closed soon afterwards.

The fund is co-managed by David Buttolph of Brookside Capital Partners Management LLC and Robert Cresci of Pecks Management.

“We were attracted to [Portal Publications] due to its dominant market position, high gross margins, and growth,” said Buttolph, a managing director at Brookside Capital (no relationship to Bain Capital’s similarly named fund) and a co-founder of the Brookside Pecks fund.

“In a difficult environment, [the fund is] being very selective,” he added. “We are looking for industries and companies that will grow and hold their own. Portal has the largest stable of artists producing pictures, which always have to supply new images, and they have the ability to sign up new artists, which is key to continued growth and market share.”

Brookside Capital Partners Management LLC, a Greenwich, Conn.-based mezzanine investment firm, partnered with New York-based Pecks Management to build the mezzanine fund. According to Buttolph, the fund’s managers are looking at more transactions right now, particularly in the consumer-products related category.

“We are seeking a target return of 18%-20% IRR, through the traditional combination of a current coupon [in the] 12% range and warrants,” Buttolph told Buyouts. “The fund will consider an all-coupon transaction.”

When asked if he was optimistic about the fund’s chances for growth, he stated that “this market is underserved for this fund size [$100M-$200M]. We are one of the larger SBICs out there, so we do larger deals than most SBICs. Our specialty is $3 million to $7 million, but once you get into the $10 million range, there is a whole lot of competition.”