– Cabot Square Capital closes second fund

Cabot Square Capital announced at the end of February that it had rounded up $290 million (Euro 300 million) for its second fund, CS Capital Partners. Credit Suisse First Boston, the key investor in the $225 million Cabot Square Structured Credit Fund, has returned to the second fund as cornerstone investor. When it first unveiled its fund-raising plans early last year, Cabot Square made it known that it was seeking very substantial investments from a small number of major institutions. The group has certainly succeeded in this aim. CSFB aside, Cabot Square has only three participants: a leading international investment bank; a continental insurance group; and a US endowment fund.

John Van Deventer and James Clark, Cabot Square’s founders, both have strong structured finance backgrounds and the group’s investment philosophy is predicated on innovative use of capital markets and other financial engineering techniques. As one might expect, therefore, its portfolio is heavily biased towards businesses that are either asset backed or have strong, predictable cash flows. In cash flow oriented businesses, Cabot Square seeks to exploit advanced applications of technology infrastructures to enhance returns.

The firm’s recent deals include February’s 140 million securitisation of revenues from Avebury Taverns’ tenanted pubs and a 297 million securitisation of Platform Home Loans portfolio of sub-prime residential mortgages, completed in December 1999. Cabot Square’s other investments in 1999 included Merchant ServiceCo, Regma Solutions and Cabot Financial (Europe); Roadchef, Unilodge Holdings and Elegant Hotels are among the group’s earlier deals.

The firm has already signalled its intention of launching a third fund-raising exercise before the end of the current year.