Gleacher Has More Than $480M For Second Mezz Fund

Firm: Gleacher Partners

Fund: Gleacher Mezzanine Partners II

Target: $350 million

Amount raised: $480 million – $500 million

Gleacher Partners will soon close on its second mezzanine investment vehicle, Gleacher Mezzanine Partners II, Buyouts has learned. The fund will close on between $480 million and $500 million. A source familiar with the fund says that the fund is closer to $480 million than $500 million.

The New York-based firm began its fundraising effort in February and should close within a week or two. The firm declined to comment on its fundraising.

Limited partners in Gleacher Mezzanine Partners II include Quartillium, the fund-of-funds unit of France-based Finama; the Pennsylvania Public School Employees’ Retirement System (PSERS), which committed $112.5 million; the New Mexico State Investment Council, which committed $25 million, and the New Jersey State Investment Council, which committed $50 million.

Gleacher provides subordinated debt, preferred stock and non-control equity to mid-market companies in need of growth capital, or undergoing LBOs or other acquisitions and balance sheet restructuring. The firm invests in companies in the healthcare, manufacturing, distribution and service and retail industries. It avoids turnarounds, start-ups and technology companies.

Portfolio companies include San Francisco-based cosmetics and skin care marketing firm Bare Escentuals; Edwin Watts Golf, a Fort Walton Beach, Fla.-based golf equipment retailer; Westwood, N.J.-based commercial lighting designer Kurt Versen; Charlotte, N.C.-based auto service provider Meineke Car Care Centers and Berwyn, Pa.-based chemical manufacturer PQ Corp.

Gleacher Partners is also in the advisory business, which it started in 2002. It recently served as an advisor to buyout firm NGP Energy Capital Management when Barclays Capital bought a 40% stake in the firm. Gleacher also served as an advisor to Gold Kist (Nasdaq: GKIS) in its rejection of an acquisition offer by Pilgrim’s Pride (NYSE: PPC).

As of the close of the third quarter, more than $24.8 billion in mezzanine capital had been closed on by fundraisers, roughly triple the $7.9 billion raised in the same period last year, according to Buyouts. Goldman SachsGS Mezzanine Partners IV, closed at $10 billion last quarter. Golub Capital Partners recently held a first closing of approximately $700 million for its latest mezzanine fund, Golub Capital Partners V (see Buyouts, Oct. 23, 2006). Newstone Capital Partners is seeking up to $500 million for its inaugural mezzanine fund. It already has secured $374 million in commitments from limited partners The Prudential Life Insurance Co. and Metropolitan Life Insurance Co. Apollo Management is planning to raise a European mezzanine fund.

Gleacher closed its first mezzanine vehicle, Gleacher Mezzanine Fund I, in 2001 at $300 million. According to the California Public Employees’ Retirement System (CalPERS), Gleacher Mezzanine Fund I has generated a net IRR of 18.1% and produced an estimated 1.30x investment multiple. Gleacher is headquartered in New York and has offices in Atlanta, Hong Kong, London and Greenwich, Conn.—M.S.