Greyrock Closes 2nd Mezz Pool Short Of Goal

Firm: Greyrock Capital Group

Fund: GCG Investors II LP

Amount Raised: $122 million

Target: $250 million

Placement Agent: Crossroad Capital Partners

Legal Counsel: Purrington Moody Weil LLP

After a 19-month process marked by the financial meltdown and recovery, Greyrock Capital Group has wrapped up fundraising for its second mezzanine pool with $122 million.

The firm fell short of its initial target of $250 million for GCG Investors II LP. “At a certain point you’ve got to move on,” said Mark Shufro, a managing partner.

The Westport Conn.-based firm held a first on Fund II in April 2008, and went into the fall of 2008 “with a lot of momentum,” Shufro said. When Lehman Brothers collapsed in September of that year, the effort was derailed as investors dove for the sidelines. “Eventually we got traction with some players in the summer of 2009, and were able to raise some additional money for our final closing at the end of November.”

All told, Fund II is backed by 15 limited partners and an investment from the general partner in excess of 2 percent, Shufro said. Crossroad Capital Partners was hired as placement agent after the first close to help the fund attract insurance companies as backers. Purrington Moody Weil LLP provided legal advice.

Typical deals for Greyrock Capital involve investments of $3 million to $15 million in companies generating EBITDA of $3 million to $20 million. The firm has been known to handle larger investments in the $30 million range, however, with the help of co-investments from LPs.

Greyrock Capital has made four subordinated debt investments though the new vehicle. Its first, in June 2008, involved backing The Cambria Group’s acquisition of Paragon Products, a maker of fuel pumps for locomotives and other industrial needs. Other Fund II deals include backing Arsenal Capital’s buyout of specialty electronics component maker Novolyte Technologies and Audax Group’s acquisition of security firm Andrews International.

Greyrock Capital’s first fund, which was formed as an SBIC in 2002 and held a final closing in February 2004, raised a total of $72 million in private capital and had a total capitalization (with matching SBIC money) of $199 million. Including returned capital from the fund that was reinvested, Fund I deployed more than $266 million in debt and equity investments, Shufro said. Greyrock Capital has offices in Westport, Conn., Chicago and San Francisco.