Following the successful close of its ICG Mezzanine Fund 2000 last month (see EVCJ September 2000, p20), mezzanine specialist Intermediate Capital Group has launched its second European high-yield Collateralised Debt Obligation (CDO) fund. EuroCredit CDO II, managed by ICG and placed by Morgan Stanley, follows in the footsteps of EuroCredit CDO I, which was launched in August 1999 and successfully raised EURO400 million.
ICG is aiming for a slightly lower target of EURO350 million and plans to make around 50 to 60 investments of between EURO5 million and EURO7 million. The fund is expected to close early this month. Andrew Phillips of ICG stated that, with the exception of original investor ICG, the new fund will be targeting a new set of investors from continental European insurance companies and pension funds. He added that there is a broad geographical split among participants, who stretch from the Nordic countries to Southern Europe. ICG will take 20 per cent of the subordinated notes of the fund, representing an investment of around EURO10 million.
EuroCredit CDO I attracted investors from across Europe and Asia and was fully invested within 12 months of its launch. Investments are a mix of high-yield bonds, senior debt and mezzanine loans. The portfolio includes UK-based ColtTelecom, ESat and Cantrell & Cochrane in Ireland, Kappa Packaging in Holland and Elior in France.
CDOs have been an important vehicle for investing in US high-yield and have played a significant role in the growth of that market, which is now estimated to have a total
value of $700 billion, with more than $100 billion invested in CDO funds. Tom Attwood, managing director of ICG comments on the development of the European market: “We believe that the European buyout and high-yield bond markets will continue to grow significantly over the next few years. High levels of M&A activity, consolidation across Europe, access to increasing amounts of private equity funding and the existence of specialist high yielding funds such as our two CDOs and our Mezzanine 2000 fund will all contribute to the continued expansion of the market.”