Firm: Kayne Anderson Capital Advisors
Fund: Kayne Anderson Mezzanine Partners
Target: $600 million
Legal Adviser: Weissman Wolff Bergman Coleman Grodin & Evall
Just how hard was it to raise a mezzanine fund during the financial crisis? Just ask
The fund will provide mezzanine capital to both PE-sponsored and unsponsored middle-market companies in various industries. Kayne Anderson Mezzanine Partners has already made six portfolio investments totaling $90 million.
Fundraising for the pool could hardly have started at a worse time. Kayne Anderson began marketing in first quarter 2009, in the midst of the financial crisis that shut down the credit markets and spurred hundreds of bank failures. “The world was ending,” Petrucco said of that time. “LPs were reeling and trying to figure out what the current state of their balance sheets were.”
Petrucco, along with Ed Cerny, also co-managing partner of the fund, had just joined Kayne Anderson from The
Instead, they waited six months until March of 2009 to start fundraising. “We waited until the skies weren’t clear but we felt we would find some success,” Petrucco said. “But it was hard.”
From October 2008 to the summer of 2009, the institutional fundraising marketplace was effectively closed, Petrucco said. So he and Cerny relied on Kayne Anderson’s relationships with high-net worth individuals and family offices. “There were a lot of meetings,” Petrucco said.
The strategy worked. In June 2009, Kayne Anderson announced the first close of the fund, which had raised $110 million at that point. Investors were mainly high-net worth individuals and family offices which, unlike the institutions, don’t really close, Petrucco said.
Petrucco also confirmed a new development in fundraising: Many institutions are waiting until a pool’s first close before committing any funds. “People want to know you are going to make it before they give you a dollar,” he says. “A lot of people that have gone on the road have since stopped.”
So, with all these obstacles, why did Kayne Anderson fundraise? “There are good times and bad times but at the end of day, if this is what you do, then this is what you do,” Petrucco says.
There is also a shortage of mezz funding right now. Only about eight to ten firms—including
Luisa Beltran writes for peHub, a sister Web site of Buyouts‘s.