Lender Nears Close On Inaugural Mezz Fund

Firm: Maranon Capital

Fund: Maranon Mezzanine Fund LP

Target: $250 million

Amount Raised To Date: $170 million

Placement Agent: Mallory Capital Group

Maranon Capital is gaining ground on the $250 million target it set for its inaugural mezzanine fund, and the firm expects to hold a final close sometime next month, a source familiar with the situation told Buyouts.

As of mid-November, Maranon Mezzanine Fund LP has raised a total of about $170 million in dry powder.

The Chicago lender, which boasts a deep bench of ex-American Capital Strategies professionals, will blend the capital from its new sub-debt fund with its existing $350 million senior debt pool, allowing it to provide one-stop financing packages to lower mid-market companies.

Recent commitments to the new mezzanine fund include a $30 million slug from the Arizona State Retirement System, a $25 million pledge from the Illinois Teachers Retirement System and $7 million from Capricorn Investment Group. American National Insurance Co. is also an investor in the fund. Mallory Capital Group of Darien, Conn., is serving as placement agent.

Counting verbal commitments (expressions of interest from limited partners that have not yet made formal pledges), the fund has just under $200 million in the hopper.

“Not too shabby in today’s tight market for a spin-out fund,” said the source.

Four of Maranon Capital’s five managing directors hail from Bethesda, Md.-based business development company American Capital. These include Tom Gregory, who served at the Nasdaq-listed firm from January 2002 through June 2006; Demian Kircher (October 2002 through July 2007); Ian Larkin (April 2003 through June 2006); and Greg Long (May 2004 to November 2007).

Maranon Capital’s list of offerings includes revolving lines of credit up to $20 million; first and second lien term loans between $10 million and $60 million; mezzanine debt in the $5 million to $30 million range; and equity co-investments of up to $10 million.

The has been raising its inaugural mezzanine pool for about 18 months, and it’s expected that about 25 percent of the vehicle’s capital will already be deployed by the fund’s anticipated December close, the source said.

At press time, Maranon Capital had already closed two deals, and the firm has two more signed up. Most recently, the firm provided a $42 million one-stop debt and equity package ($28 million of senior revolving credit and term debt, $10 million of mezzanine financing and $4 million of equity) to Canadian private equity shop Novacap, backing its August 2009 acquisition of data security firm PKWARE Inc. In June 2008, the lender provided $27 million in senior and subordinated debt to back Chicago-based Lake Capital’s investment in FishNet Security Inc., a provider of IT security services.