Maranon Closes Inaugural Mezzanine Fund

Firm: Maranon Capital

Fund: Maranon Mezzanine Fund LB

Amount Raised: $207 million

Total Amount Offered: $250 million

Placement Agent: Mallory Capital Group LLC

Legal Counsel: Kirkland & Ellis

Maranon Capital has closed its inaugural mezzanine fund with more than $200 million in capital commitments, two senior managers at the firm told Buyouts.

The provider of senior, subordinated and one-stop-debt facilities officially ended the capital raise for Maranon Mezzanine Fund LP on March 31, having collected a total of $207 million from 17 institutional investors, said Tom Gregory, a managing director with the firm. Regulatory filings with the Securities and Exchange Commission note that the fund had a “total offering amount” of $250 million.

About $65 million (31 percent of the new vehicle) has already been deployed in five deals, Gregory said. Typical mezzanine investments from Maranon Capital range in size from $5 million to $30 million. Expect 10 percent to 15 percent of the fund to be allocated to equity co-investments, he added.

The Chicago lender launched its mezzanine fundraising effort in January 2008 and held a first closing on $100 million in July of that year. Credit Suisse Customized Fund Investment Group was a lead investor in that early push, and a follow-up close was expected in short order, Gregory said. “We had a very strong book of interest—primarily from insurance companies—and expected to do our second close in September of 2008,” he said. But by then the financial sector had already begun to deteriorate, and insurance companies were among the hardest hit.

“When we started dialing [the insurance companies] to try to organize for the September close, it was very obvious the world had changed in a dramatic way,” Gregory recalled. “None of them were able to transact even though several had circled and were ready to go.”

Not until June 2009 did commitments once again start to make their way to Maranon Mezzanine Fund LP. Public pensions, including the Arizona State Retirement System and the Teachers’ Retirement System of the State of Illinois, make up about 64 percent of the vehicle’s total commitments. Corporate pensions represent about 17 percent of the fund’s total dollars, while insurance companies—originally expected to occupy a significant portion of the fund—make up 10 percent.

“We’re really very proud of the fact that A) we got it done, and B) that it was an institutional fundraise,” said Ian Larkin, a managing director at Maranon Capital. Mallory Capital Group LLC was tapped as placement agent for the fundraising effort and Kirkland & Ellis served as fund formation counsel.

Maranon Capital was formed in 2007, and the firm closed a $350 million senior debt fundraise in November of that year. Since it began doing deals in January 2008, the firm has committed a total of $240 million of its senior and subordinated debt capital to lower mid-market companies, Gregory said. At press time on April 28, Maranon Capital’s lending capacity stood at $175 million in senior debt and $142 million in mezzanine debt.