New Funds: Heller Ventures Into London –

In its first foray out of the U.S. Heller Financial Inc., a provider of leverage finance, this month formed its Leverage Finance Group in London. The group committed $1 billion to make investments in companies in the U.K. and throughout Western Europe.

The new group will be headed by Graham Randell, former managing director and head of acquisitions at National Westminster. Other former NatWest directors who joined Randell include John Foy, Elaine Bloxham and Johanna Young.

Randell said Royal Bank of Scotland’s acquisition of NatWest last year is one reason for the foursome’s departure to Heller Financial. “We have a lot of promising contacts with people we know very well, particularly private equity sponsors in the U.S. as well as in the U.K.,” Randell said. “Royal Bank’s acquisition of NatWest, and our formalization here has taken one team out of the marketplace and creates a golden opportunity for us.”

“The team that Graham has assembled is a very established team that thinks and acts like we do in terms of focusing on the middle market, buyout activities and depth of experience,” said Dan Marszalek, group president at Heller Financial.

“We want to be able to add a broader range of financing because a number of our customers, as well as a number of our portfolio companies that we had financed with private equity sponsors in the U.S., are starting to set up shop in the U.K. So by setting up shop here, we have that Trans-Atlantic capability to service our clients.”

Marszalek said Heller was alone in committing capital to the fund and that the fund is not a buyout fund to make direct, controlled investments. Rather, it is a capital commitment to make leveraged and mezzanine financing and co-investments in Europe.

The fund will invest GBP200 million to GBP250 million pounds in middle-market companies across a broad spectrum of companies. “One of the good things about this marketplace is that you have to be a generalist because you’re never quite certain what the next deal is going to be,” Randell said. “The U.K. is a smaller marketplace in comparison to the U.S. and if you try to concentrate on one particular sector, you might find it a bit tight for business. There are special situations from time to time where you find yourself doing four or five deals in one sector and half a dozen deals in another, but we’ll be focusing on right across the spectrum, whatever the deal happens to be. That will remain true throughout the U.K. and continental Europe.”

The biggest problem in terms of overseas expansion is the legal restriction on the ways the financial products are put together, Randell said. “After the U.S., the U.K. is the most liberated in its financial rules and other western European countries are getting that way. You are seeing some movement in Asia, but I think we’re a little off from having operations there.”