It is the largest credit fund by equity commitments ever launched in Europe, and will reach a size of €1.25bn when fully leveraged. Capital has been raised from three LPs:
The London-based firm will use the fund to provide first lien, second lien, mezzanine, high yield and equity financing and also has the ability to invest in distressed debt. It is able to invest up to €500m per transaction, drawing on this latest fund, 2004’s mezzanine fund and by co-investing with its LPs.
Managing partner Doumar said: “The Credit Opportunities Fund reinforces Park Square’s focus on ‘large size’ credit investing and our ability to continue building diversified portfolios of investments with attractive risk-adjusted returns. This fund builds on the success of our existing mezzanine fund, allowing us to serve our client base more effectively.”
With this new vehicle, Park Square is looking to tap into the ever popular leverage loan market, where issuance reached a record level of €150bn last year. It will join two other funds in scouring for opportunities: ICG’s Eurocredit Opportunities I, which had €80m of equity commitments when it was launched in late 2005 supporting a capital structure of €400m (a further tap issue has since been made and has taken the overall size of the fund to €1.1bn), and Cheyne Capital’s Cheyne Credit Opportunities I, launched in March 2006 with €140m of equity supporting a fund of €1bn.
Park Square states it will not be looking to generate returns using aggressive leverage but instead, due to the flexible and long term nature of its investment strategy, it will focus on fundamental analysis and credit selection to make money for its investors. The fund will draw capital when needed, thereby limiting the need to ‘ramp up’ – buy assets for the sake of it – and has the ability to change investment strategies over time to take advantage of changing market conditions.