ICG Plans U.S. Mezzanine Fund to Tap Demand for High-Yield Debt

Intermediate Capital Group Plc (ICP), a London-based money manager, plans to start its first U.S. mezzanine debt fund to tap demand for high-yield investments.

“Preparations are well advanced for the launch of a dedicated U.S. product”, the company said in a statement today. The new fund will focus on investing in mezzanine debt, Christophe Evain, ICG’s chief executive officer, said in a telephone interview.

ICG, whose assets under management increased 13 percent to 12.9 billion euros ($16.7 billion) at the end of March, raised 2.3 billion euros in the last year as investors sought high-yielding assets, according to the statement.

Earlier this year ICG closed a 2.5 billion-euro fund focused on European equity and mezzanine debt, a type of high-yield financing that can give investors access to the equity of the borrowers. The company last year hired Sal Gentile, co-founder of Blackstone Group LP’s debt business, to expand its U.S. operations.

The firm may also consider raising new funds to buy structured finance products such as CLOs, Evain said.

“We are always considering new ideas while our investor base becomes now more diversified and global,” Evain said. “The key this year is that we can get better risk-adjusted return if we focus on the mid-market.”

ICG manages 11 CLOs in Europe and its planned CLO deal, which would be about 400 million euros and be arranged by Lloyds Banking Group Plc, will focus on loans rather than diversifying into high-yield notes, he said.

“The new CLO is in the structuring phase and we don’t expect it to have a large bond bucket in the collateral,” Evain said.

CLOs are a type of collateralized debt obligation that pool high-yield, high-risk loans and slice them into securities of varying risk and return.

To contact the reporter on this story: Patricia Kuo in London at pkuo2@bloomberg.net

To contact the editor responsible for this story: Faris Khan at fkhan33@bloomberg.net

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