Alcentra Ltd., the money manager owned by Bank of New York Mellon Corp., is raising a 500 million-euro ($667 million) fund to lend to European companies as banks in the region retreat, according to two people with knowledge of the matter.
The Alcentra European Direct Lending Fund will provide senior loans and mezzanine debt as well as make equity investments, said the people, who asked not to be identified because the information is private. Funds will be also available in a so-called unitranche financing, which is a blend of higher ranking and junior debt.
Alcentra is expanding its direct debt-funding business as European banks are under pressure to reduce their balance sheets by as much as $3.8 trillion through asset sales to meet tougher capital requirements, the Washington-based International Monetary Fund said in a report in April. Direct-lending funds typically seek to deliver returns higher than investment-grade debt by providing high-yield financing to small-and-medium-sized borrowers.
About 70 percent of the Alcentra fund will be allocated to senior and unitranche debt, while the remaining 30 percent will be for mezzanine and equity financing, the people said.
The fund is separate from a 200 million-pound ($320 million) pool Alcentra raised in November for direct lending to U.K. companies, the people said.
Mike Dunn, an Alcentra spokesman in New York, wasn’t immediately available to comment.