Intermediate Capital Group closes second CDO fund ahead of target

17 July 2002

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Intermediate Capital Group has announced the closing of its second leveraged loan fund, Promus II, at EUR 340m. A Dutch BV with a 16-year life, the vehicle was raised by JP Morgan and rated by Fitch and Standard & Poors. Ashurst Morris Crisp provided legal advice. Fund investors, which provided the EUR 40m of equity, represent a broad range of UK and Continental European institutional investors, with Â‘unusuallyÂ’ high levels of UK investors reported.

Investments

Promus II will invest primarily in European leveraged loans (senior secured debt), but will have the flexibility to invest in some mezzanine and high-yield bonds. According to ICG, Promus II has been specifically designed to allow for greater flexibility than that offered by current CDO structures. Low initial leverage and a long ramp-up period mean that ICG, and not the structure, drive the investment process and the timing of investment decisions. ICG believes that this factor reflects current market conditions and will be critical in what it describes as a Â‘volatile market dependent to a large degree on the primary new issuer pipelineÂ’. It is anticipated that the fund will make over 50 leveraged loans at an average size of EUR 6-7m over the next two to three years. ICG will be able to invest in loans throughout Europe denominated in multiple currencies. Promus II is capable of applying leverage to grow to a total size of EUR 340m over the expected accumulation period of two to four years. Leverage is initially provided by a ten-year EUR 70m revolving credit facility provided by a small syndicate of banks, then over time the facility can be refinanced through the issuance of investment grade term notes, then redrawn and refinanced until the fund is fully invested. ICG now claims to have a take and hold position in senior debt of EUR 20-30m per name across its various funds.

People

ICG has a team of 35 investment professionals based in London. Promus II will be managed by Andrew Philips and Sarah Harbard.