ICG Recovery Fund set to close

Deborah Sterescu
23 March 2010

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As the first quarter of the year comes to a close, recovery remains at the top of many businessesт agendas as more of them struggle to repay their loans. Firms like ICG are looking to take advantage of these situations with its new Recovery vehicle. Deborah Sterescu reports.

ICG is expecting to hold a final close of its Recovery Fund by the end of this month, said the firm when speaking to unquote" in February. The vehicle, which started fundraising in 2008 and held a first close at €475m in the same year, was created to provide new money (equity and mezzanine) to support private equity-backed companies outside of ICG's existing portfolio that may benefit from de-leveraging and an increase in funds available for growth.

According to Christophe Evain, the newly-appointed chief executive of the specialist debt provider, the fund's long-term strategy is to fix the balance sheets of "quality companies that have poor capital structures", while its short-term strategy is to purchase good quality loans at low prices. As debt is now trading near par, the second part of the approach is no longer applicable.

Still though, the recovery area is set to be an area of promise both this year and next, as many believe tough times are still ahead given the inevitable tax and interest rate rises and the fact that in Europe, approximately €240bn of buyout loans are due to mature in the next few years. This means that many businesses will have to restructure and if senior debt gearing is too high, these companies will likely need either an equity or mezzanine injection to stay afloat.

Indeed, while the vehicle has required an unusually long fundraising period (reflecting the current fundraising environment), it has attracted more investors from overseas, including the US, the Middle East and the Asia Pacific, as many US investors realised that the recovery period could last longer in Europe than at home. In fact, many LPs are now looking to move into this space and it could be one of the reasons why several US-based pension funds and endowments are actually increasing their allocations to private equity.

To read the in-depth interview with Evain, please click here.