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ICG approaches first close for seventh European fund

Gareth Morgan
13 July 2018

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Pan-European equity and debt investor Intermediate Capital Group (ICG) is approaching a first close for ICG Europe VII, Unquote understands.

ICG is understood to be due to hold a first close for its seventh European fund imminently, having secured commitments from a number of LPs after launching in March.

The fundraising was said to be "well advanced" with commitments of €2.6bn by March 2018 when ICG announced its full-year results.

The lender's previous fund, ICG Europe VI, held a final close on €3bn in July 2015 and was 60% invested as of September 2017, at which point it reported a net IRR of 45%, according to Unquote Data. ICG Europe V reported a net IRR of 13% and total value multiple (TVM) of 1.4x as of September 2017.

ICG Europe VII is targeting a gross IRR of 18% and a gross TVM of 1.8x.

A management fee of 1.5% of committed capital will be charged until the end of the five-year investment period, with discounts offered to investors committing more than €150m, falling to 1.25% thereafter. For carried interest, 20% is payable above an 8% hurdle rate.

ICG is able to use fund-level leverage up to a 3:2 ratio for ICG Europe VII, although fund-level leverage was not used in the GP's previous two funds, and ICG does not foresee doing so in the current fund, according to documents seen by Unquote.

LPs that have committed to the vehicle include Pennsylvania State Employees Retirement System, which pledged €80m; and Teachers Retirement System of Louisiana, which approved a commitment of the euro equivalent of $75m earlier this year. Connecticut Retirement Plans and Trust Funds is considering a commitment of up to €75m, with a decision to be made during the next investment advisory committee meeting in July. ICG will commit a minimum of €500m to the fund.

The fund will invest across the capital structure with a focus on mezzanine and equity-like instruments throughout the European mid-market. The majority of investments will be corporate deals with a more significant equity component, which will make up between 30-80% of the fund, with sponsor-backed LBO and opportunistic lending making up between 20-50% each. Origination is typically done through ICG's seven local offices across Europe.