Babson Capital, a unit of MassMutual, has closed its third mezzanine and private equity fund with $1.58 billion in capital commitments. It plans to invest in companies with enterprise values of less than $200 million.
Babson Capital Management LLC (Babson Capital), an investment management firm based in Springfield and Boston, Mass., and Charlotte, N.C., announced it has closed Tower Square Capital Partners III, L.P. (Tower Square III), a $1.58 billion mezzanine and private equity fund.
Investors include domestic and international corporate and public pension plans, insurance companies, banks, high net worth individuals and families, and funds of funds. Tower Square III will invest in companies in the small end of the middle market, or companies with enterprise values of less than $200 million.
“We are pleased that Tower Square III is now fully committed and able to take advantage of the growing investment opportunities in this niche area of the market,” said Mike Hermsen, Managing Director, Babson Capital. “Adding our office in Los Angeles a year ago has helped provide us greater access to deal flow nationwide and we look forward to investing Tower Square III funds across the country.”
Babson Capital’s 18-person mezzanine and private equity team is led by Mr. Hermsen, Mike Klofas, and Rick Spencer, each of whom has more than 22 years experience in corporate finance. The three have been active in mezzanine finance and private equity investing for more than 17 years at Babson Capital and its parent, the Massachusetts Mutual Life Insurance Company (MassMutual). MassMutual has been active in mezzanine and private equity investing since the 1960s.
“Companies with enterprise values of under $200 million have been our sweet spot since we established the mezzanine and private equity team in 1992,” Mr. Klofas said. “Tower Square III allows us to continue the success that we’ve had over our team’s history, such as the launches of Tower Square I, a $265 million fund that closed in October 2002, and Tower Square II, a $1 billion fund that closed in January 2006.”
Added Mr. Spencer, “Our relationships with leveraged buyout firms focused on the smaller middle-market niche have been a key to our ongoing accomplishments. We look forward to maintaining and building upon these excellent relationships and working to provide value to our business partners and investors.”
With the closing of Tower Square III, the Babson Capital team is now managing about $5 billion in direct and indirect mezzanine and private equity assets and commitments. The investments are in North American companies and are typically structured with mezzanine financing – normally $8 million to $50 million – and equity co-investments – normally $5 million to $15 million. Mezzanine securities usually consist of subordinated debt instruments with accompanying equity features, such as warrants or conversion rights. Private equity usually consists of common or preferred stock, but can also include other equity securities.
About Babson Capital Management LLC
Babson Capital Management LLC manages more than $99 billion as of Sept 30, 2008, for sophisticated investors in the U.S. and abroad. The firm offers a wide range of absolute return, co-investing, financing and customized mandates utilizing equity, fixed-income and derivative instruments. Based in Boston and Springfield, Massachusetts, the firm has six additional offices in the U.S., an office in Sydney, Australia and subsidiaries in London and Tokyo. Babson Capital is a member of the MassMutual Financial Group.