ICG committing 500 mln euros to its new flagship mezz fund

Intermediate Capital Group is kicking 500 million euros ($615.5 million) from its balance sheet into a new fund for subordinated debt investments, documents released by Pennsylvania Public School Employees’ Retirement System show.

The firm would likely be the largest limited partner in ICG Europe Fund VII should it hit its target of 4 billion euros, according to a PSERS staff memo. Members of the ICG team are expected to commit as much as 15 million euros to the fund as well.

ICG is expected to hold a first close in April, according to a Hamilton Lane memo prepared for PSERS.

LPs generally view large commitments from fund sponsors favorably. General partners who commit large amounts to their own funds will capture more upside if their investments perform well, aligning their interests with those of the fund’s other investors.

ICG Europe Fund VII will invest in the subordinate debt of European mid-market companies with enterprise values of up to 1.5 billion euros. In addition to directly sourced deals, the firm may use the fund to support sponsor-backed leveraged buyouts or other opportunities, the PSERS memo says.

The fund’s investment committee includes CIO and CEO Benoit Durteste as well as Managing Directors Hadj Djemai, James Roddis, Jens Tonn and Luigi Bartone.

Fund VI closed on 3 billion euros in 2015. That fund was netting a 52.6 percent internal rate of return as of Sept. 30, according to PSERS documents. Fund V, which raised 2.5 billion euros, was netting a 12.3 percent IRR as of that date.

Pennsylvania PSERS committed up to 150 million euros to the fund at its March 9 meeting, according to its website. The retirement system is an LP in two previous ICG funds.

The firm did not respond to a request for comment.

Action Item: To read the PSERS memos, visit http://bit.ly/2IulsIQ

Traders work on the floor of the NYSE in New York. Reuters/Brendan McDermid