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Florida Mezzanine Fund Launches

Florida Mezzanine Fund has been launched by former partners of Gator Mezzanine Fund with backing from CapitalSouth Partners of up to $450 million. The fund will invest from $500,000 up to $30 million in debt and equity in small and mid-sized Florida companies. The firm made two investments in tandem with its official launch, in Great HealthWorks, Inc., a Fort Lauderdale-based marketing and distribution company, and Association Financial Services, a Miami-based financial services company for condo and homeowner associations.

Press release:
A new investment partnership organized in January said it is looking to lend to Florida businesses – including two South Florida ventures that have already secured financing.

In a press conference today at one of the companies – Great HealthWorks in Fort Lauderdale, Fla. – Orlando, Fla.-based Florida Mezzanine Fund kicked off a two-day statewide tour, where the fund will announce to Florida businesses that it has entered into a partnership with CapitalSouth Partners that provides access up to $450 million in capital to invest in Florida small to mid-sized businesses. Small and mid-sized businesses are in desperate need of capital due to a tough environment where banks are wary to extend or issue new loans to companies and venture capital in the state has all but dried up.

“This new fund is important for Florida’s entrepreneurs who are looking for capital to grow their businesses and bring jobs to our state,” said Lt. Governor Jeff Kottkamp. “Florida Mezz has the potential to inject significant investment into our economy.”

In addition, both of Florida’s gubernatorial candidates welcome the new funding for Florida companies.

“I applaud the founders and investors of the Florida Mezzanine Fund for making significant investment capital available to Florida entrepreneurs, fostering economic growth in our state,” said Florida Attorney General Bill McCollum. “To move our state past these challenging economic times, it is critical we diversify our economy and invest in the industries of the new knowledge-based economy.”

“To get Florida moving again and remake our economy for the future, our business owners and entrepreneurs will need this type of venture capital,” said Florida Chief Financial Officer Alex Sink. “With record high unemployment in Florida, investments in our state’s small and mid-size businesses are more important than ever.”

The fund is an innovative marriage of more than 50 Florida investors who previously formed Gator Mezzanine Fund, and CapitalSouth Partners, a Charlotte, N.C.-based mezzanine fund that provides private equity and mezzanine capital to lower middle-market companies. Since its inception, CapitalSouth has closed more than 60 transactions and seeks to invest in young companies primarily in the southern U.S.

Here is how it works: Florida Mezz will invest from $500,000 up to $30 million in debt and equity financing per investment in Florida businesses, excluding the real estate development sector. The fund will provide one of Florida’s largest sources of private venture funding.

As it ripples through the state’s economy, Florida Mezz financing could create up to thousands of new jobs in a state with double digit unemployment rates.

“Florida has been hit especially hard by the housing and credit crises, and two traditional economic strengths of our state, real estate development and tourism, are at historic lows,” said Florida Mezz Partner Seth Ellis. “Florida Mezz’s investment focus provides our local economy with a chance to boost industries like manufacturing, distribution, healthcare and more, which helps soften the impact of the decrease in tourism and real estate sectors. Our fund believes in Florida’s businesses and we are investing money and contributing our investors’ business acumen to help these companies grow, hire, and expand Florida’s tax base.”

As part of the launch, Florida Mezz announced its first two investments, including:

* Great HealthWorks, Inc., a Fort Lauderdale-based marketing and distribution company with a proprietary line of patented healthcare products that will create approximately 50 new jobs in the state; and
* Association Financial Services, a Miami-based financial services company for condo and homeowner associations.

Florida Mezz launches at a time when small to mid-sized businesses are starved for funding.

In February, the Federal Reserve Board, acknowledging that small businesses are experiencing difficulty in obtaining or renewing credit, said banks are being too cautious in lending to small businesses. Responses to the Board’s Senior Loan Officer Opinion Survey indicated that banks had tightened credit standards and terms on commercial and industrial loans to small firms to the highest level in 20 years in 2009.

Moreover, venture financing hit a 12-year low in 2009, according to a Jan. 22 MoneyTree report based on data from Thomson Reuters.

Florida has been particularly hard hit, found a report sponsored by PriceWaterhouseCoopers and the National Venture Capital Association. Only 30 venture capital investments were made in emerging Florida companies last year, compared to more than 1,100 in California, 173 in New York, 111 in Texas and 43 in Illinois.

“Working together, Florida Mezz and CapitalSouth will identify the hidden jewels among Florida’s new and existing businesses,” said Joseph B. Alala, III, President and CEO CapitalSouth Partners. “We will help these businesses prosper, and they will – in turn – yield a strong return to Florida Mezzanine investors.”

Over the years CapitalSouth has invested more than $35 million in Florida small businesses to support company growth and the creation of new jobs.

There is an increasing demand for mezzanine capital by Florida’s small businesses. Florida has the fourth largest labor force, fourth highest number of business establishments and fourth largest Gross State Product, making it the 18th largest economy in the world. Many Florida businesses seek access to growth capital for acquisitions, recapitalization or ownership changes, but there are limited mezzanine sources for Florida’s business owners.

In its first year, Florida Mezz expects to consider up to 200 Florida companies for funding. A mezzanine fund typically provides capital to profitable entrepreneurial ventures. These funds often require less collateral than secured or more senior lenders and can be an important component in a small company’s capital structure.

Companies interested in requesting funding should visit www.FloridaMezz.com.