Bahrain-based private equity firm Investcorp (INVB.BH) is set to buy 3i Group’s (III.L) debt-management business, it was announced on Tuesday, rebranding it Investcorp Credit Management.
Investcorp will buy 3iDM for £222 million, funded by the company’s existing balance sheet.
The deal will add $12 billion of assets under management to Investcorp, bringing the alternative investment manager’s total AUM to approximately US$23bn.
Jeremy Ghose will remain managing partner and CEO of the whole debt management business while John Fraser will remain managing partner in the US, Investcorp told Thomson Reuters LPC.
All 50 of 3iDM’s team will remain at the firm, which will be as committed to raising CLOs in Europe and the US as well as other product offerings, Investcorp said.
3i has issued nine CLOs, totaling €2bn so far in 2016, ranking them in fourth place for managers issuing CLOs, according to a Fitch Ratings October 2016 report on European Leveraged Loan Funds.
The debt management firm will continue to focus on senior secured large cap lending, Investcorp said.
The deal, which will gift 3i £36m profit on disposal, is expected to close in March 2017, 3i said in a statement.
3iDM played an important role contributing to 3i Group’s operating cash profit, as well as providing good returns from investments in the underlying CLOs, since 3i’s 2012 strategic review.
Now 3i is in better shape it has decided to sell the debt management arm to focus on building its private equity and infrastructure portfolios.
Increased regulation has also impacted the returns you can get from a debt management business, a source added.
3i’s Debt Management business was formed in February 2011 following the acquisition of Mizuho Investment Management, from Mizuho Corporate Bank. 3i expanded the business in 2012 with the acquisition of US debt manager WCAS Fraser Sullivan Investment Management, as well as five European CLO management contracts from Invesco.