Intermediate Capital Group, a mezzanine finance provider, has held the first closing of its new fund, ICG European Fund 2006, with initial commitments of €650 million ($855 million).
Intermediate did not disclose who committed to the fund but said that almost all investors came from the previous fund.
Deutsche Bank provided an associated debt facility of €900 million.
ICG hopes to hold a final closing in January with target equity commitments of €1.25 billion. With leverage, the fund will have a total capacity of approximately €2.25 billion.
In its six-month interim report Intermediate Capital warned of overheating in the private equity buyout market, which has €58 billion of uninvested funds.
The report said: “In an increasingly competitive and overheated debt market we are constantly examining our investment strategy in the knowledge that a number of buyout transactions are being completed at levels of leverage and with growth assumptions that leave little or no margin for error.”
The interim results show record gains on investments of £93.3 million. Core income was £52.5 million, an increase of 15 percent over last year.
John Manser, chairman, Intermediate Capital Group, said: “Core income would have been £4 million higher but for a foreign exchange loss. This one off cost occurred due to the changing nature of returns on mezzanine and the resulting IFRS accounting impact, in particular the significant increase in rolled up interest, which we are now hedging.”
Manser said: “This growth resulted from good loan book growth up nine percent in the last six months at £1.6 billion and a strong performance from our fund management business: fees were 45% up at £16.5 million for the half year.”
In September Intermediate Capital Group arranged a mezzanine facility of €60 million to assist in the management buyout and invested €30 million in the equity.
In August the group invested £30 million of senior and junior equity to refinance Care Management Group, a UK operator of care homes for people with learning disabilities.