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LONDON, Feb 28 (Reuters) - Rothschild Debt Fund Management has raised two thirds of an up to 300 million euro ($393 million) loan fund designed to help replace a looming shortfall in lending to lower-rated companies in Europe, banking sources said on Thursday.
The credit unit of the 200-year-old financial advisory group is launching the fund to invest in high-yielding European leveraged loans to companies with an enterprise value of more than 500 million euros, the sources said.
Around 25 billion euros of leveraged loans - which are credits to private equity-owned or other sub investment grade-rated companies - will disappear this year as collateralised loan obligation (CLO) funds reach the end of their reinvestment period, according to Thomson Reuters LPC data.
CLO funds were the main provider of credit for leveraged buyouts during the private equity boom of 2005 through 2007, but since the start of the financial crisis fund managers have been unable to raise new CLOs in Europe.
Last week, Cairn Capital was the first manager to sell a new European CLO since the collapse of Lehman Brothers, while many other managers have in the last two years kick-started efforts to raise alternative vehicles such as listed loan funds, managed accounts or combined loan-bond funds.
Rothschild already has 2 billion euros of leveraged loans under management, including five CLO funds.
Its new fund will invest in European senior secured loans and Rothschild is targeting to raise no more than 300 million euros, the sources added.
The main investors in new loan funds in Europe are insurance companies and pension funds, seeking high returns as leverage loans yield around 5 percent.