NETHERLANDS - Private equity investor AlpInvest Partners has been awarded a €2bn mezzanine mandate from the two largest Dutch pension funds ABP and PGGM. The two pension funds own the private equity investor jointly.
The new mandate, which covers a period of three years, will be invested globally, but with an expected 50% allocation to Europe. AlpInvest's aim is to invest 75% directly and to allocate the balance to funds.
According to AlpInvest, the mandate is one of the largest mezzanine mandates ever awarded worldwide. In 2004, ABP and PGGM awarded AlpInvest a €700m mezzanine mandate, which was mainly invested in the US.
Mezzanines investments in private equity are a hybrid of debt and equity financing. For example, the €15bn buyout of Alliance Boots, contains a large mezzanine proportion.
"Given the market dynamics of today, we consider mezzanine as a particularly well-placed investment product," Volkert Doeksen, managing partner and CEO of AlpInvest Partners, said in a statement.
"Because of the uncertainty in financial markets, and the debt and loan markets in particular, private equity investors are looking for other sources of finance," managing partner Erik Thyssen pointed out to IPE.
"Banks who used to finance leveraged buy-outs, are much more restrictive now. At the same time, fewer securitisation vehicles are being set up to accommodate loans."
Thyssen estimates AlpInvest's total mezzanine holdings at approximately €1.5bn in direct investments, across 30 to 35 investments worldwide.
Due to the expansion of AlpInvest's mezzanine activities in Europe, it intends to open a London office in the first quarter of next year. "The office - in close proximity to the key players in this market - will support the further development of our mezzanine positioning," it said.
With €40bn under management, AlpInvest is one of the largest private equity investment managers. Its sole shareholders are the €215bn civil service scheme ABP and the €85bn healthcare scheme PGGM.
AlpInvest makes investment in a variety of mezzanine securities investments across many industries on a global basis, and claims to have the ability to commit up to €100m in a single transaction.