Morgan Stanley Mezzanine Fund Raises Nearly $1 Billion
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Morgan Stanley Mezzanine Fund Raises Nearly $1 Billion
jullysan Wed Jan 12, 2011 11:59 am
NEW YORK (Dow Jones)--Morgan Stanley Investment Management, the asset management unit of Morgan Stanley (MS), said its first dedicated corporate mezzanine fund has closed with $956 million in capital from investors as it seeks to capitalize on an expected dearth of refinancing activity.
The fund, Morgan Stanley Credit Partners, or MS Credit, invests primarily in fixed income securities issued by middle-market companies in conjunction with leveraged buyouts, debt refinancings, acquisitions and recapitalizations. To date, the fund has invested more than $160 million in five portfolio companies.
MS Credit is held within the merchant banking operations of the investment bank's $273 billion asset management business. Morgan Stanley hired Gregory Fleming, a Merrill Lynch veteran, to turn around that business nearly a year ago, after it was hurt by the market downturn and its heavy exposure to real estate.
Hank D'Alessandro, Head of Morgan Stanley Credit Partners, and his team began marketing the fund to institutional and high-net-worth investors in 2009, some of which were referred from the Morgan Stanley Smith Barney brokerage joint venture. In an interview with Dow Jones, D'Alessandro said he believes the fund is "one of the largest first-time mezzanine funds ever."
Such funds are a mix of debt and equity financing used to finance existing companies.
D'Alessandro said, "over the next three to four years, there will be a supply/demand imbalance for capital for middle market companies." While there has been a surge in high yield bond issuance over the past two years, those markets aren't as receptive to small illiquid firms, an area where MS Credit sees opportunities. D'Alessandro said traditional banks will find it more difficult to provide capital to middle market firms, given new regulatory rules.
Wall Street banks, including Morgan Stanley, are facing challenges of their own such, as grappling with higher capital requirements that limit their investments in areas such as private equity and hedge funds.
MS Credit has a "broad mandate" according to D'Alessandro, but will focus on areas such as healthcare, telecommunications, utilities, and other defensive industries, adding that the "one industry we will avoid is real estate because it's not our expertise."
Shares of Morgan Stanley closed Tuesday down 0.3%, at $27.96. The stock is down 13% over the past year.
The fund, Morgan Stanley Credit Partners, or MS Credit, invests primarily in fixed income securities issued by middle-market companies in conjunction with leveraged buyouts, debt refinancings, acquisitions and recapitalizations. To date, the fund has invested more than $160 million in five portfolio companies.
MS Credit is held within the merchant banking operations of the investment bank's $273 billion asset management business. Morgan Stanley hired Gregory Fleming, a Merrill Lynch veteran, to turn around that business nearly a year ago, after it was hurt by the market downturn and its heavy exposure to real estate.
Hank D'Alessandro, Head of Morgan Stanley Credit Partners, and his team began marketing the fund to institutional and high-net-worth investors in 2009, some of which were referred from the Morgan Stanley Smith Barney brokerage joint venture. In an interview with Dow Jones, D'Alessandro said he believes the fund is "one of the largest first-time mezzanine funds ever."
Such funds are a mix of debt and equity financing used to finance existing companies.
D'Alessandro said, "over the next three to four years, there will be a supply/demand imbalance for capital for middle market companies." While there has been a surge in high yield bond issuance over the past two years, those markets aren't as receptive to small illiquid firms, an area where MS Credit sees opportunities. D'Alessandro said traditional banks will find it more difficult to provide capital to middle market firms, given new regulatory rules.
Wall Street banks, including Morgan Stanley, are facing challenges of their own such, as grappling with higher capital requirements that limit their investments in areas such as private equity and hedge funds.
MS Credit has a "broad mandate" according to D'Alessandro, but will focus on areas such as healthcare, telecommunications, utilities, and other defensive industries, adding that the "one industry we will avoid is real estate because it's not our expertise."
Shares of Morgan Stanley closed Tuesday down 0.3%, at $27.96. The stock is down 13% over the past year.
jullysan- Posts : 20
Join date : 2011-01-12
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