Mezzanine supplier to float: Placing will value Intermediate Capital Group at pounds 100m
Tuesday 12 April 1994
Tom Bartlam, managing director, who founded the company with three partners in 1989, said the float would raise pounds 30m, pounds 18m of which will be used to repay existing preference share capital.
ICG sees itself as a 'quasi-bank' and will be listed under miscellaneous financials. It has concentrated on lending to management buyouts in the UK and Europe. For example, it lent pounds 1.7m to John Cleese's Video Arts training films company.
Mezzanine is a form of capital half-way between debt and equity. The founders of ICG believe it is often the crucial layer of financing in a buyout, because it allows a deal to be structured in the most profitable way for investors and lenders.
ICG yesterday reported pre-tax profits for the year to 31 January 1994 of pounds 14.6m, up from pounds 6.1m last time. Mr Bartlam expects the institutions that take up the shares to view ICG as an attractive yield stock, with a premium to market yield.
Mezzanine pays a higher interest rate than the senior debt in a buyout. But it provides a lower long-term return than equity. However, there is normally an equity 'kicker' built into this intermediate debt, either in the form of warrants or rights conversions.
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