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Beechbrook Capital’s inaugural UK SME Credit Fund holds first close at more than GBP100m

Beechbrook Capital has held the first close of its inaugural UK SME Credit Fund, with commitments of more than GBP100m. The fund will support UK small and medium-sized businesses with a turnover of between GBP10 million and GBP100 million and EBITDA of more than GBP1 million. 

Among the institutional investors that have made commitments to the new fund are British Business Bank Investments Limited, the commercial arm of the British Business Bank, and the European Investment Fund. With additional investments to the fund already pledged, Beechbrook expects to hold a second close in the second quarter of 2016 with a target fund size of up to GBP200m.

The UK SME Credit Fund will provide mainly senior secured loans to non private equity-backed businesses to support acquisitions, buy-outs, shareholder re-alignments and general expansion plans. It is estimated there are around 40,000 UK businesses in Beechbrook's chosen target range. 

The fund will provide loans of between GBP3 million and GBP15 million. There is already a strong pipeline of investment opportunities, with the first investment expected to complete early in the New Year.

The fund builds on Beechbrook's existing three private debt funds, which invest in lower mid-market private equity-backed businesses in the UK and northern Europe. The existing private debt funds have raised EUR251 million to date.

The UK SME Credit Fund has a highly experienced management team, headed by Jon Herbert, managing director, who brings 30 years of relevant experience. He was formerly a director of LDC, where he set up the in-house debt advisory function, and before that head of Lloyds Acquisition Finance which included responsibility for sourcing, executing and managing leveraged loans in the SME market.

Herbert is supported by Tim Johnston, who has been with Beechbrook since 2009 and Peter Kirtley, who was formerly investment director at Lloyds Banking Group with responsibility for negotiating, project managing and executing debt for equity transactions.

Also supporting the team is Jon Penfold, who has joined the Beechbrook Advisory Board and the investment committee. He brings 32 years' relevant experience, 16 of them at Royal Bank of Scotland where he was engaged in managing loans to and equity investments in SMEs. Prior to that, he spent four years at the private equity firm, 3i.

Beechbrook managing partner, Paul Shea, says: “The UK SME Credit Fund is a natural evolution for Beechbrook. We are pioneering this type of funding to UK SMEs. We have received numerous requests for it from family and manager-owned businesses around the country, which are acutely aware of the shortage of long-term development and expansion finance currently available. Other credit funds in the market generally target larger companies or focus specifically on private equity-backed buy-outs.

“Beechbrook and our recent hires bring unrivalled experience of the UK SME market and a wealth of relationships. We look forward to playing a constructive role in helping fund the growth of UK small and medium-sized businesses.”

Peter Wilson, CEO of British Business Bank Investments, says: “We have supported Beechbrook and its experienced management team for a number of years through our investment programme and we are particularly pleased to have invested in its latest UK SME Credit Fund. The Fund’s focus on non private equity-backed SMEs will help address the well-publicised funding gap for loans between GBP3m and GBP15m and is in line with our aim to support diverse debt finance markets.”

Specialist advisers Ian Milton and James Newsome of Arbour Partners will continue to advise Beechbrook on fundraising for the UK SME fund’s final close.

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