Babson Capital Management, the US-based investment management firm which this month took over management of the $200 million private debt and mezzanine book of the former Babcock and Brown, has upgraded its Sydney presence.
The firm, which has had an Australian marketer, Duncan Robertson, since 2008, has added four investment professionals in Sydney as it expects to capitalise on what it believes is a rapidly growing market segment.
Babson recruited two AMP Capital mezzanine experts late last year – Shane Foster and Adam Wheeler – as local managing directors and portfolio managers. The firm has also appointed two additional investment managers, Elliott Wong as a director and Adrian Ng as an associate.
Michael Hermsen (pictured), a US-based managing director, said yesterday that Babson had been active in the Pacific Rim region since about 2005 and while it would still look for investments to the north, “Australia is the right place for us to land”.
He said that having gained its AFSL in January, Babson would build out is platform and product range, in a similar fashion to its US strategy where it has concentrated on the emerging middle market of corporate deals.
“We think the window of opportunity is quite striking,” Hermsen said, “but we think that there is also a secular trend which reminds me a little of the US in the 1990s.”
The immediate opportunity for mezzanine finance in private equity deals has come about because of the withdrawal of the major banks and other capital providers from this type of lending. Given increasing regulation it is difficult to see them coming back in the short-medium term.
Adam Wheeler said that the Australian market was still rather opaque and immature. He estimated that it averaged a total size of about $700 million a year for corporate middle market mezzanine (not including project finance or real estate) over the past five years.
Shane Foster said he thought that the Australian market had probably been constrained in the past from the supply side, with a lack of specialist managers.
Elsewhere in the region, Babson also has an office in Hong Kong and Tokyo.
The former Babcock trust has been renamed BCA Mezzanine Debt Trust. It has a range of international private debt assets including some Australian and Asian.