National Pension Reserve Fund (NPRF) announces details of funding for SME’s of three new long-term funds which will provide equity, credit and restructuring / recovery investment for Irish small and medium-sized businesses (SMEs) and mid-sized corporates. These funds were referenced by the Minister for Finance in his Budget 2013 speech. SME business experts O’KellySutton are already in discussions with the fund operators on behalf of SME’s. O’KellySutton will represent SME’s in dealing with the fund operators on drawing down funding.
The NPRF has played a significant role in the development of the three funds and will be a cornerstone investor in each alongside additional investment from third-party investors. The three funds combined will involve a commitment by the NPRF of up to €500 million.
The details of the funds announced are as follows:
1.The SME Equity Fund (total fund size €300 million – €350 million / NPRF commitment €125 million) will focus on investing in healthy businesses seeking to grow, including those with overleveraged balance sheets. The fund, which has received commitments from other-third party investors, is operational and is managed by Carlyle Cardinal Ireland in Dublin.
2.The SME Turnaround Fund (total effective fund size €100 million / NPRF commitment €50 million) will invest in underperforming businesses which are at or close to the point of insolvency but have the potential for financial and operational restructuring. Typically 40 per cent of the capital invested by the fund will be used to buy the business and 60 per cent will be used to finance the turnaround in order to place it on a sustainable long-term footing. The fund is operational immediately and is managed by Better Capital. Better Capital will establish a Dublin office from which to source deal flow.
3.The SME Credit Fund (initial fund size €450 million / NPRF commitment €175 million – €325 million depending on the amount of third-party investment raised) will lend to larger SMEs and mid-size corporates and will be managed by BlueBay Asset Management. The SME Credit Fund may also acquire and refinance loans close to maturity where existing lenders are not willing to provide new lines of credit. Lending by the fund will be at competitive market rates with loan sizes ranging from €5 million to €50 million with an estimated average size of €15 million. Returns to investors in the fund will vary according to their position in the fund’s capital structure. The NPRF has agreed a Letter of Intent with BlueBay regarding the NPRF’s investment in the SME Credit Fund and the objective is for the fund to be operational by early in the second quarter of 2013.
The NPRF is also currently reviewing additional SME fund opportunities that would complement those announced, with the objective that the eventual suite of funds would have the capacity to invest across the full spectrum of SME financing needs.
Patrick Sutton, Accountants & Business Advisers, Kildare. www.okellysutton.ie