South African mezzanine fund manager, Vantage Capital, has announced the final close on its fourth mezzanine fund.
Vantage Capital secured a total of $377 million of commitments from a mix of European and US-based commercial investors, as well as a host of development finance institutions (DFIs) that include IFC, BII, SIFEM, DEG, Norfund, Swedfund, Finnfund and EIB.
As with its predecessor funds, Vantage will continue to provide mid-sized African businesses with flexible capital to drive business expansion and support job creation. In particular, mezzanine debt is well-suited to robust sectors with strong growth dynamics, including telecoms, healthcare, education, real estate, export manufacturing, outsourced services and selective infrastructure such as private power generation.
Fund IV has made two investments to date, providing early-stage construction funding to Seaton Estates in South Africa for a residential development on the KwaZulu Natal coast, and backing a prominent Egyptian private equity firm, Compass Capital, to acquire a portfolio of A-grade office buildings in Cairo as they build a diversified portfolio of income-generating real estate assets.
Warren van der Merwe, Managing Partner, noted: “Vantage is proud of the continued support received from our investors. We were the first independent mezzanine fund in South Africa when we raised Fund I in 2006. Mezzanine was not well known in South Africa at that time, let alone in the rest of Africa. Since then, we have taken our mezzanine product across Africa, targeting 14 markets and having invested in 11 to date.
“Our fundraising success, in such a challenging environment, is a validation of the mezzanine asset class in Africa and of our role as a pioneer in this space over the past 17 years. As with previous funds, a substantial portion of the funds have been raised from private sector investors such as insurers, pension funds and endowments who find our contractual yields and equity upside exposure attractive when compared to private equity alternatives. We have also received valuable support from DFI investors, who appreciate the impact that mezzanine can have in growing mid-sized African enterprises.”
Since 2006, Vantage Capital’s Mezzanine division has made 33 investments across four funds in 11 African countries, making it the largest and most experienced independent mezzanine funder on the continent. Its inaugural mezzanine fund was raised in 2006, with US $150 million invested into five South African companies.
In 2012, its second mezzanine fund of $240 million was raised, investing in a portfolio of 13 companies across Africa. This was followed by its third mezzanine fund of $287 million raised in 2015, with a further 13 investments spread across the continent. Vantage’s success in now raising $377 million for its fourth mezzanine fund is a validation of the growing demand for flexible funding solutions amongst mid-sized African corporates, as well as a recognition by investors that Vantage is a leader in this niche.
“Vantage Capital’s mezzanine offering plays an important role in supporting the growth of mid-size businesses that would otherwise struggle to access capital through conventional banking channels”, explains Luc Albinski, Executive Chairman.
“Vantage’s non-dilutive funding enables business owners to retain control and hold on to their equity, while at the same time accessing the capital needed to realise their full potential. This, in turn, plays an important role in driving economic growth, job creation and improved prosperity.”
Over the past 17 years, Vantage has funded a number of success stories across a range of sectors around the continent. Vumatel, a fibre-to-the-home network operator in South Africa, is one such example.
Vantage invested in the company in 2016, at a time when it had a small subscriber base of 3,500 but was well-poised to take advantage of tremendous household demand for fibre. With the help of Vantage’s expansion funding, in a little over two years the company grew its subscriber base to over 90,000 and enjoyed exponential growth in operating profit.
Another example is Pétro Ivoire, a leading downstream oil & gas distributor in Côte d’Ivoire, where in 2018 Vantage facilitated the first-ever leveraged management buyout in Francophone West Africa.
The transaction enabled the founding family to regain control of their business by using Vantage’s mezzanine debt to buy out their private equity investors. The expansion funding provided to CIM Santé in Morocco has enabled the hospital group to expand its beds fivefold over the past two years, from 120 to 620, with a target of growing to 1500 beds over the coming three years. And in late 2020, Vantage provided Pickalbatros Hotels in Egypt with capital for its renovations, at a time when banks were reluctant to support the hospitality sector due to the negative impact of Covid-19.
Vantage’s support to its portfolio extends beyond funding. The fund manager plays an active role in guiding strategic direction, building robust governance structures, and supporting its companies to improve their environmental and social impact.
These interventions help to set the companies firmly on the path to becoming regional leaders and serving as role models to their African peers. As Vantage deploys its fourth mezzanine fund, this will remain an area of focus and pride for the firm.
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