Citic PE launches 5b yuan mezzanine fund

Updated: 2011-07-19 13:26


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The private equity unit of Citic Securities Co, China's biggest listed brokerage is making its foray into debt financing by launching a 5 billion yuan ($773 million) mezzanine fund, an investor said.

Zhonghong Real Estate Co plans to invest 100 million yuan in the fund, which would provide financing for acquisitions as well as resources and property companies, the company said in an exchange filing.

Fund manager Citic Private Equity Funds Management Co (Citic PE) currently manages two funds, a 9 billion yuan local-currency fund and a $1 billion dollar-denominated fund.

Chinese private equity firms are rushing to launch funds to finance merges and acquisitions amid accelerating industry consolidation.

The number of acquisitions in China totalled 469 in the first half, up 61 percent from a year earlier, while the combined size of such deals nearly doubled to $27.8 billion, according to consultancy Zero2IPO Group.

China International Capital Corp (CICC), the nation's biggest investment bank, is launching a 5 billion yuan industry consolidation fund, while Haitong Securities plans to launch a 10 billion yuan fund dedicated to merges and acquisitions.

A mezzanine fund typically provides financing to businesses such as large-scale construction projects, start-up companies in growth industries and leveraged buyouts.

Mezzanine capital can be structured either as debt or preferred stock, and in the event of a default, other debts will receive priority payments while the mezzanine fund will generally be entitled to receive residual funds.