Vantage Capital, Africa’s largest manager of mezzanine funds, said that its fourth mezzanine fund has closed. Investors from the US and Europe, as well as several development finance institutions (DFIs) like IFC, BII, SIFEM, DEG, Norfund, Swedfund, Finnfund, and EIB, have pledged a total of $377 million.
As it did with its predecessor funds, Vantage will continue to give flexible capital to mid-sized African businesses to help them grow and create jobs.
Mezzanine debt is especially good for strong industries with strong growth, like telecoms, healthcare, education, real estate, export manufacturing, outsourced services, and certain infrastructure, like private power generation.
Fund IV has made two investments so far. It gave early-stage construction funding to Seaton Estates in South Africa for residential development on the KwaZulu Natal coast.
It also helped a well-known Egyptian private equity firm, Compass Capital, buy a portfolio of A-grade office buildings in Cairo as they built a diversified portfolio of income-generating real estate assets.
The managing partner, Warren van der Merwe, said, “Vantage is proud of the support from our investors. When we raised Fund I in 2006, we were the first independent mezzanine fund in South Africa. At that time, the Mezzanine wasn’t even well-known in South Africa, let alone the rest of Africa. Since then, we’ve taken our mezzanine product all over Africa. We’re aiming for 14 markets, but we’ve already invested in 11.
In such a challenging environment, the fact that we were able to raise money proves the mezzanine asset class in Africa and that we have been a leader in this area for the past 17 years.
As with previous funds, a big chunk of the money for this one came from private investors like insurance companies, pension funds, and endowments. These investors like our contractual yields and equity upside exposure compared to other personal equity options.
We have also gotten help from DFI investors, who know how vital the Mezzanine can be to the growth of mid-sized African businesses.
Since 2006, Vantage Capital’s Mezzanine division has put 33 investments from four funds into 11 African countries. This makes it the most prominent independent and experienced mezzanine funder on the continent and with the most eIt got its first mezzanine fund in 2006 and put $150 million into five companies in South Africa.
In 2012, it raised $240 million for its second mezzanine fund. This money went to 13 companies in Africa. Then, in 2015, it raised $287 million for its third mezzanine fund and made 13 more investments all over the continent.
Vantage was able to raise $377 million for its fourth mezzanine fund. This shows that mid-sized African corporations are increasingly looking for flexible funding solutions and that investors recognize Vantage as a leader in this niche.
The mezzanine offering from Vantage Capital is essential to helping mid-sized businesses grow that would otherwise have trouble getting money through traditional banking channels, says Luc Albinski, executive chairperson.
With Vantage’s non-dilutive funding, business owners can keep control of their companies and their equity while still getting the money they need to reach their full potential.
This, in turn, is a big reason for economic growth, job creation, and a better standard of living.
In the past 17 years, Vantage has helped fund several businesses that have done well in various African areas. One such company is Vumatel, a South African company that runs a fiber-to-the-home network.
In 2016, Vantage put money into the company. At the time, it only had 3,500 subscribers, but it was well-positioned to take advantage of the massive demand for fiber from homes. With the help of Vantage’s expansion funding, the company grew its subscriber base to over 90,000 in just over two years and saw its operating profit increase by a factor of ten.
Another example is Pétro Ivoire, a leading downstream oil and gas distributor in Côte d’Ivoire. In 2018, Vantage helped organize the first-ever leveraged management buyout in Francophone West Africa. With Vantage’s mezzanine debt, the founding family could buy out their private equity investors and regain business control.
With the help of funding for growth, the hospital group CIM Santé in Morocco has grown from 120 beds to 620 beds in just two years to reach 1500 beds in the next three years. And at the end of 2020, Vantage gave Pickalbatros Hotels in Egypt money for renovations when banks didn’t want to help the hospitality industry because of how bad Covid-19 was.
With the help of expansion funding, CIM Santé in Morocco has grown from 120 beds to 620 beds in just two years, reaching 1500 beds in the next three years. And at the end of 2020, Vantage gave Pickalbatros Hotels in Egypt money for renovations when banks didn’t want to help the hospitality industry because of Covid-19’s harmful effects.
Vantage helps its portfolio in more ways than just giving money. The fund manager is involved in setting strategic direction, building strong governance structures, and supporting its companies in improving their environmental and social impact.
These actions put the companies on the right track to becoming regional leaders and serve as examples for their African peers. As Vantage puts its fourth mezzanine fund to work, this will still be a big focus and point of pride for the company.