CDC Backs South Africa's First Independent Mezzanine Fund

CDC's commitments in South Africa exceed 186 million

CDC Group ("CDC"), the UK government-backed private equity emerging markets fund of funds investor, today announces that it has conditionally committed R100 million (10 million) to Vantage Mezzanine Fund ("the Fund'), the first independent mezzanine fund to be raised in South Africa. The Fund has so far attracted commitments of almost R500 million (52 million).

Upon completion, this brings CDC's total commitments to private equity funds in South Africa to over R1.8 billion (186 million) since 2003 invested in 10 funds.

The Vantage Mezzanine Fund will provide mezzanine finance to South African mid-cap companies with an enterprise value of between R150 million to R750 million (15 million to 77 million) targeting a mixture of growth, buyout and refinancing capital. 

The Fund has attracted commitments from other international investors include FMO, the Netherlands Development Bank, and Germanys DEG, as well as the Public Investment Corporation, the Eskom Pension and Provident Fund, Transnet Pension Fund and Metropolitan Asset Managers.

The Fund held a first closing of R310 million (32 million) in August 2006 and will hold a final closing in August 2007 with a target of R550 million to R600 million (57 million to 62 million).

Vantage Mezzanine Fund, launched in October 2006, is managed by Vantage Risk Capital, which is majority owned by Vantage Capital Group, an independent, majority black-owned and managed business, based in Johannesburg.  The management of the Fund will be led by Luc Albinski, previously Head of Mezzanine Finance at Standard Bank South Africa (SBSA), and Colin Rezek, co-founder of Vantage Capital Group in 2001 and formerly a successful entrepreneur.

In 2005, private equity funds totalling R2.55 billion (265 million) were raised for investment in South Africa, with 62% of this deriving from European sources compared to 7.5% in 2004.  In 2005, the largest proportion of funds was raised for buyouts (source: African Venture Capital Association Investment Activity Report 2006).

Rod Evison, CDC's portfolio director, Africa, said:

"Until recently, the South African economy was characterised by high interest rates with funding packages for mid-market private equity deals only comprising senior debt and equity provided by private equity firms or other institutions like the IDC.  The South Africans governments success in reducing inflation and interest rates has created a large potential for mezzanine financing. 

'In Western Europe and the US, mezzanine investment has generated attractive and stable returns. Although mezzanine is a relatively young asset class in South Africa, we believe that there are now excellent opportunities for mezzanine investment in South African mid-market companies and we have been impressed by the skills and experience of the Vantage team.

'Our commitment to Vantage is in line with CDC's mission to generate wealth in emerging markets, particularly in poorer countries, by providing capital for investment in sustainable and responsibly-managed private sector businesses.'

Mutle Mogase, Chief Executive of Vantage Capital Group, added:

"South Africa's fiscal and monetary discipline over the last decade has resulted in accelerated economic growth. The country has seen increased spend on infrastructure, a rise in commodity prices and a consumer boom. In 2005, South Africa generated an overall growth rate of 4.9%, which is expected to rise to 6% by 2010.

"We believe that CDC's commitment is a tremendous vote of confidence in the Fund and further evidence of the growing importance of the South Africa market for European investors, especially in this relatively new asset class.