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ISIF puts €45m into US-led fund in bid to help SMEs

George Muzinich who founded the firm in 1988

The Ireland Strategic Investment Fund (ISIF) has ploughed €45m into a venture aimed at easing the ongoing credit squeeze on SMEs, marking its latest intervention in the sector since the onset of the financial crisis.

The Government's ISIF is funnelling the cash into a new pan-European debt fund run by the New York-based credit specialist, Muzinich.

The US firm yesterday confirmed it plans to open an office in Dublin shortly and said it is in the "process of hiring a private debt specialist to head up" its new Irish operations.

ISIF has pledged €40m to the fund's first close and €5m to a second funding round. Muzinich has previously said it is aiming to raise between €500m to €1bn for the vehicle.

The State contribution means Muzinich will inject at least €67.5m into Irish SMEs, and in an effort to ensure the debt winds-up where the credit restrictions are tightest, the fund will target firms looking for loans of €10m or less.

A spokesperson for ISIF yesterday confirmed the investment and said discussions about Muzinich establishing a presence in Ireland had been underway since early 2016.

News of the Government's involvement with the US firm, which manages $28bn worth of assets, came as Muzinich revealed it had raised €180m from pension funds, insurance companies and family offices as a first close of its Pan-European Private Debt Fund.

The Irish loans will be rolled into the closed-end vehicle, which has an eight-year investment term.

Veteran investor, George Muzinich, who founded the credit boutique in 1988, has previously described the push into Ireland as part of a longer-term strategy to provide financing to medium-sized enterprises in Europe.

While Muzinich has only just launched the new European fund that can co-invest with the likes of ISIF, filings with the Securities & Exchange Commission show it has been preparing the groundwork for years.

A document lodged with the SEC in 2015 states the firm "invests in the credit of middle-market companies in Italy and Iberia (ie Spain and Portugal) which do not have access to public capital markets".

The fund, headquartered in Luxembourg and mandated to invest across the capital stack is targeted at SMEs with an ebitda of between €3m and €20m. The loan maturities range from five-to-eight years. Kirsten Bode, a co-manager of the fund said the withdrawal of banks from the SME sector had created a "compelling opportunity" for it and its investors.

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