Document Preview
  • Full Text
  • Scholarly Journal

Claritas Capital Raising More Than $100M For Mezzanine Debt Fund

Gormley, BrianThe Private Equity Analyst; New York (Oct 2009).

Full text preview

Venture capital firm Claritas Capital is raising a mezzanine-debt fund to capitalize on the credit crunch constraining small companies.

The health care and technology venture investor is raising more than $100 million for a mezzanine fund aimed at health care-services and business-services companies with $2 million to $10 million in earnings before interest, taxes, depreciation and amortization. Banks have fled that market since the meltdown, and Claritas is betting they won't return for two to three years.

The Nashville firm began raising Claritas Capital Specialty Debt Fund LP over the summer and expects to hold a first closing shortly, said Managing Partner R. Burton Harvey, who has joined from Morgan Keegan & Co. to lead the mezzanine effort. A final closing is expected in mid-2010, he said.

Claritas' move into mezzanine investing is part of an effort to prosper in down as well as up markets. As a venture investor - it manages $43 million across three venture funds - it hopes to benefit in good times as portfolio-company valuations rise. With the mezzanine fund, the partners aim to bankroll companies being shortchanged through no fault of their own.

"If you're an alternative-asset manager, there are benefits to having multiple funds under your suite," Harvey said. "Mezzanine debt is a counter-cyclical product; I have the ability to benefit economically in both down- and up-turns."

A venture firm managing multiple types of funds is uncommon but not unprecedented. Another doing so is NewSpring Capital, of Radnor, Pa., which has a health-care venture fund, an equity pool for growth opportunities and a mezzanine-debt fund. Claritas' debt vehicle will take aim at expansion deals.

"The business model is, companies needing capital to help with [a] growth program or acquisition," said Managing Partner John H. Chadwick, a venture investor. "It helps fill a void in...