Better Capital and NTMA to shut €100m SME turnaround fund

A €100 million fund backed by the State and managed by Better Capital to invest in turning around Irish small and medium enterprises will be wound down in December after failing to find any company to invest in over two years.

British venture capitalist Jon Moulton’s Better Capital initially teamed up to create a new €100 million SME “turnaround fund” which it financed 50-50 with the National Pension Reserve Fund in January 2013.

The fund was described by the NPRF at launch as being set up to invest in “underperforming businesses which are at or close to insolvency but have the potential for financial and operational restructuring”.

Yesterday, the National Treasury Management Agency, the manager of the NPRF, said it could "advise that the NTMA and Better Capital have agreed not to extend the investment period of the Better Capital Ireland 2012 Fund ("the Turnaround Fund") which expires at the end of December 2014".

However, it added that the two parties “ will continue to collaborate in respect of turnaround investment opportunities in Ireland post-December 2014”. This will be outside the framework of the turnaround fund.

The NTMA said the fund had been set up with a lifespan of two years, with the intention of investing in distressed firms but that positive changes in the economy meant it saw few potential investments.

“In the context of improving market conditions and renewed confidence, financial institutions and business owners see a much reduced need for restructuring capital investment into distressed businesses and are now focusing more on stabilising and growing businesses’ balance sheets,” the NTMA said.

“The joint venture partners believe, however, that the presence of the Turnaround Fund in the Irish market has provided an option for business owners and banks, and will have acted as a catalyst to accelerate restructuring decisions by these parties,” the NTMA said.

Better Capital, the NTMA said, had decided to close its Dublin office in December of this year. The NTMA declined to comment on how much it had cost the State agency to run the aborted fund over the last two years.

The NTMA said the NPRF was transforming into Ireland’s Strategic Investment Fund and it had “largely completed” the recruitment programme to increase its direct investment capabilities.

Brian Stephens, director of Better Capital in Dublin, declined to comment when contacted.

Mr Moulton in a stock exchange announcement for Better Capital PCC Ltd on July 30th said in relation to the Turnaround Fund that: “The relationship with the NPRF remains strong with both parties remaining committed to the joint venture. Deal flow has, however, not been as strong as would be liked.”