Safeguard Scientifics, Inc : Penn Mezzanine Closes Strong Year in 2011 with Six New Subordinated Debt Investments

Mezzanine financing has seen a surge of activity as both buyouts and refinancings have heated up over the past year

Penn Mezzanine ("Penn Mezz"), which provides $2-$7 million subordinated debt and minority equity financing to private, lower middle market companies primarily in the mid-Atlantic region, today announced its successful deployment of over $26 million of capital into six new portfolio company investments during 2011. Penn Mezz has benefited from the current phase of the credit cycle, with average leverage across the portfolio of only 2.3x EBITDA though Penn Mezz's debt at the time of each respective closing.

"Mezzanine financing has seen a surge of activity as both buyouts and refinancings have heated up over the past year," said Darl Petty, Managing Director at Penn Mezz. "We believe our investment pace is indicative of the recovering economy and normalized bank lending. Banks are back to funding deals, but they're also using reasonable leverage metrics, which accelerates deal velocity while maintaining solid deal flow for active mezzanine lenders. Buyout equity sponsors are being prudent in their return expectations and are willing to invest substantial amounts of equity in order to get deals done. And, sellers are more receptive to take junior subordinated seller debt as a component of the purchase price in order to reach their desired valuations. Add up these elements and you get a robust deal flow environment in the lower middle market."

Investing out of its inaugural vintage 2009 fund, Penn Mezz invested in a diversified mix of companies and transactions. Three of the six investments were in buyouts, two were refinancings, and one was an acquisition financing. Penn Mezz invested with three well-known funded sponsors, two independent fundless sponsors and one management-owned company. Geographically, portfolio investments were dispersed across the U.S. and included companies headquartered in Pennsylvania, Florida, Indiana, New York, and Texas. Diversity of company types and industries was also achieved, with two business service companies, two distributors (one of consumer products and one commercial and government products), one health care service business, and one manufacturer.

"We are excited to be able to provide a healthy mix of both subordinated debt and equity co-investments to these growing companies," said Don K. Rice, Managing Partner at Penn Mezz. "Our goal for 2012 is to continue to provide financing to well-performing companies in the lower middle market space with $5-50 million in revenues." Mr. Rice has been active in the mezzanine market since 1986 and has worked with Mr. Petty since 1997. Penn Mezz's existing fund represents Mr. Rice's seventh mezzanine vehicle over the past 26 years and Mr. Petty's third mezzanine fund with Mr. Rice.

Jeff Larsen, Managing Partner of the funded equity group, Larsen MacColl Partners, said, "We found working with Don and Darl to be an efficient process and they have proven to be good partners post-closing. We would definitely do another deal with Penn Mezz and hope to do so in 2012."

About Penn Mezzanine

Based in Wayne, PA, Penn Mezzanine focuses on making $2-7 million subordinated debt and equity investments, but has a depth of experience in larger $15-20 million mezzanine transactions with funded private equity sponsors and in non-sponsored family or management-owned companies with revenues in the $5-50 million range. Penn Mezz is affiliated with Safeguard Scientifics, Inc. (NYSE: SFE), a holding company that builds value in growth-stage life sciences and technology companies. For more information, please visit our website at www.pennmezz.com, Follow us on Twitter (www.twitter.com/PennMezz) or contact us at info@pennmezz.com or (610) 977-7595.

Penn Mezzanine
Media Contact:
Gregory FCA
Matt McLoughlin, 610-228-2123
Matt@GregoryFCA.com