Shin Geum Investment & Securities Invests in Mezzanine Financing for Global IT Company 'Virtusa'

[Asia Economy Reporter Lim Jeong-su] Shinhan Financial Investment is investing in mezzanine acquisition financing for the global information technology (IT) company Virtusa Corporation.

According to the investment banking (IB) industry on the 27th, Shinhan Financial Investment plans to execute a $60 million (70 billion KRW) mezzanine loan to Austin Mezz Borrower LLC. Austin Mezz Borrower is a corporation established to raise funds for the acquisition (M&A) of Virtusa.

Austin Mezz received a total of $120 million in mezzanine loans when acquiring Virtusa. The loan has an 8-year maturity with a lump-sum repayment condition at maturity, but early repayment is possible in units of $500,000 with a minimum of $1 million depending on the circumstances.

Specific investment terms such as loan interest rates have not been disclosed. Generally, mezzanine loans offer higher expected returns compared to senior loans but are subordinate in repayment and collateral priority.

Austin Mezz was established by Baring PE Asia (Baring PEA), the Asian branch of the global private equity (PE) firm Baring PE. Baring PEA entered the bidding for Virtusa last year and successfully acquired it earlier this year for $2 billion (approximately 2.3 trillion KRW).

Virtusa is a U.S.-based IT service company founded in Sri Lanka in 1996. It provides IT and business consulting, system and application outsourcing services to major corporations. Its headquarters is located in Southborough, Massachusetts, USA.

Virtusa was delisted from Nasdaq and privatized after being acquired by Baring. Baring is expected to increase the corporate value through a global expansion strategy and then resell Virtusa to strategic investors (SI).

Shinhan Financial Investment and Shinhan Financial Group are expected to continue increasing joint investments or participation in M&A acquisition financing with Baring PEA. An IB industry official forecasted, "As Shinhan Financial Group strengthens capital partnerships or investment cooperation with PE firms, PE investments will also increase."