* To invest an initial 250 mln euros
* Plans further "significant commitments"
* To target companies worth 200 mln euros-1 bln euros (Adds background, detail, quote)
By Simon Jessop
LONDON, July 17 (Reuters) - British insurer Legal & General(L&G) plans to start lending direct to businessesacross Europe, offering a much-needed boost to small andmid-sized companies starved of credit from the banking system.
It joins peers such as French-listed AXA andGermany's Allianz in filling the gap left bycash-strapped banks, creating a so-called shadow banking systemto boost income during a period of sustained low interest rates.
L&G said on Thursday that it had subscribed for a 40 percentequity stake in Pemberton, an alternatve asset management firmthat is launching a new direct lending platform to provide loansand private placements to mid-market companies.
The service will focus on companies with turnover of between100 million euros ($135 million) and 1 billion euros. L&G, whichinvests 463 billion pounds worldwide, said it would invest aninitial 250 million euros with the intention of making further"significant commitments".
"The UK and Europe have been too dependent on bankfinancing, and this impacts particularly on businesses wishingto invest and expand," Paul Stanworth, managing director ofLegal & General Capital, said in a statement.
NEW ASSET CLASS
"Creating a new channel to deploy longer-dated institutionalmoney in the mid-market sector will help drive economic recoveryat a time when bank balance sheets are constrained, as well ascreating a further asset class for direct investments byinsurance companies and other institutions."
Loans will be made using Pemberton's on-the-ground presencein various European markets and its network of regional bankrelationships, the statement said.
"Through our platform, we will enable the mid-market toaccess funds from established institutional investors at a timewhen the number of loans available from banks is in decline,"said Symon Drake-Brockman, managing partner at Pemberton.
AXA and other French businesses, including fund managerssuch as Amundi, have taken advantage of government help to boostthe fledgeling industry.
The move to direct lending in companies by 178-year-old L&Gfollows sharp growth in its spending on building infrastructureand housing in Britain, another much-hyped avenue for higherreturns as governments struggle to fund such investments.
L&G's current investment in infrastructure and housingstands at 4 billion pounds, it said.($1 = 0.7390 Euros) (Editing by David Goodman)