Angelo Gordon Launches $900M Fundraise

Firm: Angelo Gordon & Co.

Fund: AG Private Equity Partners IV LP

Target: $700 million, plus $200 million reserve fund

Driven by the credit crunch, Angelo Gordon & Co. is joining the roster of turnaround specialists looking to capitalize on the faltering market by raising new distressed-oriented funds. Angelo Gordon, based in New York, plans to nearly triple the size of its previous fund, seeking to collect $900 million from limited partners for a fourth control-deal vehicle.

Angelo Gordon has attached a $700 million target to AG Private Equity Partners IV LP, and that doesn’t include a $200 million reserve fund Angelo Gordon plans to raise for equity plays of more than $75 million, according to a statement from the shop. Angelo Gordon’s last fund, closed in 2005, topped out at $350 million.

The LBO firm declined to comment for this story.

David Roberts, a senior managing director of Angelo Gordon, said in a prepared statement that the firm should find ample deal flow for the new fund as “the credit cycle unwinds,” opening “substantial opportunities for us to purchase smaller and distressed businesses at deep value prices.”

As part of the fundraising push, Angelo Gordon has hired two new professionals: Managing Director Jeff Feinberg, formerly an executive with turnaround advisory firm Alvarez & Marsal, and Harish Nataraj, a newly minted senior associate, who was most recently with buyout firm Kohlberg & Co.

Other firms looking to raise distressed-oriented funds include Dallas-based Treadstone Partners, which is out raising its first institutional fund with a $300 million target; Oaktree Capital Managment, which closed on a $3.5 billion fund earlier this year but is still adding to an overflow vehicle that could top $7 billion; and Drum Capital, a distressed funds-of-funds manager that is expected to close soon on a $500 million fund of funds.

Angelo Gordon writes equity checks of $10 million to $100 million in distressed and special-situations deals valued between $30 million to $300 million. Recent deals include the 2006 purchases of Kings Supermarket, a New York-area business that was orphaned by a British parent; Crunch Fitness, a boutique gym chain put up for sale by failing owner Bally Total Fitness; and Olympus Re Holdings, an insurer that suffered big losses following Hurricane Katrina.

Previous limited partners in Angelo Gordon funds include the New York State Common Retirement Fund and the University of Texas Investment Management Co. According to UTIMCO, through May 2007 Angelo Gordon’s most recent buyout fund, still deep in the J-curve stage, generated an IRR of 3.8 percent.

In addition to LBO funds, Angelo Gordon manages investments in distressed debt, real estate and hedge funds. The firm has $15 billion under management across its various strategies.—J.H.