Bain Going Back to the Well

Bain Capital is running out of money. Such a statement may seem a bit overdramatic, but the firm certainly is running low on the $10 billion it raised just this past spring. That effort included both an $8 billion general fund and $2 billion co-investment vehicle, with Bain telling LPs that the money would last far longer than the 21 months it took to blow through its $4.25 billion predecessor pool.

“We don’t raise funds with the intention of investing them in two years,” Bain CFO Mike Goss told Buyouts at the time. “[The previous fund] was undersized relative to our market power and opportunity. Now we have a fund that should last three to four years.”

Bain limited partners say that the $10 billion fund was around 30% called down as of Sept. 31, spent on deals like Dunkin Donuts and Burlington Coat Factory. Since then, it has closed on both HCA (approx. $1.2 billion from Bain) and Michaels Stores (approx. $1 billion)—and is on the hook for both OSI Restaurants and Clear Channel.

In other words, well over half of the $10 billion is committed. At this pace, it should be out of dry powder by Q2 2007—or around 15 months since holding a final close.

Sources say that Bain has little appetite for raising another fund so close on the heels of its last one, nor is it interested in some sort of public flotation like the KKR Euronext offering. Instead, it has discussed more conventional options, which could include some sort of profit reinvestment, an annex fund or an expansion of its current fund size with existing and perhaps also new LPs.

A Bain spokesman declined to comment.

Some Bain critics suggest that this capital crunch is the inevitable end result for a firm that rarely sees a deal it doesn’t like. And there is some truth to that line, although the reality is that no LBO firm has done a good job managing the current dealflow gusher. Blackstone, KKR and Thomas H. Lee Partners are among those that have increased their fundraising targets this year, and could very well do so again. Bain is no different, only more recent.—D.P.