Black Canyon Plots Next Fund

Firm: Black Canyon Capital

Fund: Black Canyon Direct Investment Fund II LP

Target: To be determined

Placement Agent: None

Black Canyon Capital is gearing up to raise its second fund, a source with direct knowledge of the firm’s plans told Buyouts.

The Los Angeles-based shop did not use a placement agent to help it raise its first fund, a $500 million vehicle raised in 2006. But it might employ one this time and is currently interviewing placement agents, the source said.

Black Canyon will likely seek to raise an amount “in the same neighborhood” as the first fund, Black Canyon Direct Investment Fund, the source said. That fund has about $75 million left to invest, the source said.

Firm executives plan to formally launch the fundraising effort by the end of the year or early in 2011, the source said.

Black Canyon recently recorded a nice exit, which should help it encourage existing and prospective investors to support a follow-up fund. Along with co-investor Bruckmann Rosser Sherrill & Co., the firm generated about 4.5x its invested capital on restaurant chain Logan’s Roadhouse Inc., which they sold to Kelso & Co. for $560 million.

Black Canyon was founded in 2004 by Managing Directors Michael Hooks and Mark Lanigan, who were formerly co-heads of Credit Suisse First Boston’s Los Angeles investment banking department. Today the firm has nine investment professionals and has a partner relationship with Canyon Capital Advisors LLC, a Los Angeles-based asset manager with more than $14 billion of assets under management.

Black Canyon invests $25 million to $75 million in control-stake and minority investments in companies with EBITDA of at least $5 million. The firm also provides mezzanine debt and senior and subordinated loans. Black Canyon has invested more than $1 billion in companies in the business services, consumer products and retail, health care, media, restaurants, niche manufacturing, and industrial sectors.