Blackstone, CrossHarbor May Team On Distressed Fund

Stephen Steinour, an executive at Boston-based asset manager CrossHarbor Capital Partners, is in early talks with The Blackstone Group to put together a fund to invest in distressed banks and financial institutions, according to sources familiar with the matter. The sources, one of which is close to Steinour, cautioned that the talks could go nowhere since the market for fundraising is so difficult.

Steinour, formerly chief executive of Citizens Financial Group, joined CrossHarbor Capital as managing partner in March. In its press release announcing Steinour’s arrival to the firm, CrossHarbor Capital touted his deal experience, noting he had overseen more than 26 bank acquisitions while at Citizens Financial. Also, earlier in his career, Steinour served as division executive for the Recoll Management unit of Fleet Financial Group, an $8 billion distressed commercial loan recovery business.

Founded in 1993, CrossHarbor Capital describes itself as an “active investor in the distressed secondaries market.” With regard to private equity, the firm makes control investments, preferring to be either the sole or lead equity investor in its portfolio companies. The firm has also committed more than $1.7 billion in capital to more than 145 real estate transactions since its inception. Its main focus is the United States but it also selectively considers deals in other countries.

In March 2006 the firm disclosed $116.5 million in capital commitments to a vehicle called CrossHarbor Institutional Partners LP. According to a related regulatory filing, that fund was seeking $450 million for real estate investments.

Blackstone, one of the world’s largest private equity firms, is fundraising for Blackstone Capital Partners VI. That fund originally had a target of $19.5 billion but the firm is widely believed to have lowered its expectations given the dismal fundraising market and credit crunch that has stifled all but small transactions. Thomson Reuters data puts total pledges at $7.1 billion.

Blackstone declined comment on this story, while CrossHarbor Capital didn’t return a call.