Cadent Surges Past Target For Fund II

Firm: Cadent Energy Partners

Fund: Cadent Energy Partners II LP

Target: $375.0 million

Amount Raised: $473.3 million

Placement Agent: Lazard

Fresh off of posting a 2x-plus cash-on-cash multiple for its debut vehicle, Cadent Energy Partners encountered little trouble convincing limited partners to re-up for the LBO firm’s sophomore institutional fund. After six months of fundraising, the energy-focused shop closed Cadent Energy Partners II LP in late March with $473.3 million in commitments, almost $100 million above its target.

Backers of the new fund, placed by Lazard, include the Andrew W. Mellon Foundation, the University of Chicago, and CommonFund. Cadent Energy Partners’s second fund includes a mix of new and old LPs, many of which increased their allocations, said Jennifer Cochran, vice president of finance for the firm, which is based in Rye Brook, N.Y.

However, one investor is not re-upping. The Royal Bank of Canada, Cadent Energy Partners’s former parent and anchor investor, declined to back the new fund. The bank and the buyout firm wouldn’t say why RBC decided not to return for Fund II.

Cadent Energy Partners formed in 2003 when RBC shuttered its buyout arm, known as RBC Capital Partners, citing Canadian regulatory concerns. Four pros from the group’s energy team spun out to create Cadent Energy Partners, and subsequently generated a 4x return on RBC Capital’s existing portfolio. Based on that performance, RBC returned to invest $25 million in Cadent Energy Partners’s first institutional fund, which closed in 2005 with $223.9 million in commitments.

The firm’s track record goes beyond its first fund and its roots with RBC Capital. Two of Cadent Energy Partners’s managing partners—Paul McDermott and Bruce Rothstein—formerly worked for First Reserve Corp., the largest energy-sector player in the buyout business.

Cadent Energy Partners plans to make six to 10 investments out of its second fund. With twice as much capital to deploy, the firm will “slightly” increase its previous EBITDA target range of $10 million to $100 million, Cochran said. The firm’s LPs blessed the firm’s move up-market, despite speculation that it might encounter bigger competitors moving down because of slower deal flow in the large market, she added. So far, however, the firm has yet to see competition from the likes of First Reserve, she said.

The firm also told LPs that it would stick to its four areas of concentration: exploration and production, oilfield services and equipment, power services and equipment and downstream petroleum.

Coinciding with the new fund, Cadent Energy Partners opened an office in Houston, its second location.—E.G.