CarVal To Close On $5B-Plus Distressed Fund

Firm: CarVal Investors

Fund: Distressed/Deep Value

Amount Raised: $4B

Will Close On: Over $5B

Placement Agent: Park Hill

If the economic downturn is coming, one of the largest distressed investors out there will be well prepared for it.

CarVal Investors LLC, a Minneapolis-based investment arm of conglomerate Cargill Inc., is preparing to close on more than $5 billion for its first distressed investment fund accepting capital from outside investors, according to two people familiar with the fund. The fund appears to be the largest first-time vehicle ever raised.

Cargill intends to put up about 40 percent of the money, leaving about $3 billion to be raised from outside investors. The fund is on pace to close by the end of this month, according to a limited partner. A CarVal spokeswoman declined comment.

The fund is a hybrid private equity and hedge fund, to accommodate investors from both realms, with about two thirds structured as a private equity fund, said one person familiar with the fund who is not an LP. But the hybrid structure is meant only to accommodate investors; the investment strategy is identical for the entire fund, the person said.

Since its founding in 1987, CarVal’s assets under management have grown to around $10 billion, and it employs over 200 people around the world. It invests in loan portfolios, real estate, corporate securities and special opportunities. Its loan portfolios include investments in commercial and industrial loans, consumer and health care receivables, and residential mortgages. Its real estate practice recently purchased Tampa, Florida-located office building Tampa City Center, while its corporate securities branch has invested in Delta Air Lines’s bonds. Its special opportunities unit has bought such varying assets as music catalogs and oil and gas rights.

The placement agent on CarVal’s distressed investment fund is New York-based Park Hill, which in the last year has also raised money for Centerbridge Capital Partners, a buyout and distressed fund founded by the former head of private equity for The Blackstone Group, Mark Gallogly. Blackstone is a Park Hill minority investor and often uses the placement agent on its fundraising efforts, including the vintage 2006 Blackstone Mezzanine Partners II.

CarVal’s parent Cargill is a food, agricultural and financial services giant perennially ranked by Forbes as the largest private company in the world. Based in Minneapolis, it employs over 140,000 people in 60 countries. Its five main businesses are crop and livestock; food; health and pharmaceutical; industrial products; and financial service and risk management. Cargill has long been a commodities trader, and CarVal grew out of a high-yield trading operations during the financial crisis of the early 1990s.—M.C.