Centerbridge Closes At $4.4B, Above Target, Has 100% Fee Offset

Centerbridge Partners, which has owned stakes in such high-profile companies as BankUnited, Extended Stay Hotels and Dana Holdings car components, just held its final close on Centerbridge Capital Partners II LP, having raised $4.4 billion, substantially above the firm’s initial $3.75 billion target. Terms include a 100 percent offset on transaction fees that the fund charges its portfolio companies, a feature that has become increasingly popular among investors.

The firm, which was founded in 2005 and manages at least $10 billion in assets, is run by private equity veterans Jeffrey Aronson and Mark Gallogly, whose investments have mainly focused on buyouts and distressed securities. Plans for the new fund are to make investments in companies of between $100 million and $250 million in size, mostly in U.S.-based firms, according to a source.

The $4.4 billion raised for Fund II includes $4.25 billion from limited partners and $150 million from the firm’s principals, according to a source who added that some investors were turned away or saw their commitments reduced. So far, about 10 percent of the fund’s capital has already been invested.

Investors in the firm include a number of prominent pensions, including the California State Teachers’ Retirement System, the Massachusetts Pension Reserves Investment Management Board, the State of Wisconsin Investment Board, the New Jersey Division of Investment, the Arizona Public Safety Personnel Retirement System, the Arizona State Retirement System, the Los Angeles Fire & Police Pensions, the Montana Board of Investments and the Alaska Permanent Fund.

Buyouts reported in August that the firm planned to start raising Fund II. The firm engaged Park Hill Group, owned by the Blackstone Group, as placement agent. The firm’s last fund, the Centerbridge Special Credit Partners LP, closed in 2010 with $2 billion in commitments. That fund, reported Buyouts, was geared more toward distressed and activist-oriented credit investments.

Centerbridge’s debut fund, the Centerbridge Capital Partners LP, which the firm raised in 2006, closed with $3.2 billion in commitments.