Crescent Capital gets $3.5 bln for mezzanine fund

  • Firm: Crescent Capital Group
  • Fund: Crescent Mezzanine Partners VII Series
  • Amount Raised: $3.54 bln
  • Placement Agent: First Avenue Partners

Crescent Capital Group, the Los Angeles specialist in junior capital investments, raised more than $3.5 billion for its seventh mezzanine fund, the largest in the firm’s 24-year history, filings showed.

The fund comes as prospects for corporate lending are strong, not only in senior debt but lower down in the capital stack where Crescent Capital participates.

A series of seven Crescent Mezzanine Partners VII vehicles drew in commitments totaling $3.54 billion, eclipsing the $3.4 billion the firm raised for Fund VI in 2013, which had been the largest private mezzanine offering in the history of the fund family.

The largest of the Fund VII series, Crescent Mezzanine Partners VIIC LP, drew in just under $2 billion. (See: Crescent-Mezzanine-Partners-VII-Funds)

A spokesman for Crescent did not return a phone call from Buyouts. Whether the fund is still in fundraising mode or has been closed is unclear.

Jean-Marc Chapus, co-founder and managing partner of Crescent Capital, said in a video on the website that the mezzanine program seeks about eight to 10 deals a year, with better returns than other asset classes in a low-interest-rate environment.

Junior debt is often lent at fixed and floating rates of 11 percent to 14 percent, according to market estimates.

Chris Wright, managing director of mezzanine for the firm, said Crescent maintains “very, very deep relationships that create significant barriers to entry.”

After looking at as many as 300 prospects a year for 20-plus years, Crescent Capital has built a “vast database” of companies and their competitors, he said. “We can move very quickly, particularly in situations where it could give our client a differentiated advantage,” Wright said.

The firm dates back to 1992 as a provider of junior debt capital, mostly to fund shareholder transitions for private equity firms, the website says. In 2013, Crescent Mezzanine Partners VI beat its target of $2.5 billion despite a dry spell at the time for more junior forms of lending.

As of Sept. 30, Crescent Capital employed 150 and managed $23 billion.

Providing mezzanine capital to firms, Crescent remains poised to capitalize on healthy interest from borrowers and investors in smaller, challenged and marginal credits, according to middle-market debt provider SPP Capital.

“Credit opportunity funds, business development companies and mezzanine lenders are eager to lock in yield,” Stefan Shaffer, SPP Capital managing partner, said in a research note. Increasingly, lenders are providing structures to reward issuers that delever or improve EBITDA generation over the life of the deal, he said.

“The fourth quarter will end on a strong note with pricing and leverage metrics among the most aggressive for the year,” Shaffer said.

“Election results seem to be a non-event, and, if anything, suggest middle-market issuers could be the beneficiaries of a more protectionist trading policy with lower tax rates and improved potential for growth. Rates seem to have stratified and will likely not become more aggressive in the new year.”

Crescent Capital Partners IV, the vintage 2011 fund, generated an 8 percent IRR as of Sept. 30, 2015, for Maryland State Retirement and Pension System. Crescent Mezzanine Partners V, the vintage 2008 fund, produced an IRR of 10.1 percent for Los Angeles City Employees’ Retirement System as of Dec. 31, 2015.

Through Dec. 16, 2016, mezzanine funds raised a total of $176.9 billion, compared with $228.2 billion in 2015, according to Buyouts.

Action Item: Contact Crescent Capital,

A crescent moon is seen over Buenos Aires at sunrise on Sept. 6, 2010. Photo courtesy Reuters/Marcos Brindicci