Distressed-investment specialist sets $7 bln objective for Fund IX

While most sponsors wait at least three years before launching their next fund, Lone Star Funds is signaling it’s already laying the groundwork for its next investment pool with a $7 billion objective for Lone Star Fund IX, according to a Form D filing with regulators.

If successful, the rapid turnaround could end up matching the short, two-year pause between Lone Star Fund VI in 2008 and Lone Star Fund VII in 2010.

The $7 billion target for Lone Star Fund IX matches the capital pledged to Lone Star Real Estate Fund III, which closed in 2013 as its second-largest fund out of 12 in the past 19 years.

With $7.5 billion raised, Lone Star Fund VI ranks as its largest buyout fund since founder John Grayken set up the firm’s first pool in 1995.

Among its recent deals, Lone Star Funds has filed a $200 million initial public offering for Continental Buildings Products Inc, after buying the former North American gypsum unit of France’s Lafarge SA for $700 million last year.

One major limited partner for Lone Star Funds has been Oregon Investment Council, which committed $300 million to Lone Star Real Estate Fund III last year. The council went beyond the $200 million recommendation of its advisor because of a more favorable fee structure, a spokesman for the state treasurer told sister publication peHub.com. Oregon Investment Council also committed $500 million to Lone Star Fund VIII last year, part of a total of $2 billion of commitments to the firm over time.

Lone Star Fund IX would continue the series earmarked for investments in the United States, Western Europe and Japan, including distressed loans and securities, as well as single-family residential and corporate and consumer debt products, along with financially oriented and asset-rich operating companies.

A spokesman for Lone Star Funds did not return a phone call requesting comment.

Lone Star Fund VI rang up an IRR of 14.6 percent for Sacramento Private Equity Partners as of Dec. 31, 2012. The performance fell short of the 19 percent top quartile threshold for that vintage year, as estimated by Buyouts, but easily outpaced the median return of 10.6 percent.

Lone Star Funds traces its roots to a joint venture between Robert M. Bass Group and the Federal Deposit Insurance Corp called Brazos Partners that acquired impaired assets from the U.S. savings and loan crisis in the early 1990s.