GSC Raises $530M For Distressed Deals

Firm: GSC Group

Fund: GSC Recovery III

Target: $500 million

Amount Raised: $530 million

GSC Group is making a bet that some mid-market manufacturing and services companies could use help straightening out their balance sheets and improving their results. Its latest distressed asset fund, GSC Recovery III, closed in mid-December at $530 million in commitments.

The Florham Park, N.J.-based firm plans to buy distressed debt securities with an eye toward eventually converting its position into a controlling or share-control equity position, says Carl J. Crosetto, a managing director.

GSC is not, and Crosetto emphasizes not, a turnaround specialist that goes into a “down and out” company, changing the way it operates. Rather, he explains, “we would fix the balance sheet, restore it to health, then be an LBO firm” that helps the company improve its results prior to an IPO or sale.

The ideal target company, Crosetto says, has financial problems, but not necessarily operational problems. “Maybe they did an acquisition that didn’t go right and they overleveraged their balance sheet,” he says.

GSC plans to invest only in U.S. companies during a four-year investment period. The pace of investment depends on the credit cycle. “If it gets really tight, it could be [invested] very quickly,” Crosetto says.

GSC’s last two funds, GSC Recovery II and GSC Recovery IIA, were both in the $400 million range.—E.B.