Firm: Hancock Capital Management LLC
Fund: Hancock Capital Partners V LP
Target: $550 million
Amount Raised: $619 million
Placement Agent: John Hancock Distributors LLC
“Credit is still a niche strategy in the private equity market,” Saverio R. Costa, a managing director at the firm, told Buyouts. “Since the financial crisis, LPs are making more risk-based decisions. They are seeking not just targeted returns, but risk-adjusted returns.”
Hancock Capital, the investment arm of John Hancock Life Insurance Co, closed its fifth mezzanine fund, Hancock Capital Partners V LP, in July at $619 million, above the vehicle’s $550 million target and just shy of its $625 hard cap.
Hancock Capital took 11 months to raise the fund, Costa said. ”We had a friendly market environment, as friendly as it could be for a niche strategy like ours.” The firm ended up turning away two or three investors that offered commitments in the $30 million to $50 million range because those investments would have carried the fund beyond its hard cap, he said.
The firm’s prior fund raised $449 million in September 2007. While Hancock Capital also makes non-control equity investments and other subordinate debt deals, the mezzanine strategy is the only one where Hancock Capital accepts commitments from outside investors. For its other strategies, it relies solely on capital from the insurance company’s own balance sheet, Costa said.
Prior investors include CMS Fund Advisors, John Hancock Mutual Life Insurance Co and St. Paul Travelers Cos, Buyouts has reported previously.
Despite the competition from senior debt, Costa said, “there still are plenty of deals out there. You just have to be very selective.” Hancock Capital has closed two deals out of the current fund and has a third transaction in the pipeline, he said.
The firm is a generalist but has done frequent deals in industries such as chemicals, logistics and transportation, government services and communications, he said. It generally avoids sectors such as retailing and risky technology developers.
Hancock Capital seeks companies with at least $10 million of EBITDA. Its investments are typically 80 percent debt, and the firm prefers to have as much as 20 percent in equity to participate in the upside of borrowers’ growth, Costa said. Warrants have fallen out of popularity, so the firm typically buys its equity positions alongside its credit commitments, but many issuers offer convertible stock.
John Hancock Distributors LLC received compensation as a sales agent for the fund, according to a regulatory filing.