Hark Capital raises $203 mln to lend to PE, VC funds

Hark Capital closed Fund II in August on $203 million to provide fund-backed loans to the portfolio companies of private equity and venture capital funds.

Unlike many private debt funds, which typically provide loans to individual companies based on their standalone creditworthiness, Hark Capital loans are backed by the underlying assets held by the funds that own the companies.

In the event of a default, Hark Capital’s loan is repaid before the underlying fund’s investors receive a return and before the general partner collects carried interest.

On its website, the Hark Capital team markets its loans as a lower-cost alternative for private market funds with aging portfolio companies in need of growth-equity-like financing.

The Hark Capital team, led by Managing Partner Doug Cruikshank, operates as a division of Enhanced Capital. The team rebranded as Hark Capital earlier this year “to better differentiate itself” in the market, according to a recent Hamilton Lane memo prepared for Teachers’ Retirement System of Louisiana.

Hark Capital “operates in a niche market and faces limited competition in this specialized financing space,” the Hamilton Lane report says. In that regard, the firm has few competitors, Hamilton Lane wrote.

Though it targeted $200 million, Hark Capital II could have as much as $400 million in investable capital by using leverage. Its portfolio will include 20 to 30 North American investments. Hark typically invests $5 million to $60 million per deal.

The firm’s first fund, a $106 million 2013 vintage, had realized 11 investments through the end of last year and was netting a 10.6 percent internal rate of return and 1.1x multiple, according to the Hamilton Lane report. Hamilton Lane marked Hark Capital’s performance among the top 25 percent of credit funds.

TRSL committed up to $25 million to Fund II earlier this month.

In addition to Cruikshank, Michael Korengold and Mark Slusar sit on the fund’s investment committee, the Hamilton Lane memo says. Rafael Castro and Rich Davis are senior principals on the fund.

Enhanced Capital and the Hark Capital team could not be reached for comment.

Action Item: More about the Hark Capital team: http://harkcap.com/

Hands are silhouetted against a backdrop projected with the picture of various currencies of money in this illustration taken April 4, 2016.  Courtesy Reuters/Kacper Pempel

Correction: The story was corrected to note that Hark Capital was targeting $200 million, not the $100 million as cited by the Hamilton Lane report. The fund’s amount of investable capital, including leverage, doubled from a prior version of the article as well. The story also was updated to include information that Fund II held a final close in August on $203 million.