Here Comes The Sun… Again –

When Sun Capital Partners raised its third fund just two years ago, the firm was overcome with limited partner enthusiasm-to the tune of over $2 billion of demand in just two weeks after sending out the private placement memorandum. But Sun ultimately capped the vehicle at $500 million, leaving $1.5 billion on the table.

Sun Capital has started raising a new fund, but this time around the firm has left some room for those limited partners that were not able to be accommodated in the last go-around. The new fund, Sun Capital Partners IV LP, according to a Form D filed with the Securities and Exchange Commission, is targeting $1.5 billion, but even that number could get higher. Sun Capital did not return calls to Buyouts by press time.

It’s unclear if Sun is raising the larger fund just because it can, or if the inflated the target is the result of something the firm sees in the market.

Sun has never been afraid of taking on a distressed property. The firm doesn’t classify itself as a distressed investor per se, but it clearly has a knack for imparting a turnaround on companies in its portfolio.

Fund III, for example, famously acquired the Musicland Group franchise out from Best Buy in a deal that cost the private equity firm just one dollar and the assumption of debt. Another example of a typical opportunistic play by Sun came when the firm made a roughly $3 million investment in the publicly held artificial flower maker Celebrity Inc. The 2002 investment gave Sun a 75% stake in the struggling company, which had been booted off the Nasdaq and was trading as an over the counter stock by the time firm made its investment. Sun quickly put a new business plan in place and the company was able to double its EBITDA in just one year. And after 18 months, KRG Capital Partners acquired the business in a deal that reportedly returned more than $20 million to Sun.

That the firm is targeting a $1.5 billion fund could be evidence that Sun anticipates there could some trouble on the horizon. On the other hand, the firm invested its third fund at a breakneck pace. In fact, by the time Sun was finished raising capital for the vehicle, the new fund was already 20% committed.

Moreover, Sun has not been afraid to go after larger transactions when the opportunities arise. Last summer, the firm acquired the former Target property Mervyn’s for $1.65 billion, teaming with Cerberus Capital Management and Lubert-Adler/Klaff Partners.

According to the filing, Sun will accept a minimum investment of $5 million for the fund, although the firm reserves the right to accept less in certain circumstances. The filing specified that there will be a $100 million management fee.