Highland Seeks $750M For Distressed Opps

Highland Capital Management LP is seeking $750 million for its latest fund, Partner Patrick Daugherty said this week during a panel discussion at the Buyouts New York conference.

The fund is Tunstall RCP II LP, a distressed opportunities fund which pursues a “loan-to-own” strategy of buying the credit of troubled companies with the intention of eventually gaining control of them. The fund has a 10-year investment life.

The fund will invest across a variety of sectors, seeking companies with “logistical or proprietary advantages with long-term barriers to entry,” according to a source familiar with the fund’s strategy.

Dallas-based Highland Capital manages around $22 billion of assets, specializing in bank loans, high-yield credit, distressed debt and private equity, among other strategies. Daugherty, as head of special situations, distressed and private equity, is responsible for the management of more than $8 billion in assets.

A typical example Highland Capital’s loan-to-own strategy can be found in American HomePatient, a medical equipment maker that avoided a second trip through bankruptcy in October 2010 when Highland Capital took 100 percent control of it.

Highland Capital initially invested in the Brentwood, Tenn.-based company more than 10 years ago, buying some of its bank loans before its July 2002 bankruptcy filing. When the company emerged from bankruptcy, Highland Capital bought more of the company’s senior debt and stock, and launched an unsuccessful takeover in 2006.