Lender Fairway Capital Plans Energy Equity Fund

Firm: Fairway Capital Partners

Fund: Fairway Energy Partners LP

Target: $200 million to $250 million

Placement agent: In preliminary talks

Fund: Jefferson Fairway Capital (SBIC fund)

Target: $50 million equity ($150 million total)

Placement agent: None

Fairway Capital Partners, a leveraged lender in Houston, is planning to launch an energy equity fund, its first, with the addition of two new investment pros.

The firm expects to go to market in the fall for the fund, Fairway Energy Partners LP, which is likely to have a target of $200 million to $250 million, said Lester F. Alexander III, a managing director. Alexander estimated it would take 18 months to raise the funds, with a probable first close at the end of this year and a final close by yearend 2012.

Fairway Capital is in talks with prospective investors now about making anchor investments, Alexander said. The firm probably will use a placement agent and is in the early stages of evaluating candidates, with seven on its list, representing both the East Coast and the West Coast.

Until now, Fairway Capital has focused on leveraged finance to companies with sales of $15 million to $250 million, according to its Web site. The firm typically provides $3 million to $10 million of capital in a senior, junior secured or subordinated loan to companies in industries including financial services, oil and gas, energy services, environmental products and services, health care, consumer goods, manufacturing, distribution, professional services, and construction and heavy industry, but the Web site says it does not make real estate investments or loans to early stage companies.

The decision to launch the new energy equity fund was the result of two new hires at the first of the year, Alexander said. He joined Fairway Capital then, along with Crichton Brown. Both men had been at a New Orleans firm, Advantage Capital Partners, which has $1.3 billion under management. Brown had been one of the original partners at Advantage Capital 17 years ago, while Alexander had been there three and a half years, he said.

For the planned Fairway Energy Partners fund, the firm envisions making plans seven to 10 platform investments, writing checks of $5 million to $15 million, with an equal amount of follow-on capital for growth or add-ons, Alexander said. The fund will target North American properties, primarily oil service and oilfield equipment companies, along with some alternative energy investments. The fund will not participate in oil and gas leasing deals, he said.

Fairway Capital is also near a first close for a planned $50 million small business development company, Alexander said. A final close may be a couple of months away. Federal rules allow SBICs two turns of leverage on their equity investment, so this one, called Jefferson Fairway Capital, will ultimately constitute a $150 million pool. SBICs typically provide mezzanine financing to small businesses.