Littlejohn Launches $500M Non-Control Fund

Firm: Littlejohn & Co.

Fund: Littlejohn Opportunities Fund LP

Target: $500 million

Amount Raised: $16.1 million

Sensing a continuing demand by limited partners to invest in distressed situations, Greenwich, Conn., buyout shop Littlejohn & Co. is raising a $500 million side fund for non-control deals.

The firm, a specialist in distress investing, has already held a first close of $16.1 million for the Littlejohn Opportunities Fund LP, a regulatory filing from January showed. The filing also identified the new fund as a hedge fund, indicating that the fund will focus on publicly traded securities, predominantly debt instruments in all likelihood.

Richard Maybaum, a managing director at Littlejohn & Co., disclosed the fund target at the Buyouts New York conference in late April. The launch of the new fund follows closely on the close of Littlejohn Fund IV LP, a $1.34 billion pool that held its final close in November. Fund IV closed above its $1.25 billion target and just below its $1.35 billion hard cap.

Fund IV set aside 20 percent of its capital to make non-control investments in distressed companies, often by buying up debt from the target’s creditors, with the intent to gain control. In fact, in 2007, the firm had persuaded investors in its $850 million, 2005-vintage Littlejohn Fund III LP to broaden the fund’s mandate beyond conventional buyouts, specifically to gain the flexibility to allocate capital to non-control distress deals.

Maybaum joined Littlejohn as a partner in 2005 to invest and manage the dedicated Distressed Securities Pool of Fund III. He is now investing and managing the dedicated Distressed Securities Pool of Fund IV and the new fund.

Angus C. Littlejohn Jr., chairman and CEO of the firm, told Buyouts in an interview in November that he believed many mid-market companies had overleveraged themselves during the boom years of 2006 and 2007. Those companies took on covenants that would require them to grow EBITDA at mid-teen compounded rates, far beyond realistic growth expectations, Littlejohn said at the time. “They are not going to be able to outgrow that debt. At some point, they are going to have to restructure that balance sheet.”