Mistral Forms As Trimaran Rebuilds

Andrew Heyer, a managing partner at Trimaran Capital Partners, has launched a new buyout firm to make plays in the consumer-related and retail markets, a source close to Trimaran told Buyouts. Mistral Equity Partners includes at least one other professional from Trimaran, Managing Director Bill Phoenix.

Meanwhile, despite the departure of Heyer and Phoenix and the departure of four other professionals earlier this year, New York-based Trimaran is preparing to raise money for its third fund, Buyouts has learned. Trimaran Capital Partners III has a preliminary target range of $700 million to $1 billion. Trimaran plans to raise an interim $300 million to make deals happen while beating the bushes for money for the larger fund. Fundraising for both is slated to start later this year, according to a source close to Trimaran.

Not surprisingly, the departure of several top executives from Trimaran had stoked speculation that the firm had abandoned any attempt to build a third fund. “It is what it is,” the source close to Trimaran said of reports suggesting the firm’s demise and friction with departed executives. “There’s no big scandal here. It’s amicable. And we wish them luck.”

Trimaran initially started trying to raise a third, $1.25 billion fund in 2004, but limited partners expressed dissatisfaction with the fact that the firm was still sitting on $370 million in unspent equity from the vintage 2001, $1 billion second fund, according to the source close to Trimaran. What’s more, LPs told the firm that if it wanted money for a third pool, it needed to achieve more than the $190 million in realizations it had produced by 2004.

Now, Fund II is fully invested, thanks in part to the $28 million purchase in February of Bugaboo Creek Steakhouse, and the firm has reaped $800 million in realizations on the second fund, the source said. In February, the firm recapitalized its $64.8 million investment in International Transmission, netting $291 million.

Trimaran has eight major investments remaining in its portfolio and, according to a second source familiar with both Trimaran and Mistral Equity Partners, Heyer and Phoenix had lead roles in the acquisitions of at least half of them. The pair will maintain all Trimaran portfolio responsibilities, and are making new investments from now on under the Mistral Equity Partners banner.

Both Heyer and Phoenix sit on the boards of a number of Trimaran-owned portfolio companies. Heyer sits on the board of Brite Media Group, a developer of alternative media businesses; El Pollo Loco, a quick-serve restaurant chain specializing in flame-grilled chicken; and Village Voice Media, an alternative newsweekly publisher. Trimaran-backed companies that Phoenix helps to direct include Charlie Brown’s, a casual dining restaurant chain; Reddy Ice Holdings, a manufacturer and distributor of packaged ice; and Urban Brands, a specialty apparel retailer.

Mistral Equity Partners plans to raise an inaugural fund of between $400 million and $500 million. To gain a competitive edge, it has formed a partnership with the Schottenstein family, a well-known acquirer of retailers such as American Eagle, DSW Shoe Warehouse and Filene’s Basement. The family will be an LP in Mistral Equity Partners’s fund, and Jay Schottenstein, chairman of American Eagle, will work part-time at the new firm.

Earlier this year, four professionals left Trimaran to take up posts at private investment firm Columbus Nova, which has offices in the United States and Russia. The four who left were Steve Flyer, a managing director; Dan Benyaminy, a director; and Dan Gaspar and Greg Prata, both associates.—D.P., A.N. & J.H.