Monomoy Capital Sets Stage For Fund II

Turnaround specialist Monomoy Capital Partners is preparing to refill its powder keg with an eye toward investing in the slew of troubled companies in the market today.

The New York-based firm is in the preliminary stages of raising its second fund dedicated to turnaround and restructuring situations, a source with knowledge of the situation told Buyouts. A first close on the new vehicle is expected sometime in the second quarter.

Monomoy Capital closed its first fund, the $280 million Monomoy Capital Partners LP, in January 2007, easily beating its $200 million target. With Fund I now two-thirds invested, the firm’s goal is to have Fund II ready to deploy capital before it predecessor runs out of dry powder for new investments. Approximately 20 percent to 25 percent of Fund I will be retained for add-on and follow-on investments for its existing portfolio companies, the source said.

Placement agent MVision, which helped raise Monomoy Capital’s inaugural pool, has been hired to assist with Fund II, as well.

Monomoy Capital has been informally gathering commitments from existing LPs for Fund II prior to its launching a more formal fundraising effort later this year. The firm’s three-year investment track record puts it in “a good place to raise Fund II,” the source said, noting it has thus far been met with investor support to move ahead with the effort.

“This is a terrible time to be raising money for a generalist fund, but a terrific time to be raising money for turnaround and restructuring plays,” the source said. The source, however, declined to comment when asked how much, if any, capital has already been raised for the new fund.

It’s expected that Fund II’s investors will primarily include Monomoy Capital’s existing limited partners, while a “select group of new investors that have been following the firm’s [Fund I] investment activity,” will also be added to the roster, the source said.

Fund I’s investor base is made up of approximately 18 institutional investors, as well as friends and family related the firm, according to a story that appeared in Buyouts around the time of that vehicle’s final close.

A target for the new vehicle has not yet been set, but our source said Fund II could end up “modestly larger” than its predecessor. The goal, however, is to keep Fund II at a size that would allow it to adhere to Fund I’s strategy of investing between $5 million and $30 million of equity capital to acquire troubled companies that generate annual revenue anywhere from $20 million to $200 million.

Monomoy Capital closed two deals in the first quarter of 2009. In February the firm acquired the Mexico-based operations of plastic injection molder Moll Industries Inc. as part of a tack-on investment for portfolio company Fortis Plastics LLC. Then in March it bought the aluminum die casting and machining operations of Citation Corp. to add on to its Compass Automotive Group Inc. platform.