Sifting through the debris of the financial crisis, a number of private equity firms are building leveraged lending funds to take advantage of opportunities for restructuring.
The St. Louis buyout firm Harbour Group Ltd. has begun marketing a $500 million fund, a source with knowledge of the campaign told Buyouts, with half of the fund designated for leveraged lending, the other half mainly for equity investing in troubled companies. Elsewhere on the restructuring front, H.I.G. Bayside Capital, an affiliate of the Miami multistrategy firm H.I.G. Capital LLC, announced in September that it had closed a $1.1 billion special situation fund, H.I.G. Bayside Loan Opportunity Fund II LP. And in April, Centerbridge Partners closed a $2 billion fund, Centerbridge Special Credit Partners LP, which also focuses on distressed debt.
Harbour Group anticipates lining up Wells Fargo & Co. to provide backing for the leveraged lending portion of the fund, which is to be leveraged at a 3:1 ratio, the source said. The equity portion is not expected to be leveraged.
Harbour Group has brought in investment pros from Freeport Financial to work on the new fund, the source said. Freeport, a mid-market lender in Chicago backed by the hedge fund manager Stark Investments, laid off most of its employees in February 2009 in the midst of the financial crisis, retaining a handful of investment pros to manage its portfolio as it winds down its operations.
Founded in 1976, Harbour Group has $706.5 million assets under management, according to Pratt’s Guide to Private Equity and Venture Capital Sources. It raised its last fund, Harbour Group Investments IV, in 1999. The firm generally invests in manufacturing and distribution companies in North America, seeking companies that have revenue of $30 million to $500 million and EBITDA of $4 million to $60 million. The firm did not respond to a request for comment.
H.I.G. Bayside Capital, H.I.G.’s distress debt specialist, said its new loan opportunity fund would complement its existing vehicle, the 2008-vintage H.I.G. Bayside Debt & LBO Fund II LP, a $3 billion fund that continues to be active and is focused primarily on control investments. The new fund, the firm said, will invest in non-control loan obligations of stressed and distressed companies in the U.S. and Europe. H.I.G. did not respond to a request for comment.