Firm: H.I.G. Capital
Fund: H.I.G. Bayside Loan Opportunity Fund IV
Target: $1 billion
H.I.G. Bayside Loan Opportunity Fund IV, which is in the market targeting $1 billion, will invest in the senior debt of distressed smaller companies in the U.S. expected to undergo restructuring, according to an investment memo from the Maine Public Employees’ Retirement System. Maine PERS’ board approved a commitment of up to $50 million to Fund IV, pending negotiations.
Fund IV will target non-control investments in companies with enterprise values typically under $350 million, the documents said.
“The small-cap segment of the private equity market is very inefficient; this is because the size of investments is typically too small to attract the attention of investment banks and other financial intermediaries,” the investment memo said.
“H.I.G.’s long experience in the small-cap market and the significant resources the firm can devote to analyzing smaller companies allows it to take advantage of this inefficiency to generate superior risk-adjusted returns,” the memo said.
Fund IV will charge a 1.5 percent management fee on committed capital during the four year investment period, and 1.5 percent of invested capital after that, according to a separate investment memo from Maine’s investment adviser, Cliffwater.
H.I.G. is kicking in a 3 percent, or $30 million, GP commitment to Fund IV, according to Cliffwater’s memo.
The firm is raising Fund IV with some new faces on the leadership group. H.I.G.’s debt group Bayside Capital is overall led by executive managing director John Bolduc. The managing director group includes Jackson Craig, Ahmed Hamdani, Lionel Laurant, Duncan Priston, David Robbins, Adam Schimel, Sensu Serpen and Paul Triggiani.
This group has changed in recent years with the departures of several managing directors, including Sean Ozbolt, who left Bayside in May after nine years and joined Aurora Capital Group affiliate Aurora Resurgence in July as a partner.
Tiffany Kosch, who worked as a managing director at Bayside, left in 2012 to work at energy-focused Peak Rock Capital. She left Peak Rock after less than two years and founded Mastiff Capital earlier this year, according to her LinkedIn profile.
Lewis Schoenwetter, a former managing director at Bayside, is listed on H.I.G.’s website as a managing director with affiliate H.I.G. Whitehorse. H.I.G. acquired the assets of WhiteHorse Capital, a CLO manager, in 2011 and formed H.I.G. WhiteHorse to provide financing to “profitable and performing” small and mid-market companies, according to the website.
Tim Eichenlaub worked as a managing director at Bayside for only about a year, from 2010 to 2011, before leaving to become chief credit officer at AloStar Bank of Commerce, according to his LinkedIn profile.
Appu Mundassery, a former managing director at Bayside who once led the group’s European activities, according to an archived version of H.I.G.’s website, is no longer listed on the site, though it is not clear when he left or if he has taken on a role elsewhere.
Maine made reference to managing director departures as one of the “risks” of investing in the Bayside fund, but said some turnover is to be expected.
“H.I.G. has 59 managing directors in the firm, with approximately nine in the Bayside platform. H.I.G. is an organization driven primarily by the senior managing directors. While turnover at the more junior managing director level is not desired, it is not as impactful at H.I.G. as it might be at other organizations,” according to the Maine investment memo.
Chris Witkowsky is editor of peHUB.