PE fund briefs, week of April 21, 2008

Cadent surges past target, sans RBC

Cadent Energy Partners encountered little trouble convincing limited partners to re-up for the LBO firm’s sophomore institutional fund. After six months of fund-raising, the energy-focused shop closed Cadent Energy Partners II in late March with nearly $475 million in commitments, almost $100 million above its target.

Backers of the new fund, placed by Lazard, include the Andrew W. Mellon Foundation, the University of Chicago, and CommonFund. Cadent Energy Partners’s second fund includes a mix of new and old LPs, many of which increased their allocations, says Jennifer Cochran, vice president of finance for the firm, which is based in Rye Brook, N.Y.

However, one investor is not re-upping. The Royal Bank of Canada, Cadent Energy Partners’s former parent and anchor investor, declined to back the new fund. The bank and the buyout firm wouldn’t say why the RBC declined to re-up.

Cadent Energy Partners formed in 2003 when RBC shuttered its buyout arm, known as RBC Capital Partners, citing Canadian regulatory concerns. Four pros from the group’s energy team spun out to create Cadent Energy Partners, and subsequently generated a 4x return on RBC Capital’s existing portfolio. Based on that performance, RBC returned to invest $25 million in Cadent Energy Partners’s first institutional fund, which closed in 2005 with $223.9 million in commitments.

The firm’s track record goes beyond its first fund and its roots with RBC Capital. Two of Cadent Energy Partners’s managing partners—Paul McDermott and Bruce Rothstein—formerly worked for First Reserve Corp., the largest energy-sector player in the buyout business.

Cadent Energy Partners plans to make six to 10 investments out of its second fund. With twice as much capital to deploy, the firm will “slightly” increase its previous EBITDA target range of $10 million to $100 million, Cochran says.

Tenaska powers up fund II

After using its first fund to make about a dozen investments in U.S. energy companies and power-related assets, Tenaska Capital Management is back on the buyout grid with its second vehicle. The firm is targeting $1.5 billion for Tenaska Power Fund II, which has a hard cap of $2.3 billion.

The Omaha, Neb.-based buyout firm is the private equity arm of Tenaska Inc., one of the largest independent power producers in the United States. With fund II, the firm plans to take control stakes in a variety of power companies and energy assets nationwide. The firm will look to invest in power plants; natural gas storage facilities; electric and gas transmission services; energy and power infrastructure goods; as well as biofuels, wind energy assets and other renewable resources.

Lehman Brothers’ fund placement group is raising fund II. The New Jersey Division of Investment has committed $100 million to the new fund. Investors in Tenaska’s first vehicle include Caisse de dépôt et placement du Québec, DuPont Capital Management and Mutual of Omaha Insurance Co. Shipping magnate forms green fund

Shipping magnate Peter Georgiopoulos has co-founded Green Maritime Partners, a private equity firm focused on environmentally sustainable investments within the maritime and clean energy sectors. Average investments will range between $5 million and $20 million. Georgiopoulos co-founded the firm with Chris Teryazos, who will handle operations. Teryazos was previously with Pegasus Capital Advisors.

Chicago firm doubles in size

In its second fund-raising go-around as an independent buyout firm, Chicago Growth Partners has doubled its fund size while maintaining its lower-middle market focus. The firm, a spinout from investment bank William Blair & Co., topped its target by $100 million as it closed Chicago Growth Partners II this month with $500 million in commitments.

Chicago Growth Partners had raised and deployed six funds as the core group behind William Blair Capital Partners. When Chicago Growth went out to raise its first solo vehicle in 2004, the firm netted $270 million in commitments, earning backing from such LPs as Goldman Sachs, Skandia and its largest backer, Minnesota State Retirement System. Those three LPs increased their allocations when they re-upped for fund II.

In the meantime, William Blair Capital Partners attempted to reorganize and raise a fund, an effort that fell apart in 2006 following management disagreements.

The formation of Chicago Growth Partners coincided with a number of LBO shop spin-outs in the investment banking world: Morgan Stanley let go of its buyout arm, since renamed Metalmark Capital; JPMorgan Chase spun out JPMorgan Partners, now called CCMP Capital; and Citigroup set free its buyout arm, now called Court Square Capital Partners.

Chicago Growth Partners started raising money in late September and held a first close on $350 million in December. Despite the increased fund size, Partner David Chandler says that the firm isn’t looking up-market.

“In today’s market, $500 million is small,” he said. “We’re small potatoes, and we want it that way.”

The firm seeks deals in the $20 million to $300 million enterprise value range, writing equity checks of between $10 million to $40 million.

HRJ closes distressed FoF

HRJ Capital announced last week that it has raised $195 million for its first distressed opportunities fund of funds. The fund is already fully committed.

The firm disclosed that a significant portion of the investor base came from outside the United States, including Germany, the United Kingdom and France. HRJ has offices in San Francisco, Chicago, New York and Shanghai.

GS aims for another infrastructure fund

Goldman Sachs

is targeting $7.5 billion for its second infrastructure fund, according to LBO Wire. It closed its debut infrastructure fund in 2006 with $6.5 billion. Goldman itself has committed to invest the lesser of $750 million or 12.5% of total capital commitments.

Providence ups target

Providence Equity Partners has raised the target of its debt fund from $700 million to $1 billion, according to Dow Jones. A first close is expected within the next few weeks.