Riverside pre-marketing first non-control credit fund

  • Riverside Strategic Capital Fund may end up at $250M to $500M
  • Firm seeks to work with entrepreneurs who want to keep control
  • Firm hired five-member structured capital team from Veronis Suhler Stevenson

Joining the ranks of buyout firms that are branching out with credit strategies, Riverside may end up raising $250 million to $500 million to take minority stakes in smaller companies led by entrepreneurs who don’t want to cede control of their companies. Investments could take the form of minority stakes, mezzanine debt, PIK-type instruments, preferred shares or warrants.

The initiative from the Cleveland-based shop marks the start of a potential new family of investment funds aimed at the United States and Europe. It’ll be the first time the firm has moved beyond control deals.

To prepare for the Riverside Strategic Capital Fund, the firm hired George ColeHal GreenbergMichael Kessler, Jeffrey Gordon and Jay Reynolds from Veronis Suhler Stevenson earlier this year. The quintet worked on structured capital for the New York-based fund management company, which invests in private equity and debt capital.

Also on the fundraising front, Riverside’s flagship Riverside Capital Appreciation Fund VI LP, targeting companies with $5 million to $25 million of EBITDA, held its fourth close last week, according to a source. That fund has reached its hard cap of $1.5 billion. The Riverside Asia-Pacific Fund II LP had raised $115 million out of a hard cap of $150 million, according to a Form D filing on June 20.

The Riverside Strategic Capital Fund is the latest move by a private equity firm to provide capital and fill the void left by commercial banks, which have pulled back from leveraged lending since the 2008 financial crisis in the face of resistance from regulators.

Cerberus Capital Management LP was reported in March to be seeking up to $1.5 billion for a mid-market, leveraged lending fund, according to Bloomberg News.The Blackstone Group LP and Kohlberg Kravis Roberts & Co are among the other firms that have credit investing businesses.

(Correction: The Riverside Capital Appreciation Fund VI has raised its hard cap of $1.5 billion as of press time; it is not up to $1.1 billion.)