december / january 2013 / 14 privatedebtinvestor.com the FundrAising suppleMent Private debt funds set the pace Sponsors: First Avenue MAcfarlAnes expertise in Credit Funds if you would like further information or specific advice please contact: alex amos damien Crossley Bridget Barker partner partner partner DD: +44 (0)20 7849 2554 DD: +44 (0)20 7849 2728 DD: +44 (0)20 7849 2495 [email protected] [email protected] [email protected] Macfarlanes LLP 20 Cursitor Street London EC4A 1LT T +44 (0)20 7831 9222 F +44 (0)20 7831 9607 DX 138 Chancery Lane www.macfarlanes.com Private debt investor - PDI - fundraising supplement - Nov 2013v2.indd 1 21/11/2013 16:43:25 the fundraising supplement | december/january 2013/14 editorial comment ISSN 2051-8439 At the forefront of the cycle editor, private debt investor Oliver smiddy Tel: +44 20 7566 4281 [email protected] Dear Reader, an allocation come from a fixed senior staff Writer Welcome to the Private Debt Investor income bucket, or an alternatives sam sutton Tel: +1 212 633 1456 Fundraising Supplement. one? The answer to that question [email protected] Earlier this year, we published our inevitably varies, but it points to advertising manager beth piercy inaugural PDI 30 – a list of the top 30 the need for managers to have a Tel: +44 20 7566 5464 [email protected] private debt managers based on the clear idea of how they want to head of production amount of capital raised in the past five position their fund. tian mullarkey Tel: +44 20 7566 5436 years. The total amount raised by those Generating momentum in a [email protected] firms in that timeframe – $322 billion – is, as fundraise is key to success. Hitting a first close subscriptions fran hobson (london) +44 20 7566 5444 First Avenue founder Paul Buckley acknowl- early, possibly via a sizeable cornerstone commit- jill garitta (new york) +1 212 645 1919 ryan ng (hong Kong) +852 2153 3140 edges in our interview on page 8, “a really big ment, allows a GP to deploy capital and demon- For subscription information visit www.privatedebtinvestor.com number for a new asset class”. strate to potential investors that the model works. editorial director Our in-house data show there are more than Thanks to the characteristics of debt investing philip borel Tel: +44 207566 5434 200 funds targeting combined commitments of – with assets yielding income from the start in [email protected] $114 billion out in market at the moment. The many cases – it’s possible to demonstrate the abil- research and analytics dan gunner data pages at the back of this supplement show ity to generate a return far quicker than with a Tel: +44 20 7566 5423 [email protected] that the featured funds closed this year which private equity fund, for example. publishing director total $64 billion. For a relatively nascent asset Structuring a fund appropriately is a key paul mclean Tel: +44 20 7566 5456 class, that’s an impressive number. decision too, as Macfarlanes pair Alex Amos and [email protected] There are plenty of challenges for firms look- Damien Crossley note in their piece on page 12. group managing director tim mcloughlin ing to raise capital however. A lucky few have the But there’s undoubtedly a secular shift hap- Tel: +44 20 7566 4276 [email protected] brand name and pedigree to attract commit- pening, playing very much in private debt’s favour. managing director – americas ments with relative ease. Just look at the amount Capital is being reallocated from sovereign and john higgins, [email protected] of capital raised by the likes of Oaktree Capital public corporate credit and into the private arena managing director – asia Management this year, or the inexorable growth at an increasing pace as investors hunt yield. Other chris petersen, [email protected] of GSO, which has outstripped The Blackstone alternative asset classes are undergoing a period of co-founders Group’s core private equity business in assets consolidation.With skill, and plenty of persever- david hawkins [email protected] under management. ance, private debt fund managers will find them- richard O’donohoe [email protected] But for aspiring managers in particular, fun- selves at the forefront of this fundraising cycle. neW YorK draising is a long and thankless task. While some 16 West 46th Street, 4th Floor New York investors have taken a progressive view of the We hope you enjoy the supplement, NY 10036-4503 asset class and have discrete allocations to private LondOn 140 London Wall debt, many struggle to pigeon-hole it. Should Oliver Smiddy, Editor London EC2Y 5DN Hong KOng 14/F, Onfem Tower 29 Wyndham Street Central, Hong Kong CONTENTS 12 the right structure © capital structure investor LLP 2013 No statement in this magazine is to be construed 2 news round-up Macfarlanes’ Damien Crossley and Alex Amos dis- as a recommendation to buy or sell securities. cuss the key considerations when choosing the most Neither this publication nor any part of it may The biggest stories in private debt fundraising be reproduced or transmitted in any form or by from around the globe. appropriate structure for a private debt vehicle. any means, electronic or mechanical, including photocopying, recording, or by any information storage or retrieval system, without the prior permission of the publisher. Whilst every effort has 8 a front row seat 14 data room been made to ensure its accuracy, the publisher and contributors accept no responsibility for the PDI interviews First Avenue founder Paul Buckley PDI’s research and analytics division brings you accuracy of the content in this magazine. Readers should also be aware that external contributors and hears why private debt will be at the forefront the biggest LP commitments to private debt this may represent firms that may have an interest in companies and/or their securities mentioned in of this and future fundraising cycles. year, and a selection of fund closes. their contributions herein. december/january 2013/14 | Private Debt Investor 1 neWs news round-up FUNDRAISING: PRIVATE cORPORATE DEBT The firm’s Private Market Credit Strategies 2013 vehicle will capitalise on the current senior secured debt market opportunity resulting from constrained banks, expiring European CLOs and the demand for refinancing, it added. It is the firm’s third PMCS fund. Private debt is one of Partners’ core strategies alongside private equity, private real estate and private infrastructure, with the firm having adopted a progressive approach to the asset class. This latest vehi- cle has an “investor friendly” investment structure, according to the firm, with a englightenment focuses on the aerospace and defence sectors quick ramp-up period of 12 months. The firm has invested in more than AEROSPACE AND DEFENCE “TPG has been a long-term invest- 40 leveraged loan deals so far this year. enlightenment raises ment partner of the WSIB,” the spokes- $41m for fund i person said in an email. “Since 2000, DISTRESSED DEBT Enlightenment Capital has raised more the Board has committed in excess of american securities than $41 million for its Enlightenment $2 billion to seven TPG-sponsored invest- within reach of $750m Capital Solutions Fund I. ment vehicles, including, most recently, target Enlightenment is targeting $100 mil- $200 million to TOP II in 2012 and TGP American Securities, led by senior part- lion for the fund, which the firm will Growth II in 2011.” ners Anthony Grillo and Lawrence First, use to make senior debt, mezzanine and TPG is targeting $2.65 billion for is within reach of its $750 million target minority equity investments in the aero- the fund. Pennsylvania Public School for its third opportunities fund. space, defence and government sector, Employees’ Retirement System docu- The firm raised at least $725.1 mil- firm co-founder Devin Talbott told PDI. ments describe Fund II as specialising in lion for the vehicle as mid-November, Talbott, a former vice president at DE corporate special situations, distressed according to an SEC filing. The fund will Shaw, founded Enlightenment in 2012 debt and non-performing loans. invest between $20 million and $100 alongside Pierre Chao, a co-founder TPG Opportunities II had generated million per deal in companies with of aerospace, defence and government an 18.01 percent net internal rate of revenues in the $100 million and $1.5 sector due diligence firm Renaissance return and 1.1x multiple as of 30 June, billion range. Strategic Advisors. The pair launched the according to Washington documents. The Los Angeles City Employees’ firm to target investment opportunities Retirement System committed $30 created by the withdrawal of traditional LEVERAGED lOANS million to the vehicle earlier this year. lenders and banks from the mid-market partners group raises A Hamilton Lane report suggests the loan business, which led to a supply/ $800m for private debt firm may raise as much as $1 billion demand imbalance for capital. Switzerland-headquartered Partners for the distressed debt fund. The vehi- Group has raised more than $800 mil- cle will include a commitment of up to DISTRESSED DEBT lion for its leveraged loans program this $20 million from the GP, according to Washington backs TPG year, it said today in a statement. Its the report. Opportunities III third leveraged loans fund accounts for The firm’s 2010 vintage opportuni- The Washington State Investment Board about two thirds of that amount, with ties fund had generated a 14.18 per- has approved a $200 million commitment separate account mandates accounting cent net internal rate of return as of 31 to TPG Opportunities III according to an for the remaining third, according to a March, according to a Public Employee investment board spokesperson.