Cerberus Capital Management LP, the private-equity firm led by Stephen Feinberg, has raised $1.32 billion for a middle-market loan fund that will seek to take advantage of a pullback in lending, a marketing document shows.
One of Cerberus Levered Loan Opportunities Fund II LP’s first investments is expected to be a group of loans issued by a company that the firm has invested in through another fund, according to the private-placement memorandum, a copy of which was obtained by Bloomberg News. Cerberus expects to close the fund in May, the document shows.
Private-equity managers are gathering capital to lend to mid-sized businesses as banks and other traditional lenders have pulled back. Sankaty Advisors LLC, the debt-investment unit of Bain Capital LLC, is seeking $1 billion for a middle-market lending fund. Carlyle Group LP (CG) and KKR & Co. are raising first- time funds that will make loans to mid-size businesses.
Cerberus’s levered-loan fund is targeting $1.25 billion with a $1.5 billion limit, compared with the $814 million gathered by its predecessor, according to the Pennsylvania Public School Employees’ Retirement System, which in September disclosed that its investment staff recommended a $225 million commitment to the fund. The Cerberus document doesn’t mention a target.
Cerberus expects to use a leverage-to-net-asset-value ratio of as much as 2 to 1, employing the use of borrowed money to amplify returns. The firm has secured $818 million in equity and $500 million in leverage commitments, according to its marketing document. The firm’s affiliates also recently closed on $530 million in equity and $215 million of leverage for two separate accounts that will make middle-market loans, the document shows.
The new fund will originate loans and invest in secured debt obligations recently originated by Cerberus’s lending business or other parties, according to the marketing document.
In one of its first deals, the fund will work with partners to purchase loans from Cerberus-backed CorePointe Group LLC, the document shows. The aggregate par value of the loans contemplated for purchase was $530.5 million as of Sept. 30.
The marketing document lists risks affiliated with the CorePointe transaction. Cerberus’s 21 percent stake in the company means it will benefit from that deal’s proceeds. The deal will comprise a “significant portion” of the new fund’s portfolio, according to the document.
CorePointe was formed in connection with Cerberus’ purchase of Chrysler Group from DaimlerChrysler AG in 2007. CorePointe started lending to middle-market companies in 2010, using part of the assets of auto lender Chrysler Financial Corp.
Cerberus sold Chrysler Financial to Toronto-Dominion Bank (TD) in 2011 for about $6.3 billion while CorePointe retained ownership of certain commercial assets of the business including middle-market loans, according to the marketing document.
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