GSO Capital Partners LP, the credit investment arm of Blackstone Group LP, raised $4 billion for its second mezzanine fund focused on middle-market companies, twice the amount of commitments for its first.
The GSO Capital Opportunities Fund II will provide mezzanine financing to companies across a range of sectors primarily in the U.S. and Europe, said Beth Chartoff, head of marketing and client relationships at GSO.
The fund has committed or deployed $780 million in four companies, including providing financing to Sony Corp. for its acquisition of EMI Group’s music publishing unit, GSO said today in a statement. It also made a preferred-equity investment in a unit of Chesapeake Energy Corp. GSO’s first mezzanine fund was $2 billion and began investing in 2007.
“Banks have really stopped providing committed financing to middle-market companies,” Chartoff said in a telephone interview. “If you are a middle-market company and need $100 million or $200 million of debt financing to make an acquisition, it is just too difficult to access the high-yield market.”
The GSO Capital Opportunities Fund II is overseen by portfolio managers and senior managing directors Robert Petrini, Louis Salvatore, Timothy White, Michael Whitman and Dwight Scott.
GSO began marketing its second fund during the first quarter of last year and closed on March 22, Chartoff said. It is one of the largest mezzanine funds raised, according to data from research firm Preqin. The largest is a $13 billion fund raised by Goldman Sachs Group Inc.’s GS Mezzanine Partners, according to Preqin.
“We thought $2 billion, the size of our first fund, was undercapitalized for what we needed,” Chartoff said. “We thought $4 billion was the right size.”
GSO, which has about $46 billion in assets, provides junior capital to leveraged buyouts, acquisitions and growth financing through its mezzanine fund, focusing on companies with earnings from $25 million to $200 million, according to its website.
GSO invested its first mezzanine fund in few European companies because many of the capital structures were overleveraged, Chartoff said. The company anticipates being more active in that area with the new fund, she said.
“What we see now is a banking sector extremely challenged, capital structures we like in Europe and private equity with dry powder that will need mezzanine financing,” Chartoff said.
GSO provided 85 million euros ($113.5 million) to Coditel Holding SA, the cable operator based in Luxembourg.
“Our mezzanine and rescue lending drawdown funds have been very active against a backdrop of market dislocation and heightened caution by traditional lenders, providing much-needed capital in a capital-constrained world,” Stephen Schwarzman, chairman and chief executive officer of Blackstone, said on a Feb. 2 conference call.
The mezzanine and rescue lending funds have generated gross annualized return of 23 percent and 21 percent since inception, Schwarzman said on the call.