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KPS Said to Seek $3 Billion for Special Situations Fund

KPS Capital Partners LP, the private-equity firm co-founded by Michael Psaros, plans to seek $3 billion for its next special situations fund, said two people familiar with the matter.

The fund is likely to come to market in the second quarter of next year, said one of the people asking not to be named because the capital raising hasn’t been announced. The predecessor, KPS Special Situations Fund III, originally gathered $1.2 billion in 2007 before accepting an additional $800 million two years later to take advantage of what the firm called “unprecedented” opportunities arising from the global financial crisis.

Daniel Yunger, a spokesman at Kekst & Co., declined to comment on behalf of KPS.

KPS, based in New York, makes control investments in special situations including corporate divestitures and carve-outs, turnarounds, bankruptcies, financial restructurings and out-of-favor industries, according to its website. The firm, which primarily targets manufacturing companies, will consider all industries except technology, financial services, telecommunications, broadcast media, real estate and natural resources.

KPS typically invests $50 million to $300 million in deals as large as $1 billion. It targets companies with revenues of at least $400 million, according to the website.

Fund Returns

The firm can point to recent exits. This month it agreed to sell North American Breweries Holdings LLC to Florida Ice & Farm Co. SA’s Cerveceria Costa Rica for $388 million. It also sold HHI Group Holdings LLC, a maker of components for automotive customers, to American Securities LLC for undisclosed terms.

The prior fund was producing a 1.7 multiple and a 21 percent net internal rate of return as of March 31, according to performance data from California Public Employees Retirement System.

Founded in 1997, KPS has four investment partners: Psaros, David Shapiro, Raquel Palmer and Jay Bernstein. The firm has more than $2.7 billion under management, according to its website.

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