Avenue Capital Group LLC, the distressed-debt firm co-founded by Marc Lasry, is starting to talk to prospective investors about a fund that will make senior loans to mid-sized companies in Europe, according to three people familiar with the matter.
The New York-based firm expects to raise $300 million to $500 million for the offering, which will be structured as a private-equity fund, said one of the people, who asked not to be identified because the plans aren’t public. The fund will supplement a $500 million pool formed earlier this year for a large institutional investor, according to two of the people.
Investment firms are raising funds to make senior loans to companies as banks have pulled back on lending since the 2008 financial crisis. Oaktree Capital Group LLC has collected $750 million for a strategy of making loans to European companies, the firm said on its third-quarter earnings conference call. Haymarket Financial LLP raised 1.35 billion euros ($1.83 billion) for a fund that will mainly buy senior debt of small and medium-sized European companies and extend loans to borrowers that are unable to get bank financing, two people with direct knowledge of the matter said in June.
Michael Herley, a spokesman for Avenue Capital, declined to comment on the fundraising plans.
The new fund, which will be managed by Peter Lockhead, will commit $20 million to $50 million to each loan, according to one of the people. Lockhead joined Avenue more than a year ago to lead the loan-origination business in Europe. He was previously a managing director and head of sponsor leveraged finance at Bank of America Corp.’s Merrill Lynch unit, according to Avenue Capital’s website.
Avenue Capital’s pool raised earlier this year from one institutional investor, known as a managed account, mostly makes senior loans with the remainder investing in private-equity deals in Europe, said two of the people. The new fund will focus purely on making senior loans, the people said.
Avenue Capital in May acted as the sole lender for the acquisition of Freedom Finance Nordic, a prime consumer-loan broker, by HIG Capital’s European private-equity arm.
Lasry and his sister, Sonia Gardner, founded Avenue Capital in 1995. The firm, which invests in troubled debt and equity in the U.S., Asia and Europe, managed about $12.3 billion in assets as of Sept. 30. The firm in July 2012 raised $2.78 billion for its second European special-situations fund, which mostly buys senior secured debt, equities and other financial obligations of companies in financial difficulty.