MHR Fund Management LLC, the investment firm co-founded by Mark Rachesky that battled Carl Icahn over the leadership of Lions Gate Entertainment Corp., has gathered almost $1.3 billion for its latest distressed fund.
The firm has spent more than a year marketing MHR Institutional Partners IV LP and is seeking as much as $3.5 billion, according to two people with knowledge of the situation. The private-equity fund will take controlling stakes in middle-market companies, said the people, who asked not to be identified because the information is private.
Rachesky, 55, a Stanford University M.D. who worked for activist investor Carl Icahn for six years until he co-founded MHR in 1996, oversees more than $5 billion. The New York-based firm is seeking capital at a time of sparse opportunities in the U.S. for distressed debt funds after the Federal Reserve held interest rates near zero for more than five years.
Annabelle Rinehart, a spokeswoman at Joele Frank, Wilkinson Brimmer Katcher, declined to comment on behalf of MHR.
MHR targets companies with hard assets such as satellites, trucks and films. It holds the largest stake in Loral Space & Communications Inc., which is in talks to sell its satellite operator Telesat Holdings Inc. Ontario Teachers’ Pension Plan is in the lead to purchase the unit for $7 billion including debt, people with knowledge of the matter told Bloomberg News in April.
Rachesky faced off against Icahn over movie maker Lions Gate in 2008 when Icahn tried to force out the leadership, calling them profligate spenders. Rachesky, who owned a 15 percent stake, crafted a debt-for-equity swap to fend off Icahn. Icahn brought a lawsuit and later lost in court in November 2010. Both Rachesky and Icahn have also built stakes in heavy-duty truck maker Navistar International Corp.
MHR is raising a fund for the first time without co-founder and lawyer Hal Goldstein. Janet Yeung took over as general counsel when Goldstein left in early 2012. It’s seeking the same size pool as its prior fund that closed at $3.5 billion in 2007.
That fund was producing a 1.9 times multiple and an 11.2 percent net internal rate of return as of Sept. 30, according to performance data by California Public Employees’ Retirement System. Its 2003 fund was generating a 1.9 times multiple and a 14 percent net IRR as of the same date, the data shows.