Castlelake Is Said to Seek $1 Billion for Distressed Fund

Castlelake LP, the investment firm formerly known as TPG Credit Management LP, is targeting $1 billion for its next fund that will purchase U.S. and European distressed assets, according to an investor presentation.

The firm, founded by former Cargill Inc. executive Rory O’Neill, is seeking a maximum of $1.25 billion for Castlelake III LP, the presentation shows. The firm raised about $1 billion for its prior fund in October 2012.

Thomas Laughran, a spokesman at FleishmanHillard, declined to comment on the latest fundraising plans on behalf of Minneapolis-based Castlelake.

Castlelake joins private-equity firms including New York-based Blackstone Group LP, Apollo Global Management LLC and Avenue Capital Group LLC, which are putting money to work in Europe as banks sell assets. Castlelake III will seek to purchase nonperforming loans, aviation assets and corporate debt, according to a separate presentation viewed by Bloomberg News.

The fund will invest for three years following the final close of fundraising, and all distributions can be reinvested during that period. The fund will have a total life of six years from the time that it stops accepting investor commitments.

Fund Returns

The management fee will be 1.75 percent of assets during the commitment period, the investor presentation shows. Afterward, that will fall to 1.5 percent on either the cost basis or fair value of all investments, whichever is less. Castlelake will take a 20 percent cut of the profit after an 8 percent preferred return is met.

The prior fund, now called Castlelake II LP, was generating a 23 percent internal rate of return as of March 31, according to performance data on the California State Teachers’ Retirement System’s website. Castlelake I LP, which raised $475 million in 2007, was producing a 5.8 percent return rate as of the same date, according to performance data from California Public Employees’ Retirement System.

O’Neill founded the firm in 2005 with TPG Capital as a minority partner. He previously led the global credit-strategies business at Cargill, the food and agriculture company. TPG Credit changed its name to Castlelake in August.

Castlelake manages $2.4 billion in assets for endowments and foundations, public and private pension plans and family offices globally, according to the firm’s website.

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