Clearlake to seed credit fund with minority investment capital – exclusive

The private equity firm is the latest to beef up or launch a credit strategy.

Clearlake Capital Group plans to expand its product set to include a performing credit fund, utilising the new capital it received from a consortium of alternative asset managers, according to a source familiar with the situation.

The Santa Monica, California-based private equity and special situations firm will seed a debt vehicle focused on financially sound companies, this person said. The firm would lend into the same sectors it currently invests in: software and technology; energy and industrials; and food and consumer services.

The size of the seed investment is yet to be finalised, though the source said Clearlake would eventually open up its credit fund to third-party capital. The firm would initially staff up its credit operations by drawing on internal personnel and later make hires from outside the firm.

Clearlake declined to comment.

The capital will come from a minority position taken by Neuberger Berman’s Dyal Capital Partners, Goldman Sachs’ Petershill programme and Landmark Partners. Dyal and Petershill split the equity cheque 50-50, and Landmark Partners, an existing partner with Clearlake, increased its investment in the firm. The trio share roughly a 20 percent stake, the source said.

The performing credit strategy will operate alongside the firm’s current strategies which include buyouts, special situations and distressed debt.

The firm recently closed its flagship Clearlake Capital Partners V fund on $3.6 billion. This fund will look to back 14-18 companies, according to investor documents from the Pennsylvania Public School Employees’ Retirement System. Clearlake committed almost $100 million to the fund across the general partner contribution and additional positions from the firm’s two founders and other employees.

Investors in the fund include Pennsylvania Public School Employees’ Retirement System, the New York State Teachers’ Retirement System and the Illinois Municipal Retirement Fund.

The fund will look to generate gross returns in excess of 25 percent. Half the capital is expected to target special situations and value private equity, one-quarter distressed debt investments from the secondary markets and one-quarter private investments in distressed companies.

Clearlake also expanded into non-control oriented positions with its Clearlake Opportunities Partners, a strategy with $542 million under management. It also invests in structured credit and equity and secondary markets for yield, rather than for control as its flagship fund does.

Clearlake, which manages $7 billion, was founded by José E. Feliciano and Behdad Eghbali in 2006.