Brightwood Capital begins fundraising for third fund

The firm’s Brightwood Capital Fund III has raised money from at least two public pension funds and has a much larger overall target than capital raised for previous funds.   

Brightwood Capital Advisors, the New York-based private debt manager, has begun collecting money from LPs for its Brightwood Capital Fund III, a direct lending fund focused on the lower mid-market. The new fund is said to be targeting a much larger size than the firm’s previous two funds. 

Clients say the firm is raising a total of $500 million for this vehicle, including some leverage in the form of credit facilities, and expects to close it later this year. Brightwood denied this fund size and declined to comment otherwise. 

The credit firm raised its first $74.85 million fund, a Small Business Investment Company (SBIC) fund, in 2011. The firm’s second fund, Brightwood Capital SBIC II, raised $50 million in the spring of 2013, according to SEC filings. 

The firm has already garnered an $80 million commitment from the Arizona Public Safety Personnel Retirement System at the pension’s board meeting on 21 January. The Arizona scheme is also giving the manager $40 million for co-investments. The Hartford Municipal Employees Retirement Fund also invested $10 million in the fund in the beginning of the year. 

In addition, Brightwood reported that it raised $66 million for this fund in Securities and Exchange Commission filings on 31 December. 

The larger fund size and the firm’s own description of its lending suggests that Brightwood’s new fund will focus on mid-market companies, whereas the previous two were SBIC vehicles focused on small businesses. 

The firm was founded in 2010 by Damien Dwin, who previously led special opportunities in North America for Credit Suisse, and Sengal Selassie, the former head of US merchant banking funds for Société Générale and Cowen Capital. 

Brightwood focuses on companies with EBITDA of $5 million and $75 million, according to its website. It targets five industries; technology and telecom, energy, business services, healthcare and franchising. 

The credit firm invests via a variety of debt and equity securities, including unitranche, senior secured and second lien loans, subordinated debt, as well as preferred and common equity. 

On a stand-alone basis, Brightwood provides up to $75 million in financing. With co-investors, it can take positions of over $150 million.