Return to search

Crescent over halfway to $1bn goal for direct lending fund

The firm’s second vehicle has already surpassed the equity commitments it secured for the initial direct lending fund.

Crescent Capital Group has locked down $600 million for its second closed-end vehicle targeting senior debt investments in deals involving a private equity sponsor.

The Los Angeles-based alternative asset manager has past the halfway mark for its Crescent Direct Lending Fund II, which is targeting $1 billion, according to regulatory filings with the US Securities and Exchange Commission. The firm also secured a $225 million direct lending separate account with the Texas County & District Retirement System in May, as Private Debt Investor previously reported.

A Crescent spokesman could not be immediately reached for comment.

Fund I closed in September 2014 on $389 million in equity commitments, according to meeting minutes from an Orange County Employees’ Retirement System meeting held the same month. With leverage, the fund had $602 million of deployable capital, according to an investor presentation to the City of Fresno Retirement Systems.

Fund II will invest in sponsored deals involving US mid-market and lower mid-market companies. The fund has a six-year life, which includes a four-year investment period and two-year harvest period. The vehicle also has the possibility of two possible one-year extensions.

The vehicle, like its predecessor, offers both levered and unlevered sleeves. The former raised $314 million, while the latter raised $286 million, the SEC documents showed.

The unlevered sleeve is aiming for a net internal rate of return of 7-9 percent and a net multiple of invested capital (MOIC) of 1.2x to 1.3x, according to a memorandum to the New Hampshire Retirement System, which committed $50 million to Fund II. Meanwhile, the levered sleeve has set slightly higher targets of 10-12 percent and 1.3x to 1.4x for net IRR and MOIC, respectively.

The unlevered sleeve carries a management fee of 1 percent on invested assets and no incentive fee, the Fresno documents showed. The levered sleeve has a management fee of 0.75 percent of invested assets and an incentive fee of 10 percent.

Crescent also does direct lending through its private business development company, Crescent Capital BDC, which had $296.92 million in assets and had raised $389 million, both as of 30 June.

The three largest industries in its portfolio were commercial and professional services (24.32 percent); healthcare equipment and services (20.11 percent); and software and services (15.96 percent). Some 95.1 percent of its holdings were in senior secured first lien, senior secured second lien and unitranche. The remaining portions of its portfolio was unsecured debt (1.9 percent) and equity (3 percent).

In January, Crescent held a close on its Mezzanine Partners VII fund on $4.6 billion of investable capital. The vehicle surpassed its $3 billion goal. The firm, which managed $24 billion in assets as of 30 June, has offices in Boston, Los Angeles, New York and London. Alongside direct lending and mezzanine, the firm also invests in special situations, structured products, bank loans and high yield bonds.