Dyal takes minority, non-voting position in direct lender HPS

The investment is Dyal’s third this year, following deals with Vector Capital and Clearlake Capital Group.

In its latest investment, Dyal Capital Partners has bought a stake in HPS Investment Partners, the two firms said in a Tuesday statement.

New York-based Dyal, part of Neuberger Berman, acquired a passive, non-voting stake in HPS, which manages $31 billion in private credit including both senior and mezzanine debt. Terms of the deal were not disclosed.

“[Dyal’s] experience and proven track record of supporting marquee alternative asset managers will be helpful to us as we continue to strategically build and scale our platform,” HPS chief executive Scott Kapnick said in a statement.

The firm was not immediately available for additional comment.

The deal is Dyal’s fourth such transaction this year. In April, the firm took a minority position in private equity firm Vector Capital. The following month, Dyal invested in special situations and distressed debt shop Clearlake Capital Group, taking a passive, non-voting stake. Clearlake will use its investment proceeds to seed a performing credit fund.

Other direct lenders Dyal has invested in include Cerberus Business Finance, TPG Sixth Street Partners, HIG Capital’s WhiteHorse Finance and Providence Equity Partner’s Benefit Street Partners.

Dyal is currently in market with its fourth fund, Dyal Capital Partners IV, for which it hopes to raise $5 billion, according to documents from the Minnesota State Board of Investments.

“From their economic model to the alignment they create with investors, Dyal’s difference is in its design,” said Christopher Zook, the founder and chief investment officer of CAZ Investors, which is a Dyal investor. “Time and time again, they impress us with the quality of their research, the depth of their due diligence and the experience of their team as a whole.”

HPS closed its latest senior loan vehicle, HPS Specialty Loan Fund 2016, in October with $4.5 billion in equity contributions. With leverage, the vehicle has $6.5 billion of purchasing power. It will invest in businesses with EBITDA from $40 million to more than $100 million.

HPS, along with Ares Capital Corporation and GSO Capital Partners, recently provided financing to Differential Brands Group’s $1.3 billion acquisition of Global Brands Group.

SLF 2016 carries a three-year investment period, with an optional one-year extension, during which HPS charges a management fee of 1.5 percent on invested capital. The fund’s harvest period, during which the management fee is knocked down to 1.25 percent, lasts for three years, with two optional one-year extensions.