Exclusive: Benefit Street targets $500m for distressed fund

The credit firm’s first fund focused on distressed debt will have a three-year investment period.   

Benefit Street Partners, the credit investment arm of private equity firm Providence Equity Partners, is aiming to raise $500 million for its first distressed debt fund, sources told PDI. The strategy is being managed by Ray Costa (pictured), a managing director at Benefit Street who joined last year from Deutsche Bank, where he oversaw distressed debt trading. He and Tom Gahan, the chief executive of Benefit Street, as well as Richard Byrne, its president, were all formerly colleagues at Deutsche Bank.

The distressed debt fund will have a three-year investment period and a two-year harvest period, according to sources familiar with the firm’s plans. A Benefit Street spokesman declined to comment.

The firm is also in the process of selling shares for a new non-traded business development company, the Griffin-Benefit Street Partners BDC Corp, which was approved by the SEC in February and is offering $1.5 billion worth of common stock. In addition to its private debt funds, Benefit Street handles long/short credit hedge funds, CLOs and a commercial real estate strategy.

The firm’s first two private debt funds were focused on TMT (technology, media and telecommunications) investments. The first Providence TMT Special Situations Fund LP delivered 15 percent net IRR and the second Providence TMT Special Situations Fund II earned 13.6 percent net IRR, according to documents from the Los Angeles City Employees Retirement System, a pension investor in some of BSP’s funds. The firm is currently investing its third fund, which is more diversified across a range of industries and raised $1.75 billion last year.

Benefit Street has $9.2 billion under management across its various strategies and is based in New York.