GSO Capital Partners is nearing the €2.5 billion target for its European Senior Debt Fund and plans to close the strategy later within a month, sources tell PDI. The GSO Capital Opportunities Fund II, a global mezzanine fund raised by the firm in 2012, will invest about $500 million of its capital in the new European fund, one of the sources said.
GSO declined to comment.
The fund is a European direct lending strategy targeting 11-13 percent net IRR, according to a document published by the Fresno County Employees Retirement Association, which has invested $30 million in the fund, according to PDI Research & Analytics.
It will invest in privately originated secured loans in performing mid- to large-size European companies (with EBITDA of €50-€150 million). It expects to make investments primarily in senior and unitranche deals. The term of the fund will be six years, with two extension options. It will employ fund level leverage of 1:1 on $2 billion of equity. The leverage on specific deals will average around three to four times, with some deals attracting leverage of five times, the source said.
“The fund will invest in privately originated loans secured loans in performing mid/large European companies. It will have quarterly distributions targeting 6-8 percent annually. The majority of underlying loans will be floating rate,” said the Fresno documents. The fund expects to invest 75 percent in unitranche loans and 25 percent in senior debt.
The GSO vehicle will charge 1.5 percent management fees on invested capital. The carried interest will be 15 percent with 80/20 catch-up split for GP/LP. The general partner will not receive carried interest until the LP receives 75 percent of committed capital.
The key team members on the European fund include portfolio managers Paul Eapen, Mike Whitman and Alan Kerr, as well as managing director Michael Ryan. Eapen is a joint portfolio manager of the fund and focused on origination and management of private credit investments in Europe. Whitman is the head of the European business at GSO and a joint portfolio manager of this fund, as well as the GSO Capital Opportunities Funds I and II, among others. Kerr is another joint portfolio manager of the fund, and is otherwise primarily focused on the European CLOs and commingled funds. Ryan joined GSO in 2012 as part of the Harbourmaster acquisition.
GSO has already invested in Europe via its other debt funds. It started investing in European loans in 2008 and achieved a 10.1 percent net IRR on those since inception. GSO is headquartered in New York and is owned by The Blackstone Group. The firm handles $72.9 billion overall.