HPS raising fourth direct lending fund – exclusive

The rebranded private credit investment firm is understood to be in the market with a $3.5bn direct lending fund.

HPS Investment Partners is raising a direct lending fund, according to PDI market sources. Specialty Loan Fund IV is understood to have a target of $3.5 billion.

An HPS representative declined to comment on the fund.

The previous fund in the series, Specialty Loan Fund III, closed on more than $3 billion in 2013. That fund sought to invest in special situations and newly issued, secured debt in mid-market refinancings, acquisitions and restructurings.

Michael Patterson (pictured), the head of senior lending at HPS and one of Forbes Magazine's 40 under 40 in 2014, serves as the portfolio manager on Specialty Loan Fund series.

“We have seen significant opportunities for our specialty direct lending group to develop customised financing solutions for companies that do not have efficient access to the capital markets, either because of their size or the complexity of their particular situation,” he said in a statement announcing the closing of the third fund at the time.

In launching Specialty Loan Fund IV, HPS joins a number of other firms currently pursuing a direct lending strategy. Ares Management recently closed it third European direct lending fund on €2.5 billion , Babson Capital plans to pursue a direct lending strategy as part of its Global Private Loan fund and in April, Onex Credit announced its intention to create a direct lending platform.

HPS is a New York-based credit investment firm that also recently reached a first close on its third mezzanine fund. HPS was formerly known as Highbridge Principal Strategies and was recently rebranded following a management buyout from parent companies Highbridge Capital Management and JPMorgan.