King Street raises $1.2bn inaugural debt fund

The fund, whose focus includes distressed corporate debt, blows past its $750m target.

Credit investment firm King Street Capital Management has raised $1.2 billion for its inaugural Global Drawdown Fund from new and existing investors. The new fund, which launched in April 2020, surpassed its $750 million target, according to a news release.

King Street’s fund will be deployed in distressed and stressed corporate debt, structured products, asset-backed investments and claim-related opportunities, with a particular focus on special situations, including growth lending, rescue financings and asset-based lending, the firm told Private Debt Investor.

“We believe the new credit cycle could become one of the best environments for our strategy since the dislocation following the global financial crisis,” Paul Goldschmid, partner and co-portfolio manager of King Street, said in the release. Both new and existing investors participated in the vehicle. He said that the firm expects that the new debt created during the pandemic, combined with secular changes and disappointments around the timing of a return to normalcy, will lead to interesting rescue financings, distressed capital structures and restructurings.

“We anticipate an increased pipeline of idiosyncratic, complex and process-driven investments that offer attractive asymmetric returns over a multi-year period,” Daniel Ehrmann, head of restructuring at King Street, said in the release.

The Global Drawdown Fund builds upon King Street’s other offerings, including its Tactical Credit Opportunity Fund, which launched in May of 2020. That vehicle seeks to take advantage of credit markets’ performance as a result of the economic impact of covid-19.

King Street also manages its Flagship fund, a multi-strategy long term credit vehicle, which climbed 12 percent in the first half of 2021, more than doubling the returns of Bloomberg’s credit hedge fund index, according to the firm. Last year, its flagship fund rose 9 percent while the portfolio turned over about three times in that period.

It also manages its counterpart European fund, which invests in the European market. Along with these vehicles, the firm has a real estate focused fund launched in 2017; it also invests in CLOs.

“For most of our 26-year history we utilised an evergreen hedge fund structure, with side pockets for private or illiquid investments. Over the last several years we have made a conscious shift to launch several drawdown vehicles with structures well-suited to private/illiquid investments,” Goldschmid told PDI. “The Global Drawdown Fund is the latest result of this strategy”.

The New York-based firm has $20 billion under in management as of 2021. It was founded in 1995 by its managing partner, Brian Higgins.