The Los Angeles City Employees’ Retirement System is considering a $20 million commitment to Providence Debt Opportunity Fund III, according to documents available on the retirement system’s website.
Providence Equity Partners is targeting between $500 million and $750 million for the vehicle, according to a LACERS staff report that describes the fund. A US Securities and Exchange Commission filing pegged the vehicle’s fundraising total at $360 million as of August.
As with previous Providence debt vehicles, Fund III will invest primarily in the telecom, media and technology sectors, though it may expand into other sectors such as business services, consumer retail, financials, energy and healthcare, according to Teachers’ Retirement System of Louisiana documents. Louisiana Teachers’ committed $75 million to the vehicle in April.
“Due to extreme market volatility during the financial crisis, Fund I primarily utilised a distressed trading strategy in order to capitalise on under-priced assets,” according to a Hamilton Lane memo to Louisiana Teachers’ that details the fund. “Given reduced market volatility post-crisis, portfolio construction shifted in Fund II to focus more on debt origination. It is expected that Fund III will continue this focus on debt origination given current market fundamentals.”
As with previous vehicles, leverage at the fund level will be limited to around 1.1x, a source familiar with the firm told Private Debt Investor in August.
Fund III has a seven year fund life with two one-year extensions that can granted at the general partner’s discretion. Providence has offered a 1 percent management fee on the vehicle with 15 percent carry and a 6 percent hurdle rate, according to LACERS documents. The GP will commit up to $50 million to the fund.
The firm’s previous debt fund, Providence TMT Special Situations Fund II, had generated a 13.6 percent internal rate of return as of 31 March, according to a LACERS staff report.
Providence Equity Partners’ capital markets team is led by chief executive Thomas Gahan and senior managing directors Michael Paasche, Richard Byrne and David Manlowe. The credit team managed approximately $4.5 billion as of March. The latest fundraising effort puts that total in the $5 billion range, a source told Private Debt Investor in August.