MBK Partners garners $850m for its first special situations fund

The buyout shop was looking to raise $750m-$1bn for the vehicle and is targeting returns from 20-25%

MBK Partners has held a final close for its inaugural special situations fund on $850 million, according to the firm’s 2018 annual letter released last month.

The North Asia-focused private equity manager’s debut vehicle for the strategy, MBK Partners Special Situations Fund I, surpassed its fundraising target. The pool of capital was launched in November 2017 with a view to invest opportunistically in the North Asian market, the firm’s annual letter for 2017 showed.

Specifically, the vehicle primarily targets credit investments, both in the primary and secondary markets, and non-control, structured equity positions, according to the 2018 correspondence.

“We believe the opportunity for special situations in North Asia today is compelling, as we see a surge in distressed or stressed opportunities but, importantly, with limited competition,” Michael Kim, MBK Partners’ partner, wrote in the letter. “The deal surge is being driven by an increasingly limited access to liquidity, given regulatory constraints on bank balance sheets,” he added.

MBK Partners hired Credit Suisse Private Placement Group to assist with raising the new fund in 2018, Private Debt Investor understands, and held a first close on $350 million.

The firm deployed $2.4 billion of capital in 14 investments across its buyout and special situations strategies as of 15 March, the letter shows.

A spokesman for the firm confirmed to PDI that the buyout firm has nearly $2 billion to invest across the fourth buyout fund and special situations fund, although he declined to comment further on the details.

On an absolute overall returns basis, Special Situations Fund I posted a gross multiple of equity (MoE) of 1.1x and 18.0 percent gross internal rate of return as of 31 December, according to the annual letter.

Its latest flagship buyout fund, Fund IV, generated an MoE of 1.3x, and a gross IRR of 20.4 percent at the end of 2018. The average marks across MBK Partners’ five funds at year-end 2018 were 16.9 percent in gross IRR and MoE of 1.9x.

Since inception in 2005, MBK Partners has increased its assets under management to $16 billion as of 15 March and equity invested to $12.9 billion in 38 companies.

The firm elected three partners during 2018: Daisuke Ikeda in Tokyo, Jinha Lee in Seoul and Hongfei Yu in Shanghai, and hired its first operating partner, Youngsoo Cha, from the Samsung Group. The firm has 59 investment professionals across five offices in Beijing, Hong Kong, Seoul, Shanghai, and Tokyo as of end-2018.