Monroe Capital is in the market with its latest direct lending fund, a vehicle months after its predecessor held a final close in October of last year.
The Chicago-based lower mid-market lender is seeking $800 million for its Monroe Capital Private Credit Fund III, a source familiar with the situations told Private Debt Investor, which will focus on senior debt investments in companies with less than $25 million of EBITDA.
The firm, which declined to comment, is seeing “strong demand” from current and prospective limited partners, both domestically and abroad. Monroe won a $37.5 million commitment from the City of Fresno Retirement Systems for Fund III in April, meeting documents show. The central California pension fund is an existing LP that committed $50 million to Private Credit Fund II.
The new fund’s predecessor sought $600 million, and eventually closed on $800 million. Alongside the City of Fresno, the Orange County Employees’ Retirement System committed $70 million to Fund II, while Chicago Policemen’s Annuity & Benefits Fund and the New Hampshire Retirement System each also committed $50 million.
The new fund will have similar terms to its predecessor, the source added.
Fund II, which utilised leverage of between 0.5x and 1x, charged a 10 percent carried interest over a 7 percent hurdle rate, according to a presentation to the City of Fresno. The fund’s life is six years, with the possibility of two one-year extensions. The investment period will last four years from the date of final close. The management fee charged is 1 percent on invested assets.
By 31 December, the levered and unlevered sleeves of Fund II showed net cumulative internal rates of return of 26.7 percent and 12 percent, respectively, according to a presentation to the Alaska Permanent Fund Corporation. The average loan-to-value ratio of deals from the fund was 45.7 percent with a closing fee of 1.7 percent.
As of 31 March, 43 percent of the Fund II holdings were refinancings, 36.5 percent acquisitions, 6.4 percent dividend recaps, 5.8 percent collateralised loan obligation deals, and 8.2 percent other types of deals.
Earlier this month, Monroe hired Cesar Gueikian to oversee its opportunistic credit strategy, including the Monroe Capital Special Situations Fund, as PDI previously reported.
The Special Situations Fund will target healthy companies with good collateral, not necessarily troubled businesses, and deals that are opportunistic because of speed, complexity or perceived risk, a source said at the time. The fund will focus primarily on North America.
The firm invests in deals both with and without a private equity sponsor. It also manages CLOs and a business development company, Monroe Capital Corporation.