NXT Capital raises third senior loan fund

The Chicago-based firm has collected about $700 million for its NXT Capital Senior Loan Fund III and is targeting $800 million in total.  

Chicago-based NXT Capital Partners has raised its NXT Capital Senior Loan Fund III. The firm has collected $291 million in equity from investors and held a first and final closing, according to a Securities and Exchange Commission filing yesterday (6 January). The firm has also collected about $420 million via a credit facility provided by a group of banks and expects to raise more debt in the coming months to bring the total fund size to $800 million, according to a source close to the situation.

NXT Capital’s predecessor fund, the NXT Capital Senior Loan Fund II, held its final close at $783 million in August 2013. The fund invested in senior debt originated and underwritten by NXT's corporate finance group. Instruments included senior secured, stretch senior, unitranche, second lien, term-over-revolver and last-out term loans made primarily to private equity-backed companies across a variety of industries. The third fund will employ the same strategy.

The second fund received commitments from nine institutional investors, including pension plans, insurers and foundations. The Teachers’ Retirement System of Illinois and the Orange County Employees Retirement Systems (OCERS) were two of the public fund LPs while Wells Fargo provided a $500 million term loan commitment to the fund. It could not be learned which banks will be providing the credit facility for the new fund.

According to 2014 fund documents from OCERS, the second senior loan fund was expected to be fully invested in the first quarter of this year, ahead of projections. As of May 2014, the fund consisted of 38 borrowers with commitments sizes ranging from $2.8 million to $16.2 million, with an average commitment size of $6.3 million, but NXT anticipated an increase in typical commitment size to a range of $8 million to $15 million.

NXT is led by chairman and chief executive Robert Radway and other former executives from Merrill Lynch Capital and Heller Financial. The firm is headquartered in Chicago and has offices in New York, Atlanta, Boston, Charlotte, Dallas, Phoenix and San Francisco.