Penfund locks down money for junior debt investments

The Canadian investment shop will participate primarily in sponsored deals with second lien and mezzanine loans.

Penfund has inked its closing on the Toronto-based firm’s fifth fund, surpassing its stated fundraising goal and aided by investors spanning the globe.

The mid-market alternative lender said it raised C$724 million ($548.1 million, €489.8 million) for Penfund Capital Fund (PCF) V, which had an initial target of C$525 million. Those that committed capital came from Canada, the US, Europe and the Middle East. Penfund Capital Fund IV raised C$460 million in 2012.

PCF V will primarily make second lien and mezzanine loans in deals of up to C$140 million along with equity co-investments in transactions involving a private equity sponsor. Private high yield, unitranche and other financings are also on the menu, though those asset classes will not be the focus of the fund, according to the release. The firm may use the fund to invest either debt or equity in non-sponsored deals, as well.

“We are very grateful for the confidence and support of our investment partners and will continue to follow the same conservative investment philosophy that emphasises the preservation of capital across widely differing economic conditions,” Penfund chairman John Bradlow said in the statement. 

In a followup interview, Bradlow told Private Debt Investor I said the fund has a five-year investment period with a 10-year life. He also said Penfund's first four funds have had a net IRR of about 15 percent over the past 17 years.

Park Hill Group served as placement agent for the fundraising, while Stikeman Elliott LLP and Latham & Watkins LLP acted as legal counsel.

Established in 1979, Penfund manages C$1.2 billion committed by pension funds, insurance companies and banks, among other sources of capital, and has closed 225 transactions since its inception. In August, the firm provided second lien financing of an unspecified amount to support the acquisition of Give & Go Prepared Foods by Thomas H. Lee Partners. In February, Penfund provided $47 million in second lien debt and equity financing to OMERS Private Equity’s buyout of Forefront Dermatology.

This article has been updated to reflect Penfund chairman John Bradlow's additional comments.