Providence closes third debt fund

The firm’s credit arm (Benefit Street Partners) raised $1.75bn for Fund III. 

Providence Equity Partners’ credit arm Benefit Street Partners has closed its third debt fund on $1.75 billion, the firm announced in a statement on Thursday. The fund was oversubscribed.

Benefit Street began marketing Providence Debt Fund III last year. The fund received commitments from The Florida State Board of Administration, Teachers’ Retirement System of Louisiana (TRSL) and the Los Angeles City Employees’ Retirement System (LACERS). Sovereign wealth funds, corporate pensions, family offices and high net worth individuals also committed to the vehicle.

Investment reports made available by TRSL and LACERS indicate that Benefit Street had been targeting between $500 million and $750 million for Fund III, well below the $1 billion target cited in the release. The firm could not be reached for comment at press time.

“We appreciate the commitment of our investors and their confidence in our team,” said Benefit Street’s founder and chief executive officer Thomas Gahan. “The significant demand for the Fund underscores the strength of our credit platform’s track record, particularly since multiple investors in this fund are also committed to one or more of our other credit products.

Providence established its credit platform in 2008 and raised two vehicles prior to the launch of Fund III last year. Funds I and II had netted internal rates of return of 15.0 percent and 13.6 percent through early 2013, according to LACERS documents. In its statement announcing the close of Fund III, Benefit Street indicated that the credit platform had netted a 14 percent return through the end of the year.

The fund will provide senior secured debt to mid-market companies with limited access to traditional financing, according to a Hamilton Lane report made available by TRSL. Fund III has the ability to utilise limited amounts of fund-level leverage, though it has never exceed a 1x loan-to-value multiple.

“We believe that a combination of regulatory and structural changes is resulting in a sustained significant funding gap for middle market companies,” said Benefit Street president Richard Byrne in a statement. “With the Fund, corporations benefit from our flexible financing solutions and the deep operational and strategic expertise we can provide management. We have already begun deploying capital from the fund”