Providence reaches $360m on debt fund

Providence Equity Partners has raised at least $360 million for its third debt fund, according a document filed Wednesday with the US Securities and Exchange Commission.

Providence Debt Fund III will have a similar investment strategy as Providence TMT Debt Opportunity Fund II, according to Teachers’ Retirement System of Louisiana documents. Louisiana Teachers’ committed $75 million to the vehicle in April.

“Due to extreme market volatility during the financial crisis, Fund I primarily utilized a distressed trading strategy in order to capitalize on under-priced assets,” according to a Hamilton Lane memo to Louisiana Teachers’ detailing the fund. “Given reduced market volatility post-crisis, portfolio construction shifted in Fund II to focus more on debt origination. It is expected that Fund III will continue this focus on debt origination given current market fundamentals.”

The firm’s previous debt vehicles invested primarily in the telecom, media and technology sectors. Fund III will also invest primarily in TMT, but may expand into other sectors such as business services, consumer retail, financials, energy and healthcare, according to the report.  

As with previous vehicles, leverage at the fund level will be limited to around 1.1x, a source familiar with the firm told Private Debt Investor.  

TMT Debt Opportunity Fund II was generating an 11.98 percent net internal rate of return as of 31 December, according to a Hamilton Lane report to the Los Angeles City Employees’ Retirement System.

The SEC filing lists David Manlowe, Thomas Gahan, Michael Paasche, Paul Salem and Richard Byrne as executive officers of the fund.

Byrne joined Providence in April to preside over Benefit Street Partners, an affiliate of Providence’s credit investment arm. Byrne, a former chief executive officer of Deutsche Bank Securities, will report to Gahan, who formed Providence’s credit business in 2008.

“[Byrne] also shares our vision of the rapidly expanding credit investment opportunities around the world. His insights into the capital markets, expertise in financing transactions and his network of relationships in the investment community all make Rich an exceptional addition to our team,” Gahan said in a statement announcing the hire.

The firm’s credit team managed approximately $4.5 billion as of March. The latest fundraising effort puts that total in the $5 billion range, the source said. The credit platform invests in high yield bonds, long-short credit, secured senior debt, direct lending and structured credit, among other strategies.

Providence closed its latest private equity fund in June, sources told sister publication Private Equity International last month. The firm required a fundraising extension for Fund VII and had decreased its target for the vehicle from $6 billion to $5 billion.