Riverside clears $350m goal for debt, equity investments

The New York-based private equity firm has raised its second fund that can invest in debt. 

Riverside Company has raised its $418 million for its first non-control investment fund, a structured equity investment vehicle, which includes debt and preferred securities, the company said on Monday. 

The Riverside Strategic Capital Fund, which surpassed its $350 million goal, will invest in companies with more than $5 million of EBITDA. The final figure includes separately managed accounts.

Each investment for the fund will have a fixed-income component that Riverside underwrites, whether that guaranteed payment stream is in the form of a coupon or dividend, fund manager George Cole told Private Debt Investor. He added the debt investments could be either senior or junior in the capital structure.

Riverside said in its statement the vehicle will target business owners and entrepreneurs looking for funding – without giving up control of their company – for an acquisition, growth, recapitalisation or a liquidity event, which can include exiting a given investment.

“Other [Riverside] funds are common equity funds,” Hal Greenberg, also a manager of the fund, said, explaining the firm’s other vehicles could have included several non-control investments. “They may have had the latitude to do [non-control investments], but it wasn’t focus of the fund.” Greenberg added the Strategic Capital fund plans to structure the investments that are as non-dilutive as possible.

Cole said one-third of the limited partners committing capital to the fund were first-time Riverside investors, one-third were returning investors and the last one-third were LPs that invested at Cole and Greenberg’s previous firm, VSS Structured Capital.

Among the LPs pledging money to the fund was the New Mexico Educational Retirement Board, which allocated $50 million for the Strategic Capital fund. Riverside planned to commit 3 percent to the fund and target investments $20 million to $40 million, according to NMERB documents.

The firm has already invested in six companies: Alcohol Monitoring Systems, a Littleton, Colorado-based manufacturer of alcohol monitoring devices; Bentley Laboratories, an Edison, New Jersey-based contracted skin care product manufacturer; Fadata, a London-based insurance software company; North American Dental Group, a New Castle, Pennsylvania-based business services provider for dental practices; True Health Diagnostics, a Carlsbad, California-based maker of medical testing equipment; and DuBois Chemicals, a Sharonville, Ohio-based company that markets cleaning solutions for different industries.

Pam Hendrickson, Riverside’s chief operating officer and vice chairman , said: “I believe there’s a difference in how you behave when you’re an influencing investor versus a control investor. RSCF’s Non-control companies have happily utilised Riverside resources.” She added those resources have included the firm’s consultants and a leadership program the firm operates called Riverside University.

Private Debt Investor exclusively reported the launching of Riverside’s credit department. The firm tapped David Dobies, a former TCW managing director and a NewStar Financial founding partner, to lead the new division. David Kilpatrick from Citizens Bank and Tom Gillis from Silicon Valley Bank were Dobies’ first hires. Both Kilpatrick and Gillis worked with the credit head while at NewStar Financial.