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Stellus holds final close on credit fund, beating target

The manager raises $1.8bn of investable capital, 'materially' exceeding its target.

Stellus Capital Management held a final close on its Stellus Credit Fund III, raising about $1.8 billion of investable capital, including target leverage. The firm said in a news release that it “materially exceeded” its target, but a spokesman said it was not identifying it.

The fundraise included $725 million of equity in SCF III and investor-specific vehicles, the spokesman said. It also included $225 million of anchor capital for Stellus’s newly launched private BDC, Stellus Private Credit BDC.

SCF III was launched in January 2021, according to Private Debt Investor R&A. Its predecessor, SCF II, closed in September 2018 on $478 million, per the news release, and has already invested in 36 companies. The BDC is an evergreen fund that is regulated under the Investment Company Act of 1940 and will be marketed to accredited investors through their registered investment advisers. The BDC will invest parallel to other Stellus funds in the same mid-market, direct lending strategy the firm has implemented over the past 18 years.

Like the predecessor fund, SCF III and SPBDC focus on private credit opportunities originated and underwritten by Stellus in a range of industries in the US and Canada. Stellus aims to build a broad portfolio of direct lending investments in industries such as business services, consumer & retail, healthcare, industrials and media and technology.

The latest vehicles received commitments from new and existing institutional and high-net-worth investors from around the world, including public and private pension plans, insurance companies, family offices and the like. Stellus didn’t identify any of the investors in the latest funds, but Arizona Public Safety Personnel Retirement System committed $75 million and the Rotary Foundation an unspecified amount to SCF II, per PDI research.

“With significant dry powder, we’re excited about the opportunity to utilise our robust origination capabilities, taking advantage of a strong private credit pipeline to provide investors with attractive risk-adjusted returns relative to other asset classes,” Robert T Ladd, managing partner of Stellus Capital Management, said in the statement.

In addition to the latest vehicles, the firm is investing through its publicly traded BDC, Stellus Capital Investment Corp, and certain investor-specific vehicles. Stellus, based in Houston, managed about $2.6 billion of assets as of 31 March 2022.