The Sterling Group may be the latest firm to throw its hat into the private credit ring, as the firm plans to launch a mezzanine debt practice, a source familiar with the matter told Private Debt Investor.
The Houston-based private equity firm has brought on Sean Davenport, a former Dallas-based banker at BNP Paribas, to lead the junior debt arm. Davenport joined the firm in May, according to his LinkedIn profile. While at BNP, he was responsible for originating and structuring both senior and junior debt for private equity-backed companies while at BNP.
Davenport could not be reached for comment.
The firm’s debut private credit fund could target at least $200 million, the source said, and will invest in corporate credit.
Sterling’s new angle comes as private equity firms continue to launch debt practices. Other recent forays into the asset class include Francisco Partners bringing on Scott Eisenberg from GSO Capital Partners, Blackstone’s credit arm, and Thoma Bravo looking at launching a credit platform.
Earlier this year, BC Partners hired Ted Goldthorpe, formerly of Apollo Global Management, to run its credit arm. The firm is currently investing a $200 million opportunistic fund, as PDI exclusively reported in April, which is made up of capital contributed by the London-based firm’s partners, including Goldthorpe.
All these launches come as the number of private debt funds in market has reached a record high of 528 vehicles seeking $270.4 billion, according to PDI data. The 20 largest funds are seeking more than one-third, or $92.8 billion, of that total. Apollo Investment Fund IX, an equity-oriented vehicle that plans to invest at least one-fifth of its fund in distressed debt, is the largest fund, seeking $23.5 billion.
The capital committed by limited partners has risen to near-record levels as well, with private credit firms raising $61.6 billion in the first half of 2017. That number nears the 2015 record for the amount raised in the first six months of the year, when alternative lenders raked in $65.9 billion.