Sun Life-backed Crescent targets $6bn for two private debt funds

Crescent in January sold a 51% stake to SLC Management, the alternative asset unit of Sun Life, for up to $338m.

Crescent Capital Group, which earlier this year sold a piece of itself to Sun Life Financial, is targeting $6 billion for a pair of credit offerings, according to sources and a pension document.

Crescent, co-founded by Milwaukee Brewers owner Mark Attanasio, is in the market with an eighth credit solutions vehicle, targeted to bring in $4 billion, sources said. It is also seeking $2 billion for a third direct lending pool.

An October report by Connecticut Retirement Plans and Trust Funds confirmed the target for Crescent Credit Solutions VIII, saying the firm has already secured more than half. Crescent Direct Lending Fund III appears to have exceeded its goal, raising $2.5 billion-plus, the report said.

Crescent’s offerings arrive as private debt fundraising is gathering steam. Capital raised by global funds reached almost $150 billion as of 30 September, up 19 percent year over year, Private Debt Investor reported.

How Crescent invests

Crescent began life in 1991, when managing partners Attanasio and Jean-Marc Chapus established Crescent Capital Corp. The business was acquired in 1995 by Trust Company of the West and rebranded as TCW’s leveraged finance group.

In 2011 Attanasio and Chapus led the spinout of Crescent as an independent, multi-strategy shop investing in debt securities at all levels of the capital structure. Overseeing more than $34 billion of assets, it today invests in senior loans, high-yield bonds, mezzanine debt and distressed debt, tapping opportunities in both private and public markets.

The credit solutions strategy provides junior debt and unitranche loans to primarily North American mid-market companies, typically with EBITDA of $35 million to $150 million, the CRPTF report said. Fund VIII will invest $75 million to $200 million per deal, creating a portfolio of 40 to 50 investments.

The direct lending strategy provides senior loans to private equity-sponsored, lower mid-market companies in the US, mostly with EBITDA of $5 million to $35 million, the report said. Fund III will aim to do 20 to 30 deals annually, investing $25 million to $100 million apiece.

PE firms with which Crescent has partnered include Carlyle, GTCR, KKR, Leonard Green & Partners and TPG. Crescent, for example, has been a backer of car wash operator Mister Car Wash, acquired in 2014 by Leonard Green. The company went public in June.

Majority sale to Sun Life

Crescent in January sold a 51 percent stake to Sun Life for up to $338 million. The Canadian insurer made an upfront payment of $276 million and will pay up to $62 million with the achievement of milestones.

The deal ensured Crescent’s continued independence, with equity holders retaining carried interest in existing funds along with certain assets and economics. Sun Life will co-invest up to $750 million in the firm’s strategies and support new product launches.

Crescent is now part of SLC Management, Sun Life’s alternative asset unit, which invests in fixed income, infrastructure and real estate debt and equity. It also holds majority stakes in BentallGreenOak and InfraRed Capital Partners.

Crescent Credit Solutions VII was as of March earning an 8.5 percent net IRR (unlevered) and an 11.1 percent net IRR (levered), according to the CRPTF report. Crescent Direct Lending Fund II reflected a 6.8 percent net IRR (unlevered) and an 8.9 percent net IRR (levered).

Los Angeles-based Crescent declined to provide a comment on this story.

This article first appeared in affiliate publication Buyouts