Tennenbaum direct lending fund tops $1bn – exclusive

The Santa Monica, California-based firm's vehicle will focus on senior secured loans. 

Tennenbaum Capital Partners has corralled over $1 billion for its latest direct lending fund through its second close, according to a source familiar with the matter.

The total includes a $200 million raised by TCP Direct Lending Fund VIII feeder fund, which was reported in a regulatory form submitted to the US Securities and Exchange Commission, the latest in a series of filings made in the latter half of last year. An October report from trade publication PE Hub showed that Tennenbaum held a first close at $763 million.

The fund will focus on performing senior secured debt with focuses on performing first lien and second lien loans along with unitranche facilities, according to a San Mateo County Employees’ Retirement Association presentation. San Mateo committed $35 million to DLF VIII.

The vehicle will target an unlevered annual yield of between 9 percent and 12 percent. Most debt will be floating rate investments in North American companies with $100 million to $1.5 billion in enterprise value.

Tennenbaum declined to comment.

In October, Tennenbaum received a $200 million direct lending separately managed account commitment from the New Mexico Public Employees’ Retirement Association. The fund will also target first lien and unitranche loans, according to pension fund documents.

Rather than the typical 2 percent management fee and 20 percent carried interest, PERA will pay a 1 percent management fee on invested capital and a 12.5 percent carried interest. The account will target a net internal rate of return of 9-12 percent with a 6-9 percent cash yield. Tennenbaum’s gross return for its direct lending strategy was 12.7 percent.

The Orange County Employees’ Retirement System has also been a repeat investor in Tennenbaum vehicles. The pension fund invested a total of $125 million in Tennenbaum Energy Credit Opportunities Fund at meetings in January and April of 2015.