TH Lee launches credit arm with $500m

US buyout firm TH Lee has created a credit fund with $500 million in commitments and a dedicated credit division staffed largely by ex-AIG executives, including AIGGIG’s former head of private placement, Sam Tillinghast.

Thomas H. Lee Partners yesterday launched a credit affiliate, THL Credit Group, and a corresponding fund with $500 million (€360 million) in commitments.

A spokeswoman declined comment as to whether the fund has been closed, and no information was disclosed as to the fund’s limited partners.

The fund will invest in securities through leveraged finance, structured credit and minority equity transactions, providing capital to companies with a minimum EBITDA of $10 million, according to THL Credit’s website.

The firm’s spokeswoman would not comment on the stimulus for starting the division, though some large US buyout firms, such as Kohlberg Kravis Roberts and The Blackstone Group, have indicated they may launch investment strategies targeting credit markets. 

Blackstone chief operating officer Hamilton James told investors last month that companies for which Blackstone had been previously outbid now seem to be “very attractive investments, where frankly, I think we may be able to buy the debt in these companies and get a higher return than [we would have on] the underlying equity”.

A spokeswoman for THL Credit said the division was launched yesterday. Corporate bios on the group’s website indicate that its junior-most executives joined in June.

THL Credit’s eight executives appear to have worked with one another extensively in the past, with AIG a common thread between most team members.

The group’s chief executive and chief investment officer is James Hunt. He co-founded Bison Capital Asset Management in 2001, before which he was president of SunAmerica Corporate Finance and executive vice president of SunAmerica Investments, which were acquired by AIG in 1999.

President and chief operating officer Sam Tillinghast is the former head of the private placement group at AIG Global Investment Group (AIGGIG), before which he was executive vice president of SunAmerica Corporate Finance.

Gregg Hammer and Chris Ochs, both executive vice presidents, were previously managing directors at AIGGIG, and co-heads of its leveraged capital group. Hammer at one time co-led the firm’s corporate private placement group, while Ochs was previously a portfolio manager in AIGGIG’s public high yield group and head of its leveraged loan group. Like Hunt and Tillinghast, Ochs was at SunAmerica prior to AIG.

Managing director Hunter Strop seems to be the only team member sans obvious ties to AIG or Hunt, having previously been a vice president in the private equity group of General Electric Asset Management.

Vice presidents Chris Flynn, Kunal Soni and Tim Tucker joined THL Credit in June. Both Flynn and Tucker were formerly vice presidents within AIGGIG’s leveraged capital group, while Soni worked previously for Bison Capital.

This is not the first time the Boston buyout firm has widened its focus in an opportunistic attempt to capture market trends. In 1999, it formed TH Lee Putnam Internet Partners, which raised a $1.1 billion fund. As the Internet investment bubble popped, the firm was rebranded TH Lee Putnam Ventures and changed its focus to later-stage companies, though it failed to raise a second fund and has yet to fully invest its first fund, according to its website.

TH Lee is currently raising its sixth private equity fund, for which it reportedly has $8.5 billion in commitments, exceeding its $8 billion target. The 33-year-old firm’s previous fund closed on $6.4 billion.