TPG forms first-ever distressed fund

Private Equity International has learned that TPG Capital is in the market to raise $1.5 billion for a distressed, credit and special situation fund that will be run by former Goldman Sachs executive Alan Waxman.

The fund will be the firm’s first dedicated pool of money specifically for the strategy. In the past, TPG has invested in special situations and credit opportunities through its main private equity funds. TPG also is associated with a credit investment firm called TPG Credit, though it doesn’t control the firm.

TPG declined to comment.

Dubbed TPG Opportunities Partners II (TOP II), the fund will focus on investments in non-performing loans, distressed-for-control and special situations on a global basis, according to a limited partner with knowledge of the fund.

The LP said the fund is likely to get attention from investors based on TPG’s long track record of distressed investments – with one of its most famed deals the turnaround of Continental Airlines in the early 1990s – as well as the quality of the TOP team.

TPG formed TOP in 2009 when Waxman joined the firm. Waxman was the co-head of the Americas Special Situations Group at Goldman. Waxman’s team initially used capital from TPG’s sixth fund to make investments, thus the “II” in the new vehicle’s name.

The firm joins a group of other large funds raising dedicated capital to take advantage of the recent market turmoil.

The Carlyle Group has been in the market targeting $1.5 billion for its third distressed debt fund that will focus on buying the corporate debt of struggling companies. Carlyle Strategic Partners, co-led by former Oaktree Capital Management executives Brett Wyard and Raymond Whiteman, has a global mandate.

Oaktree was raising its third fund for distressed investments in Europe, targeting €2.5 billion to €3 billion, and Avenue Capital was also raising a European-focused distressed fund this year.

Kohlberg Kravis Roberts, which does not have a specific fund for distressed investing, has also built up its team around the strategy, including moving one of the team’s co-heads, Nat Zilkha, to address the huge opportunity in Europe as over-leveraged financial institutions, governments and corporations sell assets.