TSSP readies platform focused on growth investments

A dedicated fund will invest in companies that have outgrown the market served by venture lenders and companies that may hope to avoid dilution by other equity investors.

TPG Sixth Street Partners is set to launch a Capital Solutions group, which will focus on growth debt, structured equity and a mix of hybrid debt-equity financings known as stapled solutions, according to pension fund documents.

The credit arm of TPG will focus on providing funding to growth companies, which the firm designates as those businesses growing faster than the economy and require a “high level” of investment, according to meeting materials from the Tulare County Employees’ Retirement Association.

TSSP is currently raising a private fund called TSSP Capital Solutions Fund that will focus on the three strategies. Of the three investments, the allocations of the vehicle would be 20-35 percent in growth debt, 30-40 percent in structured equity and 20-35 percent in stapled solutions.

The firm did not immediately respond to a request for comment.

The growth debt component of the new vertical will target companies that “have reached critical mass” and have surpassed the scope of venture lenders, the TCERA documents showed. The structured equity component will target those companies that are “debt averse” but willing to provide prospective investors the downside protection required to avoid dilution by other equity investors.

Stapled solutions will combine growth debt and structured equity investments to create financings that offer companies the opportunity to simplify capital raises that would otherwise seek multiple investors for both debt and equity.

The TCS fund has an eight-year life with two optional one-year extensions, according to the TCERA meeting documents.

Though the TCS fund is new, TSSP has invested in 24 deals across the three strategies, totalling $1.5 billion, that have generated a gross internal rate of return of 24.7 percent and a multiple of money invested of 1.46x. The firm had no losses on any of those investments, the documents showed.

TSSP is also in market with the $1.5 billion TSSP Adjacent Opportunity 4.0 and the $4 billion TSSP Adjacent Opportunities Contingent fund, which would only be activated in a distressed or dislocation scenario. They will target distress-for-control investments and opportunities that fall outside the mandates of the firm’s special situations. It is also seeking $3 billion for TOP IV to invest in distressed debt and special situations.

Founded in 2009, TSSP manages $27 billion in assets across myriad strategies from its business development company, TPG Specialty Lending, to infrastructure special situations. The firm invests across industries, geographies and the capital structure.