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Z Capital targets $500m for special situations

The James Zenni-led firm is expected to hold a first close on roughly $200m for its second special situations fund by the end of next month.

Chicago-based mid-market investor Z Capital Partners has come to market with its second special situations fund, which has a $500 million target, according to a source familiar with the situation. Dow Jones previously reported news of the fundraising.

Z Capital Special Situations Fund II launched this month and is expected to hold a first close on around $200 million by the end of October, the source said. The firm’s previous distressed fund, a 2007 vintage, collected $300 million after revising its initial target from $1 billion down to $500 million, according to Dow Jones. That fund invests in distressed US-based companies in the financial services, gaming, and consumer products sectors.

Z Capital declined to comment.

The firm specialises in managing assets in both distressed private equity and leveraged finance investments. Established in 2006 by president and chief executive officer James Zenni, the former founder of Black Diamond Capital Management, Z Capital focuses on control strategies using distressed debt, typically involving purchasing portions of debt in struggling companies to obtain control of the company.

In March, the firm took ownership of restaurant chain Real Mex, which had declared bankruptcy in October 2011. A former portfolio company of Sun Capital Partners, Real Mex is co-owned by Tennenbaum Capital Partners and JP Morgan Investment Management.

Investor appetite for debt funds has continued to be strong in 2012. In May, financial services specialist AnaCap Financial Partners raised £350 million (€436 million; $564 million) for its second credit opportunities fund. TPG Credit Management is also in market with its TPG Credit Strategies Fund II targeting $800 million with a $1 billion hard-cap. A source close to the matter said in a prior interview the firm expects to close on or above target.