Zell-helmed firm targets $1bn for distressed debt(2)

Chicago-based private investment firm Equity Group Investments is reportedly targeting $1 billion for its latest distressed debt vehicle, as interest in the sub-segment of private equity grows.

The vehicle, Zell Opporunities Fund II, will be used to invest in secondary-market purchases, distressed assets, and to provide rescue capital, according to Bloomberg. EGI could not be reached for comment by press time.

The fundraising comes as interest in distressed debt is burgeoning, with turbulent economic conditions and a sizeable volume of rapidly-maturing debt making the asset class an attractive proposition. Oaktree Capital Management, for example, is targeting $6 billion for its OCM Opportunities Fund IX, while Cerberus Capital Managment is targeting $3.75 billion for its latest vehicle. Bain Capital's debt division, Sankaty, is also looking to raise a $3.5 billion credit opportunities fund, according to PEI Media data.

EGI, founded by billionaire Sam Zell, is better known as a real estate investment group but has expanded its remit to include distressed debt in response to the post-Lehman credit crisis. Its last distressed debt fund was raised in 2009, and has to date deployed $666 million, delivered a 1.2x multiple and internal rate of return of 16 percent, according to sources cited by Bloomberg.

According to the EGI website, “The firm is continuing its long history of taking meaningful positions in debt instruments with the flexibility to either hold the investment or to actively participate in a restructuring that results in a significant ownership stake”.

EGI's team will reportedly commit $100 million to the new fund.

For in-depth analysis of the distressed debt market, read the July / August edition of Private Equity International magazine.