Alchemy to raise second distressed investment fund

The UK-based mid-market firm has been investing from its debut £300m distressed debt fund that closed in March 2007, but will raise a successor in spring with an estimated $1bn target.

Alchemy Partners will likely raise its second distressed debt fund in the spring, PEO has confirmed. Media reports have estimated the fund’s target will be $1 billion, or more than triple the firm’s debut distressed investment fund, which closed in March 2007 on £300 million.

Jon Moulton, who founded Alchemy in 1997, told PEO that reports on the potential size of the fund were “a bit premature” but confirmed the firm's plans to raise a new fund in the second quarter of 2009.

Last year Moulton said that the firm’s debut distressed debt fund would fare well because of difficulties experienced by the “over-leveraged progeny” of larger buyout firms.

“The distressed debt funds moved too soon, but now they will do well” given opportunities to purchase debt and then swap it for equity, he told UK magazine Growth Company Investor earlier this month. He said Lehman Brothers alone is offering $128 billion in distressed debt opportunities, making it “available on a scale not ever seen before”.

Moulton also acknowledged that Alchemy’s portfolio has “not been immune” to the global financial crisis affecting many private equity-backed companies.

Alchemy focuses on mid-market companies and specialises in financial services, information technology and telecoms; it added a distressed debt team in 2006. The firm's investors include banks, pension funds, fund of funds, university endowments and high net-worth individuals.

Other firms have recently raised large distressed investment funds, including Oaktree Capital Managment which closed the largest ever distressed fund in May on $10.9 billion. HIG Capital-affiliated Bayside Capital, based in Miami, closed its second fund in June on $3 billion.

Additional reporting by Toby Mitchenall