Levine Leichtman Capital Partners held a first close on $525 million for its fifth fund targeting debt and equity investments in the lower end of the mid-market, according to documents from the Connecticut State Treasurer’s office.
Connecticut’s Treasurer Denise Nappier is considering making a $75 million commitment to the fund. The state’s Investment Advisory Committee recommended the commitment at its meeting this week.
Levine Leichtman Capital Partners V is targeting $1.5 billion with a $1.6 billion soft-cap, with the option of raising the target to $2 billion, according to a March filing with the US Securities and Exchange Commission. The firm is targeting a final close for September 2014, according to Connecticut documents.
Levine Leichtman did not return a call for comment.
Various aspects of the ongoing management of [the firm] are currently being transitioned to various other principals.
The fund is charging a management fee of 1.75 percent if aggregate commitments are less than $1.25 billion, and 1.65 percent if aggregate commitments are more than $1.25 billion, according to a fund analysis by consultant Franklin Park, which was part of Connecticut’s board meeting packet.
The management fee will be offset by 100 percent of directors’ fees and annual transaction fees in excess of $3 million, according to the documents.
Key executives on the fund are Arthur Levine and Lauren Leichtman, the documents said.
Connecticut committed $75 million to the firm’s prior Fund IV, which closed on $1.1 billion in 2008. Fund IV was generating a 37.2 percent gross internal rate of return and a 1.5x gross multiple as of 30 September, 2012, according to the documents.
Investment staff pointed out in documents that the firm’s two key executives (and founders), Arthur Levine and Lauren Leichtman, are in their 60s and the firm has no formal succession plan in place. If either partner leaves the firm, the investment period will be canceled unless LPs choose to reinstate it.
“The founding partners have expressed their intentions to be fully dedicated during the life of Fund V,” the documents said. “Various aspects of the ongoing management of [the firm] are currently being transitioned to various other principals,” the documents said.
Last year, the firm hired Lee Stern from Kohlberg Kravis Roberts as a managing director and member of the firm’s credit strategies investment team.