SK Capital raises first institutional fund

The Arsenal Capital spin-out hit its hard-cap at $500m after bringing on board a diverse group of LPs attracted to the firm’s track record as well as its ‘above market’ GP commitment.

SK Capital Partners has closed its first institutional fund, hitting its $500 million hard-cap, said managing director Jim Marden.

The fundraising for Fund III took about seven months. SK Capital’s first two funds were special purpose vehicles used to buy one company each, Marden said. UBS worked as placement agent for the fundraising.

“We could have gone beyond [$500 million] but we wanted to maintain our discipline,” Marden told Private Equity International.

The firm has made one investment from Fund III, recapitalising Calabrian Corporation, a producer of sulfur dioxide and other chemicals used in industrial and municipal wastewater treatment, personal care, food preservation and other applications.

Limited partners, which include private and public pensions, banks, insurance companies, foundations and family offices, were likely attracted by the fund’s focus on mid-market investments, its modest fund size as well as its track record.

We could have gone beyond [$500 million] but we wanted to maintain our discipline.

Jim Marden

While no specific information was available, the second fund’s Ascend Performance Materials investment is positioned to make a generous exit. The investment has already generated an about 7x return, Marden said.

According to market sources and media reports, the firm initially invested just over $50 million in Ascend, a nylon producer, in 2009. The firm started the process of recapitalising the company last year for about $922 million, but pulled it after it became apparent tax cuts that were set to expire at the end of the year – driving up the capital gains rate — would be kept unchanged.

“That allowed us to wait to do a recapitalisation until the right amount of leverage and pricing was available,” Marden said.

LPs also were attracted to the GP commitment to the fund, which was “above market”, Marden said, though he declined to specify. He said the GP commitment was higher than 1 or 2 percent.

SK Capital spun out of Arsenal Capital in 2007 and is headed by Barry Siadat and Jamshid Keynejad. Siadat co-founded Arsenal in 2000 and left in 2007 when the US mid-market firm began to diversify its investment strategy.

Along with specialty materials, SK Capital also focuses on chemicals and healthcare sectors and focuses on companies in the lower mid-market.