Sterling Group seeks up to $250m for debut credit fund

The US mid-market private equity firm launched its debt practice earlier this summer.

The Sterling Group is raising its initial private credit vehicle with a target of $200 million-$250 million – and likely to settle on $225 million, sister title Private Debt Investor exclusively reports.

The lion’s share of dealflow for the Sterling Group Credit Fund, which will invest in mezzanine debt, is likely to come from the Houston-based firm’s private equity side, a source familiar with the situation said. The Illinois Municipal Retirement System made a $20 million commitment to the fund last week, according to a Friday announcement following an investment committee meeting.

Sean Davenport, whom Sterling hired away from BNP Paribas to run its credit practice, and Franny Jones, the firm’s marketing and investor relations director, gave the fund presentation to the Oak Brook, Illinois-based retirement plan. While at BNP, Davenport, who could not be reached for comment, was responsible for originating and structuring both senior and junior debt for private equity-backed companies.

The firm’s last flagship vehicle, mid-market buyout fund Sterling Group Partners IV, closed July 2015 on the $1.25 billion hard-cap, a figure it hit in three months, the firm said at the time. The fund targeted investments in manufacturing, distribution and industrial service businesses with an enterprise value of $100 million-$500 million.

Sterling’s new angle comes as private equity firms continue to launch debt practices.

Other recent forays into the asset class include Francisco Partners bringing on Scott Eisenberg from GSO Capital Partners and Capital Dynamics hiring Tom Hall and Jens Ernberg, the former co-chief investment officers of Credit Suisse’s former business development company.

Thoma Bravo also filed a notice with the US Securities and Exchange Commission that it is seeking $750 million for a debut credit fund, which will be reportedly headed by Jack Le Roy, formerly of Summit Partners.