The Sterling Group has held an initial close on its first debt fund, which will target mezzanine investments, according to a source familiar with the situation.
The Houston-based firm has locked down $200 million for the Sterling Group Credit Fund, this person said. The vehicle has set a target of $225 million, according to a regulatory filing with the US Securities and Exchange Commission.
The lion’s share of dealflow is likely to come from the Houston-based firm’s private equity side, a separate source previously told sister title Private Debt Investor.The Illinois Municipal Retirement System made a $25 million commitment to the fund in August, according to the Oakbrook, Illinois-based pension fund’s website.
Mezzanine debt has made up one-fifth of this year’s fundraising total, according to PDI data. However, of the top 10 funds closed this year, only one using the strategy makes an appearance: Crescent Capital Group‘s Crescent Mezzanine Partners Fund VII. Closing at $4.6 billion, it is the fourth biggest of 2017.
Sean Davenport, whom Sterling hired away from BNP Paribas to run its credit practice, joined his new firm in May, according to his LinkedIn profile. 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.
Sterling’s last flagship private equity 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.
Founded in 1982, Sterling’s private equity strategy invests in companies with EBITDA of $15 million or more and writes cheques of $40 million to $200 million headquartered in either the US or Canada.