Sun Capital agrees to shrink Fund V to $5bn

The firm has agreed to allow LPs in the fifth fund to shrink commitments by up to 30%.

Sun Capital Partners has reached an agreement with LPs to drop the size of its $6 billion fifth buyout fund, with the goal of getting the fund to $5 billion.

As part of the plan, LPs in the fifth fund would be able to reduce commitments by a minimum of about 16 percent and a maximum of about 33 percent, according to a source with knowledge of the situation. LPs also can choose to keep their commitments intact.

A group of LPs had asked the firm for the ability to reduce commitments as a way to help with liquidity. Sun Capital had been working with the LP group for the past few months on a plan to help reduce commitments.

Sun Capital did not return a call for comment Tuesday.

Several private equity firms have dropped the size of their funds to ease pressure on LPs in the market downturn. TPG and Permira shrank their vehicles to accommodate struggling LPs.

Sun Capital raised its fifth fund in 2007, after closing on $1.5 billion of commitments for its fourth fund in 2005.

Some big-hitting pensions, endowments and foundations helped build Sun’s fifth fund, including the Ford Foundation, China Development Industrial Bank, New York State Teachers’ Retirement System and the University of California Regents Endowment Fund.