Sunrise Capital launches second distressed fund

The US private equity firm wants to raise $500m to invest in the growing number of turnaround opportunities in North America and Europe.

Sunrise Capital Partners, a US-based private equity firm specialising in distressed and turnaround investments, is to launch a a $400m to $600m fund targeting opportunities in North America and Europe. The fund, which is managed by Sunrise Capital, an affiliate of US privately-owned investment bank Houlihan Lokey Howard & Zukin (HLHZ), will receive commitments of at least $20m from the two companies and their management.

Sunrise Capital Partners II will follow the same strategy as its 1998 predecessor which raised $192m. The new fund, which will look to make investments of between $20m and $50m per company, will invest primarily in North American investments although around 25 per cent of the fund's capital will be available for European opportunities. HLHZ has recently established European headquarters in the UK which will serve as the base for European investments.

Larry Coben, senior principal of Sunrise, believes the fund will be well-positioned to take advantage of the current economic downturn, which will provide the firm opportunities for a further three years. 'When we raised the initial fund in 1998, people asked if there was a need for a distressed fund in what was then a buoyant market. The previous fund's performance proves that the demand was there and there is an even greater need in the current environment.'

The firm has completed six investments from its first fund, one of which is close to completing a successful exit. A second exit is expected in early 2003. A rule the firm has for any investment it makes is that it must be in a position to exert substantial influence over management. 'We don't think it's possible to manage distressed businesses by consensus,' said Coben.

The firm expects to attract a greater level of investment for the second fund from European institutions, reflecting what it sees as an increased popularity among European investors for funds of this nature.