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February 14, 2018  

Solus Offers Dual Versions of Debt Vehicle

Solus Alternative Asset Management is marketing a distressed-debt fund that allows investors to choose between a private equity-style structure and an evergreen format.

The event-driven shop, with $6 billion under management, has long pursued distressed-debt investments, generating an 18.2% annualized return via its flagship hedge fund, dubbed Sola. But the new offering, Solus Distressed Opportunities Fund, would target less-liquid, longer-term plays in a bid to generate higher returns. In addition to distressed debt, the vehicle would pursue event-driven and special-situations plays — essentially the same strategy as the flagship fund, but with longer holding periods.

In an unusual twist, the New York firm is offering both closed-end and open-end versions of the new fund. The closed-end, or private-equity style, version would have a two-year investment period followed by a two-year harvest period and two one-year extension options — at which point the underlying positions would be liquidated and investor capital, including any profits, returned.

The open-end, or evergreen, version would lock up investor capital for two years, then permit annual redemptions thereafter. Withdrawals would be processed by transferring the investors’ assets to a segregated account pending eventual liquidation. As long as some limited partners remain in the fund, Solus presumably would continue investing on their behalf.

Investors would be charged the same fees regardless of the format — namely, a 1.5% management fee and 20% performance fee over an 8% hurdle. The minimum investment for both versions is $5 million.

Solus, led by chief executive and chief investment officer Christopher Pucillo, runs the bulk of its assets in the Sola fund, whose track record goes back to 2002. In 2007, Pucillo and co-founding partners Christopher Bondy and Nick Signorile spun off from Stanfield Capital to form Solus. Bondy and Signorile sold their stakes and exited the business via a 2015 transaction in which a private equity fund run by Blackstone acquired a minority ownership interest in Solus.

Sola gained 7.1% last year, and its annual returns haven’t topped 12% in the last four years. The fund was up 34.7% in 2013.

All of Solus’ vehicles are run by a three-man team including C.J. Lanktree, Scott Martin and Pucillo. The firm employs 18 investment professionals.