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August 14, 2019  

Platinum Equity Developing Debt Platform

Distressed-buyout shop Platinum Equity is getting ready to launch a direct-lending fund targeting troubled companies — the latest sign that Tom Gores’ firm is seeking to diversify its business.

The Beverly Hills firm has set a tentative fund-raising goal of up to $1.5 billion for the drawdown vehicle, with a first equity close penciled in for the first quarter of 2020. Michael Fabiano, who joined Platinum Equity in January from Blackstone’s GSO Capital unit, will manage the fund.

The offering marks the first step toward the development of a broader debt-investment platform by Fabiano, who has hired several key executives for his team. Overseeing operations is Jamie Smith, previously a collateralized loan obligation manager at Benefit Street Partners, currently a unit of Franklin Templeton. On the investment side, Fabiano recruited former GSO colleague Patrick Fleury, who most recently worked at Nokota Management.

Fabiano’s initiative coincides with a separate effort by Gores and his partners to back the launch of an equity fund by a team that worked together at now-defunct distressed-debt shop Archer Capital. That operation, called Centerline Capital, is led by Archer co-founder Joshua Lobel.

Both Centerline and the nascent debt-investing operation stem from a 2017 deal under which Platinum Equity sold a minority stake in its business to Neuberger Berman’s Dyal Capital unit, which invests in the general partnerships of hedge funds and private equity funds. Dyal’s backing typically is contingent on the manager’s willingness to develop new lines of business.

Until now, Platinum Equity largely has been focused on buying out troubled companies and turning them around. The firm, founded in 1995, currently has assets under management and capital commitments totaling more than $22 billion. On July 1, it held a first equity close for its fifth buyout fund with $7.2 billion. The fund has a “hard cap” of $10 billion.

Platinum Equity has begun talking to investors about the direct-lending fund, which presumably would target small and mid-size companies. The firm is expected to kick off a formal marketing campaign at its annual investor meeting in November.

A source suggested the fund’s strategy would be similar to vehicles currently being marketed by Blue Torch Capital and Sound Point Capital that lend money to companies facing financial, legal or operational challenges. Sound Point so far has raised $300 million for Sound Point Strategic Capital Fund, which has an overall fund-raising goal of $500 million.