TPG and its $33 billion private credit arm, TPG Sixth Street Partners, are negotiating a split in which the credit business will buy back a portion of TPG's minority stake in the business, said sources with knowledge of the situation.
"Over the past year or so, we (TSSP and TPG) have had a series of good discussions about what that next evolution should look like," according to a letter TPG Sixth Street Partners sent to limited partners that was obtained by Pensions & Investments. "Together, we have decided now is the right time to pursue our respective next phases as independent organizations."
Any agreement would include a multiyear period to transition the limited services TPG and TSSP currently share. TSSP will provide more information when the agreement is finalized, said TSSP's letter, which was signed by Brian D'Arcy, a TSSP partner who leads TPG Sixth Street's capital formation team.
TPG said TPG executives do not expect the separation of TPG and TSSP into independent businesses would impact its funds or its investors "given our businesses operate mostly autonomously today," said a separate letter TPG sent to limited partners signed by James "Jim" Coulter, co-CEO and a founding partner of TPG, and Jon Winkelried, co-CEO and a partner at TPG, that was also obtained by P&I..
However, TPG's letter leaves room for future collaboration after the companies separate.
"We expect and intend to continue to look for ways to collaborate and work together when opportunities arise," the TPG letter said.
The two firms notified clients Tuesday.
Executives at both organizations wish to be free of current restrictions on the types of transactions in which they can invest, said sources familiar with the negotiations. The terms of any agreement, which is yet to be finalized, would bar each firm from investing in each other's focus areas for 12 months, the sources said.
TSSP spokesman Patrick Clifford and TPG spokesman Luke Barrett declined to comment.
TSSP was formed in 2009 to capitalize on liquid and illiquid credit dislocations and other special situations on a dynamic basis across various economic cycles, according to information on the website of the New Jersey Division of Investment, which makes investments for the $78.5 billion New Jersey Pension Fund, Trenton, a TSSP investor.
Until around 2011 when TSSP, then known as TPG Opportunities Partners, began raising its own funds and separate accounts, the firm invested capital through separately audited entities primarily within TPG Partners VI, and TPG Financial Partners funds.
In 2017, TSSP sold a 10% stake to Dyal Capital Partners, a Neuberger Berman business. At the time, TSSP managed about $20 billion in assets. More recently, in October 2019, TSSP closed its first growth fund, TSSP Capital Solutions fund, at its $2.2 billion hard cap. The fund makes both credit and equity investments of between $25 million and more than $500 million in growth companies.
TPG is expected to maintain a minority interest in TSSP and discontinue including TSSP assets as part of TPG's AUM should a transaction be finalized.