GSO Capital Partners, a unit of Blackstone Group, and Monarch Alternative Capital are raising money to acquire debt and finance troubled companies at a time when investors have been reluctant to back buyout funds.
GSO, acquired by Blackstone in 2008, is seeking $2 billion for a fund that will invest in cash-strapped companies, including those taken private in leveraged buyouts, said two people with knowledge of the matter who declined to be identified because the information is private.
Monarch hopes to raise $400 million for its new distressed-asset fund, which may complete a financing round by July and has a commitment from a seed investor of $175 million, according to a letter obtained by Bloomberg.
While fundraising has slowed, investors are allocating cash to some managers that have successfully bought debt in companies struggling to meet their payments. Monarch’s previous fund, which started in June 2008 and has assets of about $550 million, is up almost 50% from the completion of fundraising, according to the letter.
Spokesmen for Blackstone Group and Monarch declined to comment.
Buyout funds take almost four times longer to lock up commitments greater than $1 billion than they did in 2004, according to researcher Preqin. Pension plans and endowments that invest with them are wary of pledging fresh money to managers that have been slow returning cash profits on prior funds, Preqin said.
Distressed private-equity funds raised $3.8 billion in the first quarter, Preqin data show.
GSO Capital Solutions Fund will provide so-called rescue financing to companies that need cash injections to keep them from violating debt agreements. In 2008, GSO raised $1.5 billion for its Capital Opportunities Fund, which makes mezzanine loans to companies at higher rates than banks and buys their preferred stock.
Monarch Capital Partners II will target midsized companies — those whose capital structures include $500 million to $5 billion in debt — that are coping with heavy debt loads and need restructuring, according to the letter.