BC Partners seeks $1.25bn for new opportunistic debt fund, eyes Q1 first close

BC Partners returned to the market with a third opportunistic credit offering, as private debt continues to make gains in a rising-rate environment.

BCP Special Opportunities Fund III is targeting $1.25 billion, according to pension documents and sources with knowledge of the firm, just above the $1.2 billion raised by its 2020-vintage predecessor.

The vehicle is expected to hold an initial closing in the first quarter of this year, sources told Buyouts. BC Partners declined to comment.

Fund III is managed by BCP Credit, a New York private debt shop launched by BC Partners in 2017 with the hire of strategy head Ted Goldthorpe, a former Apollo Global Management executive. Set up as an all-weather, mid-market credit investor, the group was intended to complement the firm’s private equity business and to utilize its global networks and resources.

Last year, hikes in interest rates motivated LPs to explore asset classes that offer some measure of refuge. They included private debt, owing to key characteristics like floating rates. Private debt was also afforded fresh opportunities in sponsored financings, mostly because traditional players, among them syndicated lenders, pulled back.

This trend is expected to continue in 2023. In a column published this month by Private Debt Investor, Latham & Watkins said they see a “possible inflection point in the leveraged lending market.” They forecast “another year of selective expansion by private debt providers,” even if competition from traditional players resumes.

BCP Credit’s strategy was designed to be flexible in nature, hunting for mid-market opportunities across cycles and looking to fill spaces that emerge as other capital sources retrench.

Areas of primary interest include liquid special situations opportunities, such as event-driven or stressed and distressed deals. They also take in illiquid private capital opportunities, such as private lending and structured equity investing involving sponsored and unsponsored companies backed by robust cashflows.

Dealflow is sourced across North America and Europe and in sectors like business services, consumer, financial services, healthcare, industrials, technology, media and telecommunications and utilities.

Fund III will build on this strategy, allocating roughly 50 percent of its capital to private lending and structured equity investing, a report prepared for Teachers’ Retirement System of Louisiana said. The other 50 percent will go to dislocated liquid credit transactions as well as specialty lending, including receivables finance and GP and NAV-based lending.

The vehicle will target 30 to 50 investments in companies with values of $200 million to $10 billion. Equity check sizes will range from $20 million to $100 million.

BCP Special Opportunities Fund II was earning a net IRR of 13.3 percent as of June 2022, according to TRSL documents. For realized investments, the gross IRR was 22.4 percent, and for unrealized investments, 15.4 percent.

Prior to BCP Credit, Goldthorpe was president of Apollo Investment Corp and CIO of Apollo Investment Management.

He today manages a dedicated team of 20 credit professionals. Other partners are Matthias Ederer, formerly with Wingspan Investment Management, and Henry Wang, formerly with Stonerise Capital Partners. Both earlier in their careers worked with Goldthorpe at Goldman Sachs.