Bruckmann Rosser the Latest To Enter Fundraising Purgatory?

Bruckmann Rosser Sherrill & Co.’s third buyout fund may be the latest firm to enter what we’ve been calling “Fundraising Purgatory.” It’s a place where not-yet-aborted funds lay in wait for “market conditions to approve.”

Since neither the firm or Knight Capital, its placement agent, wouldn’t call me back, I can’t be clear, but let’s look at the facts: Bruckmann Rosser entered the market, seeking $600 million, as early as July of 2007. That is 20 months ago. According to a Buyouts report, the fund accumulated $250 million from existing investors, with plans to hold a first close on that sum, in October 2007.

Yet according to regulatory filings, the firm has $168.5 million in commitments from 23 investors. Giving them the benefit of the doubt, perhaps there is a parallel fund containing at least the next $81.5 million or more. There are none that I could find, and no announcements that the fund has closed.

What makes Bruckmann Rosser Sherrill & Co. a “have-not”? Well, to start, the firm has had a few problem portfolio companies in its past funds, which focuses on consumer spending-reliant industries like restaurants, specialty retail, and consumer products.

Last year, portfolio company EZ Lube filed for bankruptcy. Bruckmann Rosser purchased the company in 2005. Meanwhile, Lazy Days RV Center has undergone a number of ratings downgrades, and it skipped an interest payment in November of last year. Bruckmann Rosser purchased the company for around $200 million; according to the deal, its equity value in the company dropped from $71.2 million to $66.1 million between year-end 2007 and Sept. 2008.

Both Lazy Days and Eurofresh, another Bruckmann Rosser portfolio company, appear on S&P’s Weakest Links list. Eurofresh, a tomato company, defaulted on its debt but negotiated a forbearance agreement with its lenders. Bruckmann Rosser invested $20 million in EuroFresh in 2001 and it recouped this investment during a recapitalization in 2004. The firm also collected more than half of a $122 million special dividend from Eurofresh through a deal with Banc of America Capital Partners.

That doesn’t mean the firm hasn’t seen some exits on the way. The firm exited B&G Foods, a pickle maker, via IPO in 2007, making around 3x its money. The firm also exited well-known companies like Au Bon Pain, California Pizza Kitchen, New York Sports Clubs and totes-Isotoner. In fact, in October of 2007, fund two had posted an 18.2% IRR, Buyouts reported. That’s surely changed since then.

Even if the firm’s track record holds up, it may not stand a chance with raising new money ‘till this whole recession thing blows over. In today’s environment, LPs would probably say no to God if he were raising consumer-products focused LBO fund.