Bain Capital offers LPs in 2 older credit funds the chance to cash out

Bain Capital is working with Neuberger Berman to enable investors in older credit funds to cash out while giving the GP more time to manage investments, three sources told Buyouts.

Bain Capital’s secondaries process is another example of a high-profile PE manager using the secondary market to sort out older funds. Other firms that have run secondaries processes include Warburg Pincus, TPG and Providence Equity.

The deal involves Sankaty Credit Opportunities Funds II and III. Bain Capital rebranded the Sankaty group into Bain Capital Credit in 2016.

The credit group was formed in 1998 by Jonathan Lavine, who is CIO of Bain Capital Credit and co-managing partner of Bain Capital. The credit group manages about $41 billion.

Neuberger Berman is the sole investor in the deal, sources said.

Bain Capital would enable LPs in Credit Opportunities Funds II and III to cash out of their stakes or roll their interests into a continuation vehicle, two of the three sources said. The new vehicle, which will house assets out of the two older funds, would have a five-year term, the sources said.

It’s unclear at what price existing LPs would be able to cash out of their interests. Pricing on the secondary market generally is high, meaning many deals trade at or near face value as of certain reference dates.

Houlihan Lokey is secondaries adviser on the transaction. LPs are currently deciding whether they want to sell their stakes in the two older funds or roll their interests into the continuation vehicle — known as the election period.

Bain’s Sankaty Credit Opportunities Fund II, a 2005 vintage, raised about $1.3 billion, according to an investment memo from Indiana Public Retirement System. Fund III, a 2007 vintage, raised about $2.2 billion, the memo said.

A spokesman for Bain Capital declined to comment.

Action Item: Check out Bain Capital Credit’s Form ADV here: https://bit.ly/2F5Zvhg