Greenwich Street Wraps Fund II at $1.46 Billion –

After spending 15 months fund raising, Greenwich Street Capital Partners on Feb. 9 held a $200 million final close to wrap its second buyout fund at $1.463 billion.

Some of the fund’s success and its current deal flow is due to a more formalized partnership the firm formed last Spring with Salomon Smith Barney.

Greenwich Street, which is the buyout arm of The Travelers Group (now Citigroup), started talking to its L.P.s in late 1997 about Greenwich Street Capital Partners II, L.P. and set a $1 billion target. Although the firm surpassed its goal, the group did not find it easy to raise capital. Some of its L.P.s questioned the firm’s slow rate of investment in its $475 million first fund (BUYOUTS Dec. 8, 1997, p. 6), which it raised in 1995.

Greenwich Street responded by solidifying its team. The group last Spring added Sanjay Patel, who previously ran a mezzanine fund at Goldman, Sachs & Co., as its third partner and Greenwich also highlighted its deal-flow relationship with Salomon Smith Barney in its marketing pitch (BUYOUTS March 9, 1998, p. 4).

“I think adding Salomon did help us a great deal with our fund-raising,” Eric Bomze, chief administrative officer at Greenwich Street, said. “When out on the road, people do check your references, and Sanjay also added a lot because of his contacts and good reputation in private equity.”

Delays also were caused by the difficulty of raising a billion-dollar fund at a time when many L.P.s were renewing with other firms raising mega-vehicles.

“Funds in the U.S. are not that easy to raise because there’s a lot of competition. People automatically re-up with [Hicks, Muse, Tate & Furst Inc.] and [Kohlberg Kravis Roberts & Co.], so this fund raising took a little longer than we thought,” said James Manley, partner at Atlantic-Pacific Ltd., which worked in conjunction with Salomon Smith Barney placement agents to raise the effort.

Greenwich Street eventually raised about 30% of its capital internally from a $320 million commitment from The Travelers Insurance Co. and $100 million in commitments from employees at Citigroup.

The lead outside investor was Pennsylvania Public School Employes’ Retirement System, which committed $200 million. Other limited partners that signed on include Detroit City Retirement Systems, Wayne County Retirement System, Bank of Nova Scotia, Credit Lyonnais, First Union Bank and Societe Generale, Mr. Bomze said.

Solomon Provides Deal Flow

Besides making the fund more attractive to investors, Greenwich Street also is benefiting from its Solomon partnership in finding deals. Greenwich Street already has invested about $400 million from the new fund, and the group has sourced five of its first seven deals from Salomon bankers, Mr. Bomze said.

In Fund II, the firm’s largest investments are $180 million in Tampa-based IMC Mortgage Co., a consumer finance company that buys and sells home equity loans and was in financial difficulty (BUYOUTS Dec. 21, 1998, p. 3), and $70 million in Staten Island, N.Y.-based Atlantic Express, a school bus operating company.