Wellspring offers discounts to large LPs with $1.2 bln Fund VI

Wellspring Capital Management is offering management-fee discounts to the largest LPs in its new fund.

Wellspring, which has been marketing its sixth flagship fund with a $1.2 billion target for about two years, will offer discounts on the management fee and carried interest to LPs who agree to commit more than $115 million, a summary of the fund’s confidential private-placement memo shows.

How large a discount is being offered is unclear. The firm declined to comment.

The headline terms Wellspring offered to LPs are relatively standard, according to the PPM summary. Fund investors would pay an annual management fee of 2 percent on its commitments through the first five years of the fund’s investment period. Afterward, the fee falls to 1 percent of committed capital and, later, 1 percent of actively invested capital.

The GP will commit an amount equal to 2 percent of the fund’s total size.

Minnesota State Board of Investment approved a $125 million commitment to the fund at its Sept. 12 meeting. Kansas Public Employees Retirement System backed the fund for up to $75 million late last year.

Wellspring specializes in middle-market investments across a variety of sectors. Previous investments include stakes in the restaurant chains Checkers Drive-In Restaurants Inc and Dave and Buster’s Inc, as well as for-profit college Vatterott College, gas station and convenience-store operator Stripes Holdings LLC and Chemaid Laboratories Inc, a hair and skincare products maker.

Wellspring’s previous fund, a $1.2 billion 2011 vintage, was netting an 18.8 percent internal rate of return and 1.2x multiple as of March 31, the PPM summary says. Its fourth fund, which raised $1 billion in 2006, was netting an 8.2 percent IRR and 1.5x multiple as of that date.

Greg Feldman, who co-founded Wellspring with Martin Davis in 1995, is the firm’s executive chairman. The firm is also led by CEO William Dawson along with Managing Partners Alexander Carles, Joshua Cascade and John Morningstar. Matthew Harrison and Seth Pearson are partners at the firm.

Action Item: Contact the firm: www.wellspringcapital.com/contact.html

Springhead and cascade of Krupaja River running out from a cave at Krupajsko Vrelo, Serbia. Photo courtesy Aleksandar Milutinovic/iStock/Getty Images