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Glendon tops $2 bln, heads for $2.5 bln cap for distressed investments

  • Glendon’s delayed-draw fund approaches cap
  • Fund II employs back-ended carried interest
  • Charges fees on invested capital

Glendon Capital Management has raised more than $2 billion for a second fund that won’t be drawn until triggered by market conditions and related factors, according to a source with knowledge of the fundraising and public pension documents. The firm is heading for a $2.5 billion hard cap.

The firm, which spun out of Barclays in 2013, could close the reserve fund in the fourth quarter. It is not clear exactly what would trigger deployment of the reserve vehicle. Park Hill Group is working as placement agent on the fundraising.

“The fund has a delayed draw period which offers the fund and its investors the ability to be patient and well-positioned to deploy capital at optimal points in the next credit cycle,” according to an investment memo from New Jersey Division of Investment.

Delayed draw, or reserve funds, the likes of which have been raised by Oaktree Capital Management and Centerbridge Partners, begin investing based on market conditions. They generally don’t start charging fees until they are activated. Glendon is only charging fees on invested capital for Fund II.

Fund II also won’t pay the GP any carried interest until all capital is returned to LPs plus an 8 percent preferred return, the investment memo said.

Glendon’s debut fund, a 2014 vintage that hit its $1 billion hard cap and is still early in its J-curve period, was generating an 8.1 percent net internal rate of return as of March 31, 2017, according to New Jersey State Investment Council.

Glendon invests in bank loans, corporate bonds, municipal debt, sovereign debt, asset-backed securities and equity securities related to debt restructurings and special situations, according to the firm’s Form ADV.

The firm was formed by Barclays’s head of distressed debt and special situations, Matthew Barrett, along with former Managing Directors Holly Kim, Brian Berman and Eitan Melamed. Another partner, Michael Keegan, joined in May 2016, according to the Form ADV.

Barrett, Kim and Berman worked at Barclays from 2006 to 2013, according to regulatory filings by Glendon. Earlier they had worked at Oaktree Capital Management.

Action Item: Check out the investment memo for Fund II: http://bit.ly/2wD5t94

Photo: A Barclays sign is seen outside a branch of the bank in London on Feb. 23, 2017. Photo courtesy REUTERS/Stefan Wermuth