Irving Place Targets $1.5 Bln to $2 Bln for Next Fund: CORRECTED

Irving Place Capital expects to begin fundraising for its newest pool towards the end of this year, says CEO John Howard.

The fund, Irving Place Capital Partners IV, will likely look to raise $1.5 billion to $2 billion, Howard says. The pool is coming in lower than the New York firm’s last fund. In 2006, Irving Place Capital Partners III LP raised $2.7 billion.

The fund will also be the first for Irving Place since its former parent, Bear Stearns, imploded in 2008. J.P. Morgan famously ‘acquired’ Bear Stearns that year after the investment bank collapsed. Then the PE arm of Bear Stearns (and known as Bear Stearns Merchant Banking), the firm split off from J.P. Morgan later in 2008. It renamed itself Irving Place Capital.

Fund III has been riddled with portfolio issues that were not Irving Place’s fault, placement sources say. Because of problems at Bear Stearns, Irving Place, completed only one deal from August 2007 to August 2010, a placement agent says. The slow deployment threw off their investment pace, the source says. “That was more an Act of God rather than their fault,” the person says.

“[Irving Place] is generally viewed as a much stronger group than their portfolio might indicate,” a banker says.

Irving Place’s LPs also granted the firm a one-year extension on the fund’s investment period until 2013, sources say. Irving Place still has to invest about 15% to 20% of fund III, another person estimates.

The only issues Irving Place encountered were in the firm’s financial services and natural resources investments, Howard says. He declined to name the specific deals. “We’ve worked through those problems,” he says.

Irving Place has made seven portfolio investments with Fund III since spinning out of Bear Stearns, Howard says. In 2011, the middle market PE firm recapped National Surgical Hospitals and acquired Dots, the fashion retailer. Other deals in 2010 include Thermadyne Holdings Corp., Pet Supplies “Plus,” Alpha Packaging and Mold-Rite Plastics, according to the firm’s website.

Howard estimates that the post-spin portfolio should return 2.5x to 3.5x Irving’s initial investment. “This is probably the best portfolio we’ve ever invested in,” he says.

(CORRECTION: Irving Place has made seven portfolio investments since separating from Bear Stearns. The return cited in the story is for that specific portfolio. An earlier version of the story incorrectly said that IPC made seven portfolio investments out of its third fund and implied that the return cited was for Fund III.)

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