KPS Tops Off Fund III with $800 Million

Do you work at a private equity firm that is having trouble raising money? Then beware the green-eyed monster that may follow…

KPS Capital Partners will announce this morning that it has raised $800 million in new commitments for its third fund, which originally closed in early 2007 with $1.2 billion. This is not a so-called “annex fund,” in which firms raise extra capital to support existing portfolio companies. Instead, it’s more of a “top-off,” because KPS sees more opportunities than the original fund size can support.

The New York-based turnaround firm informed LPs of its plans to raise another $800 million on June 12, asking for orders by June 28. It held a $700 million first close in mid-August, with the final close occuring last Thursday (two LPs needed extra time).

KPS so far has only made three investments out of the fund, with equity checks of approximately $150 million. This includes: Waterford Wedgewood, Global Brass and Copper Inc. (fka Olin Metals) and North American Breweries (fka Labatt USA). It now expects to be able to make a total of between 12 and 15 platform investments.

Not only is it relatively amazing that KPS was able to quickly secure $800 million in this environment, but it did so without adjusting the fund’s premium terms. KPS III has a 25% carried interest structure and a 50/50 fee split.

The most recent data for KPS III comes from CalPERS, which reports an 8.8% IRR — which of course doesn’t mean too much, given the J-curve and how little of the fund has been called down….