Lone Star pulls out of unitranche joint venture with Antares Capital

Antares Capital confirmed Monday that Lone Star Funds has pulled out of its joint venture that provides unitranche loans for middle-market companies.

Lone Star Funds has “decided to cease making new unitranche loan commitments through the Middle Market Growth Program,” wrote Carol Ann Wharton, an Antares spokeswoman, in an emailed response to questions.

Antares and Lone Star are working together “to evaluate a go-forward approach” but both will continue to support the existing program, including outstanding commitments and current portfolio companies, Wharton said. Antares will also continue to originate unitranche transactions outside MMGP through a combination of its balance sheet, asset-management partners and institutional loan investors, the email said.

Christina Pretto, a Lone Star spokeswoman, also confirmed that the firm wouldn’t be making unitranche loans in connection with the MMGP program. She declined to comment further.

Lone Star wasn’t happy with the way the JV was working, according to a source with knowledge of the situation.

Antares and L Star Capital, Lone Star’s credit affiliate, announced the latest version of MMGP in 2016. Antares had prior unitranche joint ventures with Ares Capital and Lone Star that ended when Canada Pension Plan Investment Board acquired the Chicago lender in 2015 for $12 billion.

Antares, one of the biggest middle-market lenders, has more than $20 billion in capital under management and administration.

Most recent MMGP deals include providing unitranche financing for Littlejohn & Co’s buy of Tidel in March, Calera Capital’s acquisition of Evans Network of Cos in February and, in December, FFL Partnersbuy of Crisis Prevention Institute. 

MMGP could provide up to $350 million in financing. In the MMGP joint venture, Lone Star owned the junior interest, while Antares has the senior interest, a second source said. The loans were structured so that if one went bad, Lone Star was responsible for all the losses until its capital was wiped out, the second person said. The junior interest had a higher yield if the portfolio performed satisfactorily, the person said.

Antares, which owned the senior debt, had a lower yield but its stake was much safer, the source said. “Antares doesn’t lose anything,” the source said.

Lone Star Funds invests in real estate, equity, credit and other assets. The PE firm has more than $70 billion in aggregate capital commitments. In 2014, Lone Star closed its ninth flagship fund with $7.2 billion in capital commitments.

Action Item: Contact Antares’s Tim Lyne, a senior managing director, at timothy.lyne@antares.com

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