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NY Shop To Close Fund V At Hard Cap

Cortec Group expects to close its fifth buyout fund at its $620 million hard cap on Wednesday, a source close to the fundraising effort told Buyouts.

The New York-based shop raised $600 million in commitments from LPs, and principals at the firm are committing an additional $20 million. The firm’s target had been $500 million.

The fundraise is significant considering that Cortec raised it after barely five months in what for many firms has been a difficult fundraising market. Cortec also did it alone, with Managing Partner David Schnadig leading the effort rather than hiring a placement agent.

The fund, Cortec Group Fund V LP, is also a healthy increase from Cortec’s fourth fund, which closed in 2006 with $411 million in commitments.

Backers of fund V include investors in previous Cortec funds, such as the California State Teachers’ Retirement System and the University of Texas Investment Management Co. New supporters include the State of Wisconsin Investment Board, the New York State Teachers’ Retirement System, RCP Advisors and Adams Street Partners.

Working in Cortec’s favor was the fact that limited partners seem to be favoring mid-market funds of late. In a survey the placement agency Probitas Partners released last December, 46 percent of LP respondents said they were likely to back mid-market buyout funds ranging in size from $500 million to $2.5 billion, compared to 5 percent who said they would back LBO funds of $5 billion or more.

More importantly, Cortec’s recent funds are performing well. Fund IV, though still reasonably young, has generated a 1.4x return so far. And fund III, a $332 million, vintage 2000 fund, has so far generated gross cash-on-cash returns of about 3x, according to the source (UTIMCO puts the multiples for funds III and IV at 2.10x and 1.04x, respectively, but those numbers were last updated in May 2010).

Cortec typically invests in companies with $40 million to $300 million in annual revenues in a variety of sectors. The firm prefers market-leading companies with histories of profitability; it also targets companies undergoing management transitions, in need growth equity, or that are struggling with too much debt.

Cortec’s Fund IV companies include 180 Medical, an Oklahoma City-based distributor of single-use urologic catheters; Hygenic Corp., an Akron, Ohio-based maker of branded products used by physical therapists, chiropractors and other professionals that provide physical rehabilitation services; and CGI Windows and Doors Inc., a Miami-based maker of hurricane-resistant windows and doors.

Bernard Vaughan is a senior editor at Buyouts Magazine. Follow him on Twitter @BVaughanReuters. Follow Buyouts tweets @Buyouts. For information on how to subscribe, contact Greg Winterton at greg.winterton@thomsonreuters.com.