Sankaty Closes MM Debt Fund

Sankaty Advisors has closed its debt fund dedicated to the middle market with more than $900 million in commitments, the firm confirmed. The Boston-based credit affiliate of Bain Capital aims to use the capital to fill a whole in middle market deal financing.

Sankaty launched the Sankaty Middle Market Opportunities Fund LP in August of 2009 with a $750 million target. Ropes & Gray acted as legal counsel on the fundraise.

Sankaty will invest in middle-market mezzanine loans with some senior debt and equity. More specifically, it would target credit for new buyouts, rescue financings and secondary purchases of mezzanine debt. Sankaty expects to close on fundraising in November 2009, and then invest over the subsequent four years. Sankaty MMOF will charge a 1.25% fee on drawn capital with a 20% carry, including an 8% preferred return to LPs.

Sankaty’s middle-market group has generated a gross IRR of 21.5% through 34 exits to date, according to marketing materials.

The firm also raised a DIP fund from high net worth individuals in the fall of last year, securing $672 million in commitments, topping a $400 million target. The fund, called DIP Opportunities Fund, has a two-year investment period with fees of 1.75% on commitments. Sankaty anticipates returns of between 12% and 15% for the entity.