Wellspring Limps Along in Fundraising Market

Wellspring Capital Management continues to struggle in its efforts to raise a fifth fund, according to a recent regulatory filing.

The New York-based buyout firm has secured around $330 million in new commitments over the past year, bringing it to just over $490 million in total. This is compared to an original plan to raise upwards of $1.5 billion, which later was revised downward to $1.3 billion. [Update: We’re told that Wellspring has closer to $600m total when overseas commitments are included, and that the $1.3b figure is a hard cap]

Credit Suisse is serving as placement agent.

Why the troubles? One explanation is that Wellspring hit the fundraising market at a lousy time in general, particularly for a middle-market shop seeking for than it did the last go-around (Wellspring raised just over $1 billion for its fourth fund in 2006).

Another is that Fund IV has underperformed, with a -3.1% IRR through the end of Q3 2009, according to the Oregon Public Employees’ Retirement Fund (which commited $100 million to the new vehicle).

Finally, there is the issue of deal-flow. Specifically, Wellspring has not announced a new acquisition since May 2008, when it and Blackstone Group took Performance Food Group Co. private for $1.3 billion. According to the Oregon report, Wellspring has only called around 2/3 of the Fund IV capital.

Exits haven’t been much more common, save for last fall’s sale of Vatterott Educational Centers to TA Associates. Bix box arcade/restaurant chain Dave & Buster’s filed for an IPO in July 2008, but issued its only amended filing two months later.

On the upside, Wellspring’s prior funds are winners. Oregon reports positive IRRs or 20.1% and 24.7% for Fund II (1998) and Fund III (2002), respectively.

peHUB has a call into Wellspring, and will update this post if they reply.