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Z Capital eyes $750 mln cap on Fund II

Z Capital Partners, the special situations firm run by James Zenni, the founder of Black Diamond Capital Management, has beat its target for its second fund and is now eyeing its $750 million hard cap, according to two people with knowledge of the situation.

Fund II, which launched in December 2012 with a $500 million target, will likely be finished fundraising in the first quarter, one of the people said. The fund held a first close in January 2013, and has collected more than $600 million, the person said.

One of the people characterized the fundraising as having demand over the cap, but it’s not clear if the firm will try and raise the cap on the fund. Z Capital declined to comment.

Z Capital has already deployed about $135 million from Fund II, one of the people said. The firm focuses on middle-market companies – many of them backed by private equity firms – that are in need of a financial restructuring or turnaround.

Most recently, the firm acquired racing auto-parts maker MSD Performance, which it bought out of bankruptcy. MSD filed for bankruptcy in September. MSD was sold by Gryphon Investors to ValueAct Capital and management in 2005, after it acquired the company in 2004.

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