Capitala Group, which lends to middle market companies, announced today it closed a new private credit fund, the $500 million Capitala Private Credit Fund V.
The private credit fund, which closed last month, is Capitala’s largest since the company listed its BDC in September 2013. The fund has no SBIC component since Capitala has already reached the $350 million limit for borrowing across a family of funds.
“We expect to be deploying the fund promptly,” Joseph Alala, Chairman and CEO of Capitala Finance, told LCD News. “The opportunities are there, and deals are still getting done. We have the opportunity to invest now, thanks to the fund.”
The fund will target the same investments as the BDC, traditional lower middle market and middle market companies. The BDC will have the opportunity for co-investment with the private fund.
The investment committee has been expanded for Capitala Private Credit Fund V. In addition to Alala, Jack McGlinn, and Hunt Broyhill, who make investment decisions for the BDC, the private fund’s investment committee includes Chris Norton, Randall Fontes, and Adam Richeson.
Alala said Capitala Group is actively seeking to expand its investment team, adding staff in Charlotte, N.C., and the Northeastern U.S..
The news of Capitala Private Credit Fund V comes on the heels of an announcement late last month that Capitala Finance exited four investments totaling $57.1 million.
These investments included $18.4 million of subordinated debt in Merlin International, an $8 million subordinated debt and a $10.6 million equity investment in MTI Holdings, a $6.4 million subordinated debt and $2.8 million equity investment in STX Healthcare Management Services, and a full repayment of a $10.9 million senior and subordinated debt investment toSparus Holdings.
Including the exit of Sparus, Capitala’s exposure to the troubled energy sector declined to 3%, on a fair value basis, from 9% at year-end 2015.
Alala added that there had been no new development to the situation at Sierra Hamilton, an oil and gas engineering and consulting services company. As of June 30, a $15 million 12.25% senior secured term loan due 2018 was booked at $7.5 million at fair value, compared to $10.1 million as of Dec. 31. The investment consists of a first-lien loan behind a working capital revolver.
On an Aug. 10 earnings call, in response to an analyst’s question, management said the borrower was current on interest payments.
Charlotte, N.C.–based Capitala Finance targets debt and equity investments in middle market companies generating annual EBITDA of $5–30 million. The company focuses on mezzanine and subordinated deals, but also invests in first-lien, second-lien, and unitranche debt. It trades on the Nasdaq under the ticker CPTA. Capitala Investment Advisors is its external investment adviser. — Abby Latour
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