Chicago-based NXT Capital LLC has closed a $900 million debt fund, the lending firm’s fourth leveraged loan fund. The NXT Capital Senior Loan Fund IV will target senior debt transactions that NXT Capital’s Corporate Finance Group originates.
The new fund received $321 million in equity from U.S. and international investors including public and private pension plans, nearly $30 million more than firm’s previous fund that closed in January 2015. Wells Fargo Bank N.A. is the fund’s administrative agent and will also provide the balance of the investment capacity with a $425 million credit facility commitment. The credit facility is expected to increase to nearly $600 million by the 2016 fourth quarter.
Though some dealmakers say pricing is down in debt, NXT Capital touts more than $5 billion in third-party commitments with the addition of the leveraged fund. The fund will lend to private equity-backed middle market businesses and will focus on senior secured loans including: straight senior, stretch senior, unitranche and some second lien loans.
Private debt funds became more popular after the 2008 credit crisis. Investors’ increased commitment to NXT Capital’s leveraged loan fund during a low interest rate environment underlines the interest they see in middle market private debt. A 2015 Intermediate Capital Group plc (LON: ICP) study, conducted by Preqin and Create-Research, found that 54 percent of institutional investors were invested in private debt and 13 percent were considering it. Next to private equity, private debt is expected to deliver the highest returns over the next three years.
Recent fundraising efforts for leveraged loans include: Audax Group’s raising nearly $1.2 billion in capital for the firm’s fourth mezzanine fund; and The Carlyle Group LP’s (Nasdaq: CG) announced completion of fundraising efforts for a $403 million collateralized loan obligation fund. NXT Capital won Mergers & Acquisitions’ 2012 Award for Lender of the Year.