Sixth Street soars to €1bn hard cap for new European debt fund amid Covid-19 opportunity


Former TPG credit arm Sixth Street has struck a €1bn hard cap final close for its second fund targeting European direct lending deals.

AltAssets revealed last month that the firm was in the market targeting €800m for Sixth Street Specialty Lending Europe II, with a €1bn hard cap – broadly in line with the €812m equity raised for predecessor vehicle TSSP Specialty Lending Europe Fund I from 2016.

LPs committed to the fund include the Pennsylvania Public Schools Retirement System, which agreed to invest up to $125m. Fund I had a net IRR of 11.7% as of June 30, 2020, PSERS investment documents show.

Those documents said Sixth Street would use Fund III to provide debt capital to European mid-market companies, typically with an enterprise value of between €50m and €1.5bn.

It added that spreads and lender protections have improved in the wake of the Covid-19 crisis, along with the risk/reward dynamics embedded in new loan opportunities.

Sixth Street has already committed to five investments through Fund II.

Joshua Easterly, co-Founder and co-president of Sixth Street, said, “This capital raise is consistent with our approach of disciplined, patient fund sizing to serve our core client base of middle market companies, coupled with the upsize flexibility from Sixth Street TAO which allows us to commit quickly and in size to larger transactions.”

Sixth Street TAO is the firm’s $24bn platform for investing across the firm’s eight investment strategies.

Michael Griffin, the partner at Sixth Street who leads the European specialty lending team, added, “Our business in Europe keeps growing as more companies and management teams recognize the breadth and capabilities of the full Sixth Street platform.

“We have transacted in nine countries since expanding our Specialty Lending strategy to Europe five years ago, and we look forward to continuing to provide financing solutions for our sponsor and direct-to-company partners.”

Sixth Street was an affiliate of TPG known as TSSP until January last year, when it spun out as an independent entity.

The firm’s current and past direct lending investments in Europe include BluJay Solutions, Easy Software, CDK International, ClearCourse Partnership, Kyriba and Medius.

The firm also provides life sciences royalty financing, retail asset-backed lending and bespoke debt and equity capital solutions.

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