Dallas private equity financier Newstone Capital Partners is aiming to raise $1.25 billion for a fourth fund, according to a recent regulatory filing.
The firm invests in what’s known as “mezzanine” financing for private equity firms looking for more debt to bridge the amount needed to buy out a company. This generally higher-risk debt comes with higher interest rates by the rush of firms offering it since the 2008 financial crisis. They often also have the ability to convert this debt into equity.
Timothy Costello and John Rocchio — longtime executives in the mezzanine debt world — started Newstone, which targets larger middle-market companies in manufacturing, consumer products, health care, software development and service industries. Newstone will invest as much as $100 million per deal. The firm also gets in on recapitalizations and investments for later-stage growth companies.
Newstone did not immediately reply to a request for comment about the new fund raise.
Fund raising for mezzanine investors reached a record in 2016 with $34.2 billion committed across the industry, according to a recent report from Pitchbook. That fell to $14.9 billion last year.
The capital raise comes amid a number of billion-dollar funds cropping up in Dallas recently.
Dallas oil and gas investor Energy Spectrum Capital is raising $1.3 billion for its eighth fund. Hedge fund giant Highland Capital is raising $1 billion to invest in rental homes. And a new private equity firm started by a former executive at Lone Star Funds is raising $1 billion.