GSO Capital Partners LP, the credit investment arm of Blackstone Group LP (BX:US), is offering a fee break to clients that join the initial close of its second company rescue fund, said two people familiar with the situation.
The firm is seeking more than $4 billion for GSO Capital Solutions Fund II LP to invest in companies in need of cash, said one of the people who asked not to be identified because the information isn’t public. The firm expects to complete the first stage of fundraising this quarter.
BC Partners Ltd., EQT Partners AB and Permira Advisers LLP in Europe have offered similar breaks to entice early investors as private-equity firms compete for money in a crowded market. In the U.S., Carlyle Group LP and Silver Lake are among those lowering management fees in exchange for large commitments in an effort to woo institutions.
Christine Anderson, a spokeswoman for New York-based Blackstone, declined to comment.
The new GSO fund will charge a 1.5 percent management fee on invested capital and any amounts borrowed for leverage or financing. That will be cut by 0.25 percentage point for those joining the first close, the people said.
GSO will take 20 percent of profits after the fund achieves an 8 percent preferred return, regardless of when clients join. The general partner will pledge the lesser of $100 million or 5 percent of fund commitments, the people said.
The team’s first fund, Blackstone/GSO Capital Solutions Fund, closed in July 2010 with $3.25 billion. That fund had generated a multiple of 1.1 times capital and a 9.7 percent internal rate of return as of Dec. 31, according to performance data by California Public Employees’ Retirement System.
GSO, which was purchased by Blackstone in 2008, manages more than $50 billion in assets, primarily debt. GSO was founded in 2005 by Bennett Goodman, Douglas Ostrover and J. Albert Smith, all of whom previously worked at Credit Suisse Group AG.
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