© Reuters. FILE PHOTO: A woman is on the phone at Airbnb headquarters in the SOMA district of San Francisco
By Lawrence Delevingne and Joshua Franklin
BOSTON / NEW YORK (Reuters) – Glade Brook Capital Partners LLC, Paul Hudson's venture capital firm, is offering investors a new fund to target the debt of private technology companies affected by the economic disruption caused by COVID-19.
The $ 1.5 billion company, based in Greenwich, Connecticut, started marketing the Special Situations Fund last week and is planning to spend $ 100 million by the end of April, according to a pitch document published by Reuters.
The fund will invest in preferred stocks, convertible bonds and senior debt in the primary and secondary markets, which Glade Brook sees as "high quality" but "dislocated" private technology companies, according to the materials.
"We see an exceptional investment opportunity," the marketing document said, given the recent shift in funding for private technology companies from traditional equity to debt, as companies try to avoid revaluing their equity in the economic crisis.
The fund's first investment will be part of a new $ 1 billion loan to Airbnb, according to a person familiar with the situation. Reuters reported Tuesday evening that Airbnb was in advanced talks about new debt. Https://www.reuters.com/article/us-airbnb-debt/airbnb-in-advanced-talks-about-new-1-billion-loan-sources -idUSKCN21W37H, just a few weeks after an investment of US $ 1 billion -Dollar was closed by private equity firms.
Further investments could include loans to media, entertainment, cloud computing and fitness companies with returns between 7% and 12% and expected returns between 25% and 50% over a 24-month period.
"I expect there will be many more situations in the future where lenders in the private market will lend to weakening private companies that have no access to liquidity from the syndicated banking market," said Leonard Klingbaum, financial partner at Ropes & Gray , without comment directly on the Glade Brook Fund.
Glade Brook, founded by Shumway Capital Partners Alaun Hudson in 2011, has evolved in recent years from investing in hedge fund-style public securities to long-term bets on the growth of private technology companies, a so-called growth equity approach.
Approximately two-thirds of Glade Brook's current portfolio includes companies that have seen increased demand for their services due to the global economic and health crisis related to the coronavirus. This is evident from an email sent to Glade Brook investors on March 26.
These include the US web-based pharmacy Capsule; Patreon, a digital platform for artists; and Instacart and Miss Fresh, online grocers in North America and China, respectively.
"We believe that the crisis will accelerate secular trends that are already going on and will increase the tailwind of growth long after the crisis," wrote Glade Brook.
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