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September 10, 2007

Drum Close To Finishing Distressed Fund Of Funds

Just in time for the fallout from the cooling credit markets, Drum Capital Management LLC is nearly finished raising Special Situation Partners II LP, its distressed debt-turnaround fund of funds, with commitments approaching the target of $500 million. The firm doesn’t seem to be saving it for a rainy day.

Using the new pool, Drum Capital has already committed to turnaround shop Monomoy Capital Partners’s debut fund, which closed in early January with $280 million. Monomoy Capital plans to deploy its money in $5 million to $30 million increments to acquire troubled businesses generating annual revenues between $20 million and $200 million. The funds-of-funds manager also backed distressed operator Treadstone Partners LLC, a Dallas firm that invests in small- to middle-market distressed companies, to the tune of $60 million.

In January, Drum Capital Managing Director Scott Vollmer told Buyouts that his firm, based in South Norwalk, Conn., this year plans to commit about $500 million to funds, some of which employ loan-to-own strategies. The firm is most interested in buyout shops that are active in sectors rich with hard assets, such as manufacturing, shipping and energy.

Nevada System of Higher Education committed $10 million to Special Situation Partners II LP from its endowment. A Drum Capital representative declined to comment further on fundraising until the final close, slated for mid- to late September.

In 2005, Vollmer left as managing director of Pacific Corporate Group LLC, a La Jolla, Calif.-based advisory firm, to launch Drum Capital. Corporate turnarounds are smack in the middle of Vollmer’s comfort zone. While at PCG, he raised a fund of funds dedicated to the distressed market, while earlier in his career he launched what he calls the first-ever distressed debt fund of funds, Distressed Debt Partners LP, while working for Commonfund, a Wilton, Conn.-based investment advisor.

Drum Capital also manages Special Situation Partners LP, a $350 million vehicle that closed in 2003 under Vollmer’s management at PCG. Through underlying partnerships the fund has been invested in more than 290 companies across 31 industries, with manufacturing, energy, transportation, business services and telecommunications companies comprising 49 percent of its portfolio.

The firm shows no signs of slowing. Just over a year ago Tim Ortez joined Drum Capital as a managing director and opened its West Coast office in Redlands, Calif. And in January, Vollmer told Buyouts he planned to open two Asia offices, including one in Mumbai. — J.P.

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