Sun Capital Fund Values Said to Rise 8.3% in Second Quarter

By Jason Kelly

Sept. 11 (Bloomberg) -- Sun Capital Partners Inc., a private-equity firm that manages more than $9 billion, told investors its funds rose 8.3 percent in the second quarter as financial markets began to rebound.

The value of Boca Raton, Florida-based Sun Capital’s fourth fund increased by $136.2 million, the firm told investors in a letter, according to a person who’d seen it and declined to be identified because the communication was private. The valuation includes investments the fund owned in the quarter and those sold off previously.

Private-equity firms are marking up the value of some investments as global markets rise and the world economy stabilizes. KKR Private Equity Investors LP, the publicly traded buyout fund of KKR & Co., said last month the value of its assets increased 14 percent in the second quarter.

Private-equity valuations fell an average of almost 16 percent industrywide in 2008, according to data compiled by London-based researcher Preqin Ltd. Buyout funds’ asset values fell an average of almost 20 percent, the data show.

Sun spokesman Richard Hurwitz declined to comment.

The Standard & Poor’s 500 Index has gained about 16 percent this year, and private-equity firms typically use comparable publicly traded companies to help gauge valuations. Rising earnings also boosted valuations and Sun told investors that profit, excluding some costs, at its companies rose about 29 percent in July versus July 2008.

Bankruptcy Filings

Sun specializes in distressed investments and has stakes in more than 200 companies, focusing on troubled consumer and retail concerns, according to its Web site. More than 10 of its companies have filed for bankruptcy since 2006, including auto- parts maker Mark IV Industries Inc.

The firm has tried to shore up other holdings. Kellwood Co., the closely held maker of Phat Farm clothing, in July completed a bond exchange that pushed debt maturities until 2014.

Sun negotiated with investors earlier this year to allow money from its fifth fund to be used to support companies in the fourth. In the letter, Sun said no companies in those two funds were “likely” or “possible to fail.”

The firm told investors it expects to sell one or two companies from the fifth fund by the end of the year.