KKR seeks $1.5 billion for third special situations fund: sources

(Reuters) – U.S. private equity firm KKR & Co Inc is seeking to raise $1.5 billion for its third special situations fund, people familiar with the matter said on Friday.

KKR Special Situations Fund III, which was registered with regulators in June, will acquire distressed debt at a discount, said three sources who requested anonymity to discuss the matter.

KKR, which has not announced the fundraising target, declined to comment. It told investors during its second-quarter earnings call in July that it was fundraising for a special situations fund.

New York-based KKR closed its first special situations fund after raising $2 billion from investors in 2014. Its second closed with $3.35 billion in 2016.

Special situations funds invest in the bonds of companies about to go bankrupt, with hopes of earning substantial gains when the firms return to financial health.

KKR’s special situations investments include Gibson, a Nashville-based guitar manufacturer, and Telepizza, a pizza delivery company based in Madrid.

U.S. private equity firms are expected to raise about $220 billion this year, according to data provider Pitchbook, as institutional investors continue to seek returns not available in public markets.

(This story corrects “situations” to plural throughout.)