Jason Mudrick’s Mudrick Capital has filed plans to launch its second-blank check company.
The IPO is one of several recent and current fundraisings by the distressed investment specialist, as it seeks to take advantage of what it deems to be a sharp increase in opportunities to invest in the restructurings of struggling companies in the wake of the Covid-19-induced recession.
Late Friday Mudrick stated in a regulatory filing that it is seeking to raise $300 million for Mudrick Capital Acquisition Corporation II. Mudrick did not single out specific industries it is targeting. Rather, it stressed the surge in potential targets that have arisen since the pandemic, noting that the number of corporate bankruptcies through July 2020 is the highest since 2009.
“The economic dislocation caused by Covid-19 has impacted the financial performance of a large number of otherwise quality middle-market companies, many of which are highly levered due to either private equity ownership or the general expansion of corporate borrowing over the most recent economic cycle,” Mudrick added in the regulatory filing. “These companies will likely either require comprehensive balance sheet restructurings to right-size their respective capital structures or incremental equity capital to support liquidity and business investment.”
The management team and board of directors of the SPAC include Mudrick Capital managing directors Victor Danh and David Kirsch.
Mudrick declined to comment.
This is Mudrick’s second SPAC. Two years ago it raised $250 million for Mudrick Capital Acquisition Corporation. On June 1, that company completed its reverse merger with Hycroft Mining Corporation, a gold and silver producer.
Earlier this month, Hycroft raised $75 million when it sold 8.3 million units consisting of one share of common stock and one warrant to purchase a share of stock for $9 per unit. Shares of Hycroft closed Monday at $7.34 per share.
The new SPAC is just the latest of a number of recent fund raises by Mudrick Capital, which managed a total of $2.6 billion as of September 18, according to the filing.
It raised $400 million when it closed Mudrick Distressed Opportunity Drawdown Fund II and the related offshore vehicle, Mudrick Distressed Opportunity Drawdown Offshore Fund II, on June 30.
Drawdown vehicles generally resemble private equity funds, with a fixed term and capital-call structure. Mudrick’s five-year term includes a three-year investment period and two years for harvesting gains.
The fund focuses on middle-market distressed credit. It is the second vintage of the Mudrick Distressed Opportunity Drawdown Fund.
Mudrick is also raising money for the Mudrick Distressed Opportunity 2020 Dislocation Fund. Mudrick describes this fund as a hybrid capital-call vehicle, according to its offering document shared with Institutional Investor by a client. It will only have an 18-month investment period.
It is targeting $200 million to $300 million, with a final close aimed for the first quarter of 2021, according to the document. The portfolio will generally target 20 positions, with the top-ten expected to represent more than 50 percent of the portfolio.
It will focus on “catalyst-driven distressed situations…driven by specific events,” the document added.
The fund will focus on middle market, off-the-run credit opportunities that the firm feels may be overlooked by larger credit managers. It will have “limited energy exposure” but have “potential exposure to physical commercial real estate assets.”
“Market dynamics over the last decade have set the stage for the next significant distressed cycle,” the offering document stated. “The global economy is facing unprecedented levels of disruption. As a result of this dislocation, the opportunity set for distressed credit has grown materially.”
Mudrick also recently more actively marketed its flagship hedge fund, the Mudrick Distressed Opportunity Fund. According to a person familiar with the firm, the amount it raised was offset by an equal amount that was redeemed.
The hedge fund had gained about 1.4 percent for the year through September, according to a document from investment bank HSBC that reports hedge fund returns. It posted double-digit gains in three of the four previous years, including 22.4 percent in 2019.
Since its launch more than ten years ago, the fund has made more than 180 distressed or post-restructuring investments, including 27 investments with active involvement via boards of directors or credit committee representation, according to the SPAC’s filing.
