HPS Investment Partners

Last updated

HPS Investment Partners, LLC
FormerlyHighbridge Principal Strategies
Company type Private
Industry Investment management
Founded2007;17 years ago (2007)
Founders
  • Scott Kapnick
  • Scot French
  • Michael Patterson
Headquarters New York City, U.S.
Key people
Scott Kapnick (CEO)
Products Private credit
Private equity
Mezzanine capital
Real assets
Public credit
AUM US$106 billion (October 2023)
Number of employees
630 (2023)
Website hpspartners.com
Footnotes /references
[1]

HPS Investment Partners (HPS) is an American investment firm headquartered in New York City. The firm focuses on investments in private credit and public credit as well as private equity and real assets. Outside the United States, the firm also has offices in Europe, the Middle East and Asia-Pacific.

Contents

In 2022, the firm was ranked by Private Debt Investor (under Private Equity International ) as the third largest private debt investment firm based on total fundraising over the most recent five-year period. [2]

Background

In 2007 Scott Kapnick, Scot French and Michael Patterson founded Highbridge Principal Strategies after leaving Goldman Sachs. It was formed as the private equity and credit investment division of Highbridge Capital Management (Highbridge) within J.P. Morgan Asset Management. Its strategies included mezzanine capital, bonds, direct lending and growth capital. [3] [4] [5] [6] [7] [8] [9]

In 2009, as a result of 2007–2008 financial crisis, many hedge funds suffered from redemption. However Highbridge Principal Strategies grew significantly during this period. [4] [10]

In February 2011, Highbridge Principal Strategies was expanded after Highbridge acquired Gávea Investimentos and had let go of its event-driven trading team. [7] [10]

In December 2014, Institutional Investor reported that Kapnick and the management team of Highbridge were in discussions with JPMorgan Chase to lead a management buyout of the firm. The talks were focused mostly on Highbridge Principal Strategies. One of the main reasons for the buyout was the Volcker Rule which put strict limits on how much banks can invest in alternative investments which would be detrimental to Highbridge. Another reason was how Highbridge staff were compensated with bank stock which put the firm at a disadvantage when hiring and retaining staff compared to privately held hedge funds since the bank was a highly regulated entity. Finally, Jes Staley who headed J.P. Morgan Asset Management and was instrumental in Highbridge's acquisition back in 2004 had left the firm in 2013 and was replaced by Mary Callahan Erdoes. In fact by this period, Highbridge co-founders Glenn Dubin and Henry Swieca and former Highbridge President Todd Builione had all left Highbridge. [4] [5]

By 2015, Highbridge Principal Strategies became the larger more dominant part of Highbridge due to its performance and popularity among investors. It managed $22 billion in assets under management while the hedge fund side managed $6 billion. It was one of Highbridge's most successful ventures. [6] [10]

In October 2015, it was reported that only Highbridge Principal Strategies would be separating from JPMorgan Chase. JPMorgan Chase would keep the Highbridge and its hedge funds operations as well as a minority stake of Highbridge Principal Strategies. [5] [6] In March 2016, the buyout was completed from Highbridge and JPMorgan Chase. This led to an independent firm being spun out as HPS Investment Partners. [3] [8] [9] [11]

In July 2018, Dyal Capital acquired a minority investment in HPS. [3] [8] [9]

In April 2023, Financial Times reported that HPS had almost $100 billion in assets under management after it had raised $12 billion for a new junior credit fund. [12]

In December 2023, HPS confidentially filed for an initial public offering. [13]

On November 21, 2018 LBI Media filed for Chapter 11 bankruptcy protection with the United States Bankruptcy Court for the District of Delaware. Afterwards the company created a bankruptcy-exit plan where HPS would take over the company. Bondholders of the company such as York Capital Management and Caspian Capital launched a lawsuit to oppose the deal and stated the plan was product of insider trading and fraud. Both LBI Media and HPS denied the allegation and said the plan followed standard market practices and big boy letter was signed. In April 2019, HPS and the bondholders came to an agreement on the plan after agreeing to boost recoveries for bondholders. HPS then took over LBI Media. [14] [15] [16]

On August 17, 2020, Citigroup filed a lawsuit against  HPS, Brigade Capital and Symphony Asset Management, seeking the return their share of $504 million from a near $900 million payment that Citi said it paid by mistake to Revlon's lenders. The payments were related to loans made to Revlon by various private lenders which included the three firms. The lenders took the position that they were not obligated to return the money. [17] On February 16, 2021, a Federal court ruled that the lenders are under no obligation to return any of the monies mistakenly received. [18] However Citigroup asked the United States Court of Appeals for the Second Circuit for an appeal and on September 8, 2022, the court ruled in favour of Citigroup reversing the 2021 ruling. [19] The lenders then requested an appeal but were denied by the court on October 12, 2022. [20]

In June 2023, Jacob Chetrit sued HPS over 850 Third Avenue claiming the firm filed a fraudulent deed. Chetrit claimed when he handed over the property to HPS, he signed a deed showing the balance on the loans to be $320 million. However HPS created a separate deed showing a balance of only $266 million. The reduced loan amount allowed HPS to charge Chetrit more for other expenses like an exit fee and interest costs. [21]

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References

  1. ↑ "Form ADV" (PDF). SEC.
  2. ↑ "PDI 100". Private Debt Investor. December 1, 2022. Retrieved July 20, 2023.
  3. 1 2 3 "Banking Escapees Make Billions From Private Credit Boom". Bloomberg.com. November 30, 2023. Retrieved December 1, 2023.
  4. 1 2 3 Rose-smith, Imogen (December 5, 2014). "Highbridge Capital Is Seeking an Exit from JPMorgan Chase". Institutional Investor. Retrieved July 20, 2023.
  5. 1 2 3 Chung, Juliet; Glazer, Emily (October 20, 2015). "J.P. Morgan Near Deal to Sell Majority of Highbridge Private Equity Business". Wall Street Journal. ISSN   0099-9660 . Retrieved July 20, 2023.
  6. 1 2 3 Donde, Anastasia (October 20, 2015). "Highbridge credit business soon to go it alone". Private Debt Investor. Retrieved July 20, 2023.
  7. 1 2 Taub, Stephen (February 9, 2011). "Highbridge Expands Credit Business". Institutional Investor. Retrieved July 20, 2023.
  8. 1 2 3 "Neuberger's Dyal Is Near Deal to Buy HPS Stake". Bloomberg.com. June 12, 2018. Retrieved July 20, 2023.
  9. 1 2 3 Fortado, Lindsay (July 3, 2018). "Credit investment firm HPS sells minority stake". www.ft.com. Retrieved July 20, 2023.
  10. 1 2 3 Jones, Sam (February 7, 2011). "Highbridge to launch standalone credit fund". www.ft.com. Retrieved July 20, 2023.
  11. ↑ "CLOs - Creditflux.com". www.creditflux.com. Retrieved July 20, 2023.
  12. ↑ Platt, Eric (April 11, 2023). "HPS assets near $100bn as credit funds move deeper into banks' territory". www.ft.com. Retrieved July 20, 2023.
  13. ↑ "HPS Investment Partners Confidentially Filed for IPO". Bloomberg.com. November 30, 2023. Retrieved December 1, 2023.
  14. ↑ Brickley, Peg. "Bondholders Go on the Offensive as LBI Media Seeks to Restructure". WSJ. Retrieved July 20, 2023.
  15. ↑ Brickley, Peg. "Bondholders Accuse LBI, HPS of Insider Trading in Debt". WSJ. Retrieved July 20, 2023.
  16. ↑ Brickley, Peg. "LBI Media Bondholders, HPS Reach Deal on Bankruptcy Exit". WSJ. Retrieved July 20, 2023.
  17. ↑ "Citigroup Gets Almost Half of $900 Million Revlon Funds Frozen". Bloomberg.com. August 19, 2020. Retrieved July 20, 2023.
  18. ↑ "Citi Loses Bid to Recoup Massive Mistake in Surprise Ruling". Bloomberg.com. February 16, 2021. Retrieved July 20, 2023.
  19. ↑ "Citigroup Wins Appeal in $500 Million Revlon Transfer Case". Bloomberg.com. September 8, 2022. Retrieved July 20, 2023.
  20. ↑ "Citigroup's (C) $500 Million Win Holds, With Revlon Lenders Denied Review - Bloomberg". October 12, 2022. Retrieved July 20, 2023.
  21. ↑ Hourie, Ilya (June 7, 2023). "Jacob Chetrit Sues Lender Over 850 Third Ave Deed-in-Lieu". The Real Deal. Retrieved July 20, 2023.
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