New Jersey barters carry cut from Tenex

New Jersey's Division of Investment has scored a significant concession from Cerberus Capital Management spin-out Tenex Capital Management, negotiating carried interest on the turnaround firm’s debut fund down to 16 percent from 20 percent as part of a $50 million commitment.

Carry on the fund generally is 20 percent and the management fee is 2 percent, sources and pension documents said. Tenex declined to comment. The fund also is offering to use 100 percent of transaction fees to offset the management fee, according to pension documents.

One market source said a reduction in carry is “very unusual”, but in the sluggish fundraising environment, “LPs may be able to negotiate better terms, especially with first-time funds and coming into a first close”.

Tenex represents New Jersey’s second private equity commitment in two years. The pension also committed to Warburg Pincus joint venture Sheridan Production Products II, which will target oil and gas producing properties in the US.

Michael Green

Tenex is targeting $425 million for its debut fund to invest in underperforming mid-market companies in North America, according to pension documents. The fund will make investments between $25 million and $75 million in Canada and the US. Tenex will work for a return of 2.5x and a gross internal rate of return of 25 percent.

The firm is headed by Michael Green, who was a member of Cerberus’ investment committee until 2009.

Green is joined by other former Cerberus senior executives, including Varun Bedi, a former senior vice president, and former Cerberus senior operations leaders Chad Spooner, Joe Cottone and JP Bretl.

Tenex had formerly been an independent firm, founded in 1999, which was acquired by Cerberus in 2004 and became Cerberus Operations. It's not clear when the team officially spun-out of Cerberus.

Four of the Tenex team, including Green, had previously worked together at General Electric.