Onex Said to Target $500 Million for First Direct Lending Fund

(Bloomberg) -- Onex Corp., Canada’s largest buyout firm, plans to raise $500 million for its first direct lending fund, two people with knowledge of the process said.

With leverage, the fund could have as much as $1.4 billion in buying power, one of the people said, asking not to be named because the details are private. Onex will contribute $100 million to the pool, the second person said.

A representative for Onex declined to comment on the plans.

Private equity firms and other investors are increasingly filling the lending void left by banks in the wake of increased regulation following the financial crisis. Onex joins large buyout firms including Carlyle Group LP, KKR & Co. and Blackstone Group LP in expanding their capabilities outside of leveraged buyouts, including in credit.

Regulations that hamper banks have created “white space” for private lenders to fill, Nat Zilkha, KKR’s co-head of credit, said Thursday in a Bloomberg Television interview.

Onex in April hired Walt Jackson to establish its direct lending platform. Jackson previously was the chief operating officer of Goldman Sachs Group Inc.’s private credit group.

“Direct lending is a natural extension of our business and further leverages our credit team and established infrastructure,” Michael Gelblat, the chief executive officer of Onex’s credit business, said in a statement at the time.

Founded in 1984, Toronto-based Onex has about $22.6 billion in assets under management.

To contact the reporters on this story: Ainslie Chandler in New York at achandler14@bloomberg.net, Scott Deveau in Toronto at sdeveau2@bloomberg.net. To contact the editors responsible for this story: Elizabeth Fournier at efournier5@bloomberg.net, Devin Banerjee, Elizabeth Wollman