Mudrick Finally Closes the First Phase of Fundraising for Distressed Drawdown Fund

After facing a challenging fundraising environment for the new fund in 2022, Mudrick has lowered its target.

Jason Mudrick, president of Mudrick Capital Management (Michael Nagle/Bloomberg)

Jason Mudrick, president of Mudrick Capital Management

(Michael Nagle/Bloomberg)

Mudrick Capital Management’s new drawdown fund marked its first close on June 1.

The distressed-credit specialist is currently targeting a total of $500 million for Mudrick Distressed Opportunity Drawdown Fund III, the third vintage, whose launch was delayed, according to an investor. However, Mudrick won’t cap the fund if the fundraising environment improves. It plans to raise capital for the fund for the next 12 to 18 months, the investor says.

Institutional Investor reported back in October 2022 that Mudrick was raising money for the new fund and seeking to bring in between $800 million and $1 billion. The firm told investors that limited partners are not getting distributions from their private equity and private credit investments, making fundraising for new launches generally challenging.

The new Mudrick fund is focused on stressed credit, liability management transactions, special credit situations, and distressed credit, according to the investor. It aims to allocate about 80 percent of capital to the U.S. and 20 percent to the U.K. and Europe, focusing on middle-market deals — $1 billion to $5 billion in enterprise value — the investor explained.

A drawdown vehicle is similar to a private equity fund, with a fixed term and a capital call structure. The new fund’s five-year term includes a three-year investment period and two years for harvesting gains.

This is Mudrick’s third drawdown fund. The first generated a 16.2 percent annualized net return through December 31, 2023, according to an investor. The second fund, which focused on middle-market distressed credit, has generated an 8 percent annualized return and entered a three-year harvest period in March.

Meanwhile, Mudrick’s hedge fund, Mudrick Distressed Opportunity Fund, is having a tough time so far in 2024. It was down 7.1 percent for the year through April after gaining 1.3 percent that month, according to the HSBC database. But, an investor notes, it had a strong May, although specific results have not yet been communicated to investors. The hedge fund was up 10.8 percent in 2023 and posted double-digit gains in three of the past five years, according to HSBC.

Altogether, Mudrick managed about $3.3 billion as of year-end 2023, according to its website.

At the end of first-quarter 2024, Mudrick said that nearly half of the roughly $250 million of assets reported in its quarterly 13F filing — a small part of the firm’s overall assets — was invested in notes issued by Vroom. A parent company of United Auto Credit Corp. and CarStory, Vroom was previously a used car retailer and e-commerce company but shuttered its e-commerce automotive sales operations in January 2024.

On May 1, Getaround, an online car-sharing platform, announced that it had expanded its existing debt facility with Mudrick Capital Management to provide the company with up to $50 million in additional capital. On April 29, Getaround drew down the first $20 million of this capital. In January, Jason Mudrick was named chairperson of the company’s board of directors after his firm agreed to provide financing.

Getaround was Mudrick’s second-largest U.S. common stock holding at the end of the first quarter, valued at about $5.7 million. The shares are held by a variety of the firm’s funds, including the drawdown funds. The company’s stock trades at just 17 cents a share, down nearly 50 percent since late January.

On January 2, FuboTV announced that Mudrick had exchanged nearly $206 million in 3.25 percent convertible senior notes due 2026 for $177.5 million in Fubo’s new convertible senior secured notes due 2029. Since then, the company’s common stock has plunged about 60 percent, to about $1.26 per share. It traded as high as $48.78, in February 2021.