Lone Star Funds is preparing to return approximately $3.5bn to its limited partners in the coming weeks, according to a report by Bloomberg citing unnamed sources familiar with the matter, amid mounting pressure for PE firms to deliver cash distributions to limited partners.
The Dallas-based buyout firm recently generated about $1.8bn in proceeds from the $4.35bn sale of specialty chemicals company AOC to Nippon Paint Holdings, marking a more than 3x return on invested capital, the sources said.
Further distributions will be driven by Lone Star’s investment in Portuguese lender Novo Banco, which is expected to pay out $1.1bn in dividends in the near term. The private equity firm could unlock even more value from Novo Banco, with an IPO in the works. CEO Mark Bourke confirmed this week that the prospectus is “well advanced” and that a listing could happen as early as June.
Additional cash returns are being sourced from assets such as Titan Acquisition Holdings – a ship repair and fabrication business Lone Star acquired from Carlyle Group and Stellex Capital Management in 2023 – and GTT Communications, which has rebounded following a Chapter 11 restructuring.
The $3.5bn payout comes as the private equity industry faces a heightened focus on DPI (distributions to paid-in capital), which has become the primary performance benchmark for LPs in the current environment. A sluggish exit market and tighter fundraising conditions have made liquidity events increasingly valuable, especially for GPs looking to raise new funds.
Lone Star’s Fund XI, launched in 2019, has so far delivered a 0.9x DPI, while its predecessor fund from 2017 has achieved a 1.35x DPI, the sources said. For comparison, a recent Goldman Sachs report shows that post-2019 PE vintages across the industry have returned just 0.1x at this point in the cycle, while 2015–2018 vintages averaged 0.6x by year four.
Lone Star declined to comment on the performance data.
The firm, founded in 1995, manages over $85bn of assets across private equity and credit strategies, with a longstanding focus on value-oriented investments in dislocated markets.
