Lone Star Funds is preparing to distribute approximately $3.5bn to its limited partners, according to sources cited by Bloomberg, marking one of the largest liquidity events in the firm’s recent history.

The move reflects intensifying pressure on private equity managers to deliver meaningful DPI (distributions to paid-in capital) amid sluggish exit markets and constrained fundraising.

A major source of proceeds is the $4.35bn sale of specialty chemicals business AOC to Nippon Paint Holdings, which generated more than 3x return on invested capital. Additional distributions will come from Lone Star’s investment in Novo Banco, which is expected to issue a $1.1bn dividend in the near term. An IPO of the Portuguese lender could follow, with CEO Mark Bourke confirming this week that the listing prospectus is “well advanced” and could be launched as early as June.

Lone Star is also expected to realise capital from Titan Acquisition Holdings—a shipbuilding and repair company acquired from Carlyle and Stellex in 2023—and from GTT Communications, which has rebounded post-Chapter 11 restructuring.

The planned payout comes at a time when DPI has become a defining metric of private equity performance. Lone Star’s Fund XI, raised in 2019, has so far delivered a DPI of 0.9x, while its predecessor Fund X from 2017 has achieved 1.35x. These figures compare favourably with broader industry data, which shows that post-2019 vintages have delivered an average DPI of just 0.1x, according to a recent Goldman Sachs report.

Founded in 1995, Lone Star manages over $85bn in assets across private equity and credit strategies, with a focus on value-oriented investments in dislocated markets. The firm declined to comment on fund performance.

Source: Bloomberg