Revelstoke runs secondary to buy Upstream Rehab from older fund

Revelstoke Capital Partners, a Denver-based firm that spun out of KRG Capital, is running a process to move a company out of its 2015 debut fund and into a new vehicle, giving it more time to manage the company, three sources told Buyouts.

Single- or concentrated-asset restructurings have become more popular in recent years as traditional secondary buyers have raised larger funds. Bigger pools of capital can better handle the type of risk that comes with concentrated exposure to assets.

For Revelstoke, the asset in question is outpatient rehabilitation services provider Upstream Rehabilitation. Revelstoke invested in the company in 2015. Revelstoke needs more than $1 billion to buy Upstream out of Fund I and move it into the continuation vehicle, one source said.

Coller Capital is lead buyer on the deal, two sources told Buyouts. Revelstoke’s second fund, which has been in market fundraising, will also be a buyer on the deal, one of the sources said.

Upstream has grown over the years, including through an add-on last year of Drayer Physical Therapy Institute. As part of the add-on acquisition, certain Drayer shareholders, including Goldman Sachs, rolled portions of their proceeds for minority ownership in Upstream, according to a press release at the time.

The proposed new deal allows investors in Revelstoke’s debut fund the option to cash out of their exposure to Upstream or roll their interests into the continuation vehicle. The process gives Revelstoke more time to manage and grow the asset, sources said.

Upstream has grown beyond the size of company Revelstoke normally invests in, which is why bringing co-investors into the deal will help dilute the firm’s exposure, the sources said.

Revelstoke was formed when KRG co-founder Mark King left in 2013 along with Simon Bachleda and former chief fundraiser Dale Meyer. The firm closed its debut fund in 2015 on $303 million. It is now in the market with Fund II, which has raised more than $437 million so far, according to an SEC filing in June.

King died in 2016. Revelstoke is now led by Bachleda, Meyer and Managing Partner Russell Cassella, according to Revelstoke’s Form ADV filed in June. Revelstoke manages about $1.2 billion in assets, the Form ADV said.

Representatives of Revelstoke and Coller Capital did not respond to requests for comment.

Single-asset deals accounted for just under 10 percent of GP-led transaction volume in 2018, according to Evercore’s full-year secondary volume report. Evercore estimated total secondary volume at about $72 billion in 2018. GP-led deals represented about 28 percent of total 2018 volume, Evercore said.

Action Item: Contact Revelstoke Managing Partner Simon Bachleda at sbachleda@revelstokecapital.com