Quick Sales Yielding Secondary Gains

In a departure from their usual strategies, some secondary- market buyers are trying to flip their investments for quick profits. The play involves interests that man- agers of secondary-market funds and funds of funds picked up from distressed sellers last year on the cheap — often for prices APRIL 7, 2010 Infrastructure Team Mapping Bold Campaign 2 Energy Capital Zips Toward Capacity around 40% of net asset value. The thinking now is that with Global Infrastructure Partners 2 ArcLight Heading Into Second Lap The New York firm is eyeing Septemberis planning or its October second to fund. start marketing the vehi- cle, with a possible equity target as high as $6 billion. It’s now contacting prospec- 3 Roundy’s Recap Seen as Turning Point market conditions looking better, they can unload those same tive placement agents. 3 Quick Sales Yielding Secondary Gains Credit Suisse would appear to be the frontrunner for that assignment, as the bank was the lead placement agent for Global Infrastructure’s $5.6 billion debut fund. It positions for double that price or more. 3 Edison Finishing First Round could also help that Global Infrastructure chief 4 Credit Suisse to Run NC Book firm’s other founders are Credit Suisse alumni. ButAdebayo given difficultOgunlesi capital-raising con- ditions, Ogunlesi’s team is interested in hearing multiple marketingand pitches. several of the There’s no word on who is involved in the transactions. The 6 Israel Cleantech Compiling Pledges Whoever wins the mandate will have to vehicles in general has wanedovercome since Global several Infrastructure obstacles. Demand finished forits sellers have been keeping their activities under tight wraps, in maiden capital-raising drive in May 2008, with limited partners especially souring THE GRAPEVINE See CAMPAIGN on Page 4 part to shield their identities from fund managers who typical- Charlie Ogburn Solo Buyer Ready to Pay for RBS Holdings has told his colleagues at Arcapita that he plans to exit his post as It looks like RBS’ ly frown on active trading strategies. a director on the shop’s investment team of a single secondary-marketEuropean buyer, private and equity at a higher holdings price could than wind most up industry in the hands play- in the coming months. The move comes ers were expecting. after Arcapita, an alternative-investment The buzz is that the bank, which put most or all of its European private equity Such trades aren’t usually in the repertoires of secondary- unit of Bahrain-based Arcapita Bank, fund interests up for sale about two months ago, is poised to finalize the deal in the began responding to declining deal vol- coming weeks. The suitor remains unidentified, but sources have pointed to market buyers either. But for some, rising values are temporar- ume by planning about 50 layoffs — AlpInvest, Coller Capital, Credit Suisse, Lexington Partners some of which would involve members possibilities. of the Atlanta team where UBS is serving as broker. While the emergence of a single buyer re and Partners Group Ogburn works. Ogburn joined the firm as ily creating impossible-to-resist opportunities to boost their has come as even more of a surprise. The bidderpresents is prepareda twist in tothe pay sale, an the estimated pricing nine years ago. 95 cents on the dollar for the package, which contains a combined $1 billion or so of deployed and undeployed fund commitments. Abu Dhabi’s state-controlled short-term returns. That’s especially the case for firms that are In recent months, most secondary-market buyers came to the table with calling off efforts to start an infrastruc-Invest AD is ture fund in partnership with preparing to raise fresh capital or that want to roll the proceeds three or four UBS staffers workingUBS. onThe the See SOLO on Page 6 project in Invest AD’s home office will Staff Losses Spell Trouble for Ripplewood now return to London, while Invest AD’s Two more executives have split from into long-term plays — along with those that got into invest- own employees face layoffs. The project tions about the firm’s future. Ripplewood Holdings, dissolved after pressures stemming from Managing directors raising further ques- the global credit crisis rendered Invest Tony Lee ments that were outside their usual strategies simply because weeks to start a New York fund-managementand Scott Spielvogel shop called AD and UBS unable to raise the $600 by operations specialists from Ripplewood and elsewhere.left amicably in the past few million they sought One Rock. for the vehicle, which Lee and Spielvogel focused on chemical, industrial, business-serviceThey’re joined and prices were too good to pass up. hit the market in 2008 and later held a telecommunications companies at Ripplewood. One Rock, meanwhile, would take first close with $250 million. control-oriented positions in ailing companies. The firm is apparently working on a few deals with its own capital, ahead of a Take a fund stake purchased at 40 cents on the dollar at the Marc Cali has landed a job as a full-time in the next year. consultant to fund-raising drive that could come with- Third Avenue Management The losses of Lee and Spielvogel are the latest in a series of blows for midpoint of 2009. Today, that position might be worth 80 See GRAPEVINE on Back Page Ripplewood, reinforcing perceptions that the New York firm may not survive much cents, which works out to a gross annualized return of 147%. See RIPPLEWOOD on Page 2 What if the buyer took the more common strategy of holding the interest to maturity? Assuming the underlying assets could be sold at par in, say, mid-2011, the annual return would be a much lower 58%. New York secondary-market consultant Azla Advisors has that were bold enough . . . to be very active buyers in the bot- helped buyers and sellers carry out some such deals. Azla chief tom of the market during the first half of 2009,” Waxman said. David Waxman said intermediaries have come into play as the “It’s a very short-lived phenomenon in the secondary-market principals in the sales try to remain anonymous, at least until world.” the managers have to sign off on the transfers. However, there Another source reported seeing a in Europe are times when the managers whose fund shares are being sell a position it bought last year, something the seller wasn’t traded might also want to replace secondary buyers with lim- planning to do when it got into the deal. “It’s quite unusual for ited partners that have the capacity for new-fund commit- a fund to be on the secondary market and to sell after only a ments. “We have been working with several secondary funds year or so,” he said. Y

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