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PEH in large secondary sale

The Swiss private equity group has sold a large enough part of its portfolio to CSFB Private Equity to enable it to repay a SFr325m loan to Swiss Life.

Private Equity Holding, the troubled Swiss private equity portfolio managed by Swiss Life Private Equity Partners, has offloaded around two thirds of its remaining investment portfolio.

 

The firm said it has sold a portfolio of private equity fund investments with a total fair value as of March 31 2003 of SFr616m (E407m) and outstanding commitments amounting to SFr305m (E201m). PEH values its remaining portfolio at SFr268m, and outstanding commitments to private equity funds at SFr59m.

 

The buyer is CSFB Private Equity, although the fund behind the investment has not been disclosed. The firm’s activities in the secondaries market are led by DLJ Strategic Partners, the group’s secondary fund run by Stephen Can, which has $832m in committed capital. Swiss Life has assisted CSFB with a SFr150m loan to back the transaction.

 

In line with the majority of transactions in the secondaries market, the financial terms of the deal have not been disclosed. However, a source closed to PEH said that CSFB has agreed has secured sufficient proceeds from the sale to repay in full an outstanding SFr325m loan to Swiss Life.

 

PEH said in a statement that the transaction had “secured [the firm’s] financing”. “The company is debt free and has regained the necessary managerial flexibility to actively shape its future.”

 

The sale reduces the fair value per share per share from SFr131.70, as of March 31, 2003, to SFr60, compared with PEH’s current share price of SFr22.

 

The remaining PEH portfolio comprises primarily venture funds and direct investments. Balanced and buyout funds amount to around 15 per cent of the retained assets.

 

Prior to this sale, and the disposal last week of a US venture capital partnership to an unnamed secondary buyer, 54 per cent of the portfolio was allocated to venture, with 26 per cent to buyout funds.

 

Outstanding unfunded commitments, which will be financed with distributions from the portfolio and credit facilities, were reduced by more than 80 per cent to SFr59m. PEH has also been granted an earn-out to share in future net distributions, above defined hurdles, originating from the portfolio sold to CSFB.

 

Swiss Life is reviewing the future of its five per interest stake in PEH as well as that of SL Private Equity Partners, which continues to manage PEH's investments.

 

Last year, PEH implemented a revised cash flow plan after significantly overcommitting to new investment at the height of the venture investment boom. At the end of 2002, the firm had SFr1.3bn committed to funds and direct investments. Of this, 54 per cent was allocated to venture, compared with only 26 per cent to buyout funds.

 

Private Equity Holding was advised by the corporate finance team of Bank Sarasin, which managed the sale process.