PEH offloads US VC commitment

Troubled Swiss private equity group Private Equity Holding (PEH) has taken a step to alleviating its liquidity crisis with the sale of its interest in a US venture partnership to an unnamed secondary buyer.

Terms for the deal have not been disclosed, although PEH confirmed that the investment represented a total original commitment of SFr54.3m ($40m) of which SFr15.4m had been drawn down. The firm said the transaction reduced its total unfunded commitments by SFr41.2m, or approximately ten per cent, with a “minimal loss” of fair value.

Last week, Swiss Life, which has been managing PEH’s portfolio via its private equity unit, confirmed that it had severed its ties with David Salim and Thomas Grotzer, CEO and COO respectively of Swiss Life Private Equity Partners, “with immediate effect”. Swiss Life said the decision was the result of “insurmountable differences of opinion” between Swiss Life and part of Swiss Life Private Equity Partners’ management.

Last month, Swiss Life agreed to extend a SFr325m credit facility beyond its original expiry date of March 10, providing a short-term solution to PEH’s problems.

In a statement, PEH said that negotiations were ongoing with Swiss Life and other third parties regarding the restructuring of the company’s long-term financing.

In its most recent report for the year ended 31 March 2002, Private Equity Holding reported a SFr264.9m (E181m) net loss, the result of significant write-downs in its portfolio. The largest write down was for SFr118m, taken on an investment in US Ventures, a US tech investor to which PEH made its largest single commitment in March 2000.

Last year, the firm 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.