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SVG seeks £200m, takes liquidity measures

The listed Permira investor has taken a number of measures to boost liquidity, including reducing by £796m its original commitment to Permira’s fourth buyout fund.

SVG Capital, the listed fund of funds which invests predominantly in Permira’s funds, has renegotiated its credit facilities and is seeking £200 million (€212 million; $310 million) in fresh capital to shore up its balance sheet and ensure it can meet future commitments.

The firm has also confirmed it will shrink its investment in the €11.1 billion Permira IV fund to 60 percent of its original €2.8 billion commitment. This is the maximum reduction Permira allowed under revised terms for the fund’s LPs.

In an unprecedented move earlier this month Permira, whose funds constitute 82 percent of SVG’s portfolio, extended a lifeline to those limited partners in its fourth fund who were at risk of defaulting on capital calls by allowing them to reduce commitments.

The offer was taken up by 10 percent of Permira IV’s 180 limited partners, meaning the fund will be no smaller than €9.6 billion, a reduction of 13 percent from its original size of €11.1bn, said Permira in a statement this morning.

The pace of the market and economic deterioration since the end of September has been unprecedented.

SVG Capital

In choosing to cap its commitments to Permira IV, SVG has freed itself from around £796 million in uncalled capital, but will see its entitlement to distributions reduced by 25 percent.

Historically listed vehicles such as SVG pursue an over-commitment strategy, making more commitments than the fund has assets and recycling distributions from existing investments to meet upcoming capital calls.

As distributions have slowed many listed funds have looked increasingly likely to default on capital calls. Like many other vehicles, such as Switzerland-listed groups ShaPE Capital and AIG Private Equity, SVG has sold fund interests in the secondaries market to lighten the firm’s commitment load and generate some liquidity.

In the first half of 2008 SVG raised £222.4 million through secondaries sales, but the firm now needs more cash. “The pace of the market and economic deterioration since the end of September has been unprecedented,” the firm said in a statement.

As of the end of November, SVG’s uncalled commitments totalled £1.21 billion, but the firm held just £194 million in cash and €750 million in an undrawn debt facility.

The rights issue will be priced at 100p per share, which the firm said represents a 45 percent discount to December 17 share price. It will be partially underwritten by JPMorgan Securities.

SVG has called in investment bankers to undertake a strategic review of the business, the results of which it hopes to announce at the end of April 2009.

The review will look at all aspects of the business' strategy. “It will be a free-thinking and open review of how the future will look for SVG,” chairman Nick Ferguson told PEO.