Prime Edge CPO fund holds EUR 175m second close

01 February 2002

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Deutsche Bank, Allianz Risk Transfer and Capital Dynamics have announced the second close of Prime Edge Capital PLC, the first Collateralised Private Equity Obligation (CPO) fund, on EUR 175m, giving the vehicle an investment capacity of EUR 280m. The net proceeds of the issuance will be invested in a diversified pool of funds managed selected from thirty-five pre-determined European fund managers. These include Argos Soditic, Atlas Venture, Advent International, Bridgepoint Capital, EQT Partners, Global Life Science, PolyTechnos Venture Partners, Quadriga Capital and Wellington Partners. The portfolio is expected to take positions in buyout vehicles (55-70%), early-stage (10-15%) and later stage (5-15%) venture funds, as well as generalist funds (5-15%) and special situations vehicles (5-15%). A joint venture involving Capital Dynamics (acting as lead manager), RMF (Rainer Marc Frey), and Hamilton Lane Advisors will manage the investment selection and risk management process for Prime Edge. Since its first closing the fund has committed EUR 91.4m to some 12 private equity partnerships. The advisory fee for Prime Edge has been set at 0.5% p.a.; the carried interest is fixed at 7.5% after satisfying a 12% preferred return; all carried interest is paid in junior notes with lock-up.

The global credit derivative team at Deutsche Bank acted as arranger for the transaction and placed EUR 84m of class A senior notes and EUR 38.5m of class B senior notes. The senior notes are supported by a financial guarantee provided by Allianz Risk Transfer. The notes have a stated maturity of 12 years and are priced at 300 basis points above euro libor. To the extent that assets remain in Prime Edge after the senior noteholders have been redeemed, such assets will be distributed for the benefit of the junior noteholders. The return of the private equity funds is transferred through Belgian and Irish special purpose vehicles in a tax efficient form to the investors. Allianz Risk Transfer (acting through its Netherlands and Swiss entities) facilitated the notes issuance through the provision of a financial guarantee of the senior notes and a liquidity facility increasing the rating from A and BBB for the senior A and Senior B notes respectively, to AA. Deutsche Bank, through its global credit derivatives team, acted as sole arranger and placement agent. It is understood that the majority of investors are European and Asian banks and pension funds.]]>