Nordic to restructure fund VII, roll €2.2bn into new vehicle

The restructuring of Nordic's seventh fund, which held a final close on €4.3bn in November 2008, is shaping up to be one of the largest GP-led secondary transactions inked in Europe.

Selected as buyers in the deal, Goldman Sachs and Coller Capital are offering a 11% premium to NAV to existing LPs. Goldman Sachs would clinch 30% of the deal and Coller would take 70%, with the transaction valued around the €2.4bn mark.

If approved, this will see the remaining nine unlisted assets in the fund, valued around €2.2bn in aggregate, rolled into a new vehicle, Unquote understands after speaking with sources with knowledge of the situation. 

Nordic Capital and Campbell Lutyens, which is advising on the deal, declined to comment.

The fund's investors received a notification on 5 February that they have 20 days to decide whether to sell shares in Nordic Capital Fund VII or join the vehicle that will hold the remaining assets.

Nordic began discussions with LPs in September 2017, according to media reports at the time. The Stockholm-based private equity firm was said to be exploring the process on its fund due to different motivations in the fund's LP base. With the vehicle nearing the end of its life cycle, some investors wanted to exit, while others wanted to remain and realise more value on their assets.

Unlike other recent restructurings that involved a staple element, it is understood that the process for the seventh fund is unrelated to Nordic's current fundraising efforts, which are focused on raising a ninth flagship fund.

Traditionally, Nordic Capital's funds have a life span of 10 years with the option to extend this by two years. Unquote Data shows that Fund VII attracted commitments from a range of international investors. US investors contributed 35%, European investors 30% and Nordic backers 15% of the total commitments, with the remainder coming from investors based elsewhere globally.

The top three largest commitments were from public pension fund Washington State Investment Board (€315m), Pennsylvania Public School Employees Retirement System (€150m) and Denmark-based ATP (€100m), according to Unquote Data. Companies still in the fund's portfolio include Munters, Handicare and Resurs.

As of June 2017, the fund's net IRR stood at 5.5% with a TVPI of 1.3x, according to LP return figures obtained by Unquote Data. These same performance figures show that the fund had a negative IRR until 2012 (click here to see the full return data).

Driving dealflow
GPs have indicated they are prepared to use the secondaries market to run processes on existing funds; these GP-led transactions are likely to account for a sizable portion of this year's secondaries deal volume. Situations around the 2007 and 2008 vintage years in particular have been cropping up, a source told Unquote. The funds are sitting on large portfolio companies that still have upside potential, having been acquired when assets were particularly expensive. These companies take a longer time to exit on average, while later vintage years are typically more normalised.

Apax Partners was said to be looking to start the process on a five-year continuation vehicle in a deal involving its 2007-vintage Apax Europe VII fund, as was Spanish private equity firm ProA Capital for its 2007-vintage Iberian Buyout Fund I.

Elsewhere, Investindustrial launched its second build-up fund to stretch the life cycle of its Fund IV portfolio last year. Similarly, Lexington and BC Partners agreed a $1bn stapled secondary deal in August 2017. The figure included both secondary acquisitions in BC Partners' €6.7bn ninth fund and new commitments to the GP's 10th fund.[Editor's note: BC Partners is the majority owner of Acuris, the parent company of Unquote].

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• Topics
• Secondaries
• Nordics
• Fundraising
• Secondaries
• Nordic Capital
• BC Partners
• Apax Partners
• Coller Capital
• Goldman Sachs