Apax writes down $1.4bn from its 2016-vintage fund – updated

Firms including Blackstone, Carlyle Group and KKR have reported falls in their private equity portfolios this year due to the combined impact of covid-19 and a rout in oil prices.

Apax Partners, one of Europe’s oldest and largest private equity firms, wrote down $1.4 billion from its ninth flagship buyout fund last quarter as coronavirus battered global markets.

Apax IX reported unrealised losses of $1.08 billion and €313 million in its US dollar and euro sleeves for January to March, according to an update on Wednesday from Apax Global Alpha, the firm’s listed trust which invests in Apax funds. The sleeves were valued at $7.7 billion and €2.5 billion at 31 March.

The drop represents a negative 11.5 percent difference between March and December for Fund IX.

Fund IX is a $9.5 billion 2016-vintage vehicle, according to PEI data.

Apax Europe VII, the firm’s €11.2 billion 2007-vintage fund, posted a €354 million unrealised loss and €11 million of distributions for the period. Its remaining holdings, which include Brazilian IT business Tivit and Israeli investment house Psagot, were valued at €79 million as of 31 March.

The London-headquartered firm had mulled a GP-led secondaries process on AEVII in 2017, which it ultimately did not proceed with, as sister title Secondaries Investor has reported.

Apax’s reported valuations are net of relevant fees and carried interest.

AGA, which will publish its full first quarter results on Friday, did not provide details of reasons behind Apax’s funds’ performance in its Wednesday update.

According to information Private Equity International has seen from a letter Apax sent to investors on Tuesday, most of Apax’s portfolio is exposed to sectors less severely impacted by the crisis and the firm has limited exposure to retail, travel and energy industries.

The average entry leverage for Apax IX is 4.2x EBITDA and the more cyclical companies held in that fund have “no net debt”, the letter noted.

Private markets portfolios have taken a beating this year due to the combined impact of covid-19 and a rout in oil prices. Blackstone’s corporate private equity portfolio declined 21.6 percent in Q1, versus 8 percent and 12 percent for Carlyle Group and KKR respectively.

Apax was expected to a hold the final close on its 10th flagship in Q1 and had collected $9 billion on the way to its $10.5 billion target as of late February, Bloomberg reported. Fund X has already drawn down on a capital call facility as a bridge to the first capital call for fund costs and investments, according to the AGA update.

Apax completed several deals in the first quarter, including the acquisition of North American education business Cadence and sale of its stake in Italian IT services provider Engineering Group, according to its website.

The firm targets the tech and telecommunications, services, healthcare and consumer sectors globally and has raised more than €40 billion of funds since the early 1980s.

– This story has been updated to include the quarterly percentage drop for Apax IX in the third paragraph and details from a letter the firm sent to investors on Tuesday in the ninth and 10th paragraphs.