BC LPs have 5 weeks to decide on Fund IX tender

Investors received a letter on Wednesday outlining the terms of the secondaries transaction, which includes a staple commitment to BC Partners’ latest fund.

Limited partners in BC European Capital IX have until 9 August to decide if they want to sell their stakes in the 2011-vintage fund, Private Equity International has learned.

LPs received a letter on 5 July with an offer that allows them to sell their interest in the fund, which has €6.7 billion in net asset value, at a 14 percent premium. They have five weeks to respond to the letter, but early chatter is that it's “a pretty attractive price”, according to a person familiar with the matter.

Secondaries firm Lexington Partners has emerged as the buyer, as first reported by the Wall Street Journal. It has undertaken to purchase €1.2 billion from Fund IX as well as commit €600 million in new capital to BC European Capital X, which is currently in market seeking €7 billion.

The source said the results of the tender would determine the staple component, as Lexington has agreed to commit 50 cents to Fund X for every €1 sold in Fund IX.

LPs who decide to sell would secure a net internal rate of return of about 19 percent and a 1.6x investment multiple, according to the source.

The fund had a net 17 percent IRR and a 1.5x multiple as of 31 March, according to a source familiar with the matter.

According to PEI data , at least 60 LPs initially committed to Fund IX.

North American pension plans included the California State Teachers' Retirement System, Canada Pension Plan Investment Board, CDPQ, Florida State Board of Administration, Los Angeles City Employees' Retirement System, Michigan Department of Treasury, New York State Teachers' Retirement System and San Francisco Employees' Retirement System.

Asian investors included Korea Investment Corporation and National Pension Service of Korea.

University endowments and foundations included Columbia University, the Rochester Institute of Technology, the Grable Foundation, the University of Oklahoma Foundation and the James S McDonnell Foundation.

There were also several insurance companies and private pension plans committed to Fund IX such as Dusseldorf-based Ergo, Guardian Life Insurance Company of America, the Finnish Ilmarinen Mutual Pension Insurance Company and CNP Assurances of France.

Fund X has so far raised €6 billion, according to two people familiar with the matter. BC has been on the fundraising trail for about a year and a half.

Campbell Lutyens, the advisor working on the secondaries transaction, and BC Partners declined to comment. Lexington also declined to comment.