Cabot Square wins $10m from Credit Suisse

In a rare private equity court case, UK firm Cabot Square Capital has come out on top after a four-year argument over fees relating to the liquidation of a Credit Suisse-backed fund.

A New York jury has awarded UK private equity firm Cabot Square Capital $10 million from Credit Suisse, concluding a four-year legal battle stemming from a 2003 no-fault divorce.

Credit Suisse was a cornerstone investors in a ten-year, $275 million fund in 2003, according to Kenneth Van Deventer, the Riker Danzig Scherer Hyland & Perretti attorney who represented Cabot Square in the case. The fund had several other limited partners as well. The agreement included a break fee of $850,000 if Credit Suisse chose to withdraw before the ten year period had passed, which it did in 2003, Van Deventer said.

But after liquidating the fund, Credit Suisse refused to pay the break up fee. Credit Suisse also said that the fund had incurred a loss, and took possession of $8 million held in escrow as security for a potential clawback liability, Van Deventer said.

Credit Suisse was ultimately unable to convince the jury that the fund had actually incurred a loss, Van Deventer said, and so Cabot Square was awarded the $8 million, plus the break fee and statutory interest.

The case is a rarity in the private equity world, where disputes are usually worked out in the privately rather than in the courtroom.

“It was very surprising,” Van Deventer said. “No one knows why Credit Suisse decided to push it this far.”

Jay Fastow and John Mastando of Weil Gotshal and Manges represented Credit Suisse. Credit Suisse declined to comment on the matter.

Cabot Square is currently investing its Fund II, which closed on £200 million in July 2003, and a third with a £300 million target, which the firm took to market in 2006.

The latest fund invests in small to medium sized companies across the UK and Western Europe. It has a particular focus on the financial services, hospitality, leisure and outsourcing sectors and aims to make equity investments of between €10 million and €50 million in each deal.