What has 2013 been like for Terra Firma?
Last year has been about realising some of the value in our portfolios for our investors. We have exited three businesses (fully or in part), Deutsche Annington, Infinis and Phoenix. For Tank & Rast, a German motorway service station business, we have recently completed a €2.1 billion refinancing – all things we can be very proud of. Overall the past few years have been very good for our business.
Do you feel the availability of debt has improved recently?
Yes, it definitely has improved. In 2013, we also did refinancings in Tank and Rast and in Phoenix and Infinis before we sold them. We have seen an increase in appetite in the debt markets in the course of the last 12 months. We have done some high-yield issuances as well.”
How is your current Fund III [a €5.38 billion, 2007-vintage] looking?
Our current transformational business fund is fully invested, but we can still make follow-on investments in those portfolio businesses. More broadly, we’ve delivered a significant improvement across our funds over the course of the last 24 months. We have achieved that through some of the exits, but more importantly through some of the work we have been doing in our portfolio companies. Our most recent fund has two investments which are relatively new: Four Seasons Health Care & The Garden Centre Group. These deals are great examples of the types of opportunities we see in Europe where Terra Firma can apply its expertise and capital to deliver value.”
Will your recent exits pave the way for Terra Firma to raise another private equity fund soon?
Two years ago I said to the firm that what we really needed to focus on was realising the value that we have created in our existing portfolios. We have delivered this after returning over €2 billion to our investors across our portfolios. With the new investments of Four Seasons Health Care and The Garden Centre Group [and by] raising our first new capital since 2007 with our special opportunities fund, we are moving in the right direction.
If you’d asked people a couple of years ago whether they thought we would be able to refinance [German landlord] Deutsche Annington and Tank and Rast, I think a lot of people would have said that would be very challenging, but we achieved both of those in the past 18 months.
How are investors feeling about opportunities in Europe?
A couple of years ago, it was very difficult to find investors who would want to allocate capital to the European space. And at the time, we actually felt this was the right time to invest in Europe. Asset prices are low, there are a number of businesses which have lacked capital, an engaged shareholder, strategic direction and/or dynamic management. And those are precisely the types of businesses that appeal most to Terra Firma and our strategy.
I think today we still see Europe presenting a lot of interesting opportunities and we are seeing investors being interested in this space. At this stage we are very focused on renewable energy investments. We are certainly seeing a lot of deal opportunities there, but beyond that, there will be an opportunity for the next business transformation fund.
It is understood Terra Firma, which declined to comment on fundraising, is currently raising a renewable energy fund, which is targeting €2 billion, with a hard-cap of €3 billion. The vehicle is expected to hold a first close of between €700 million and €1 billion in March.