Investors Wanting Out of THL VI Being Waitlisted
Selling private equity fund stakes on the secondary market is never as simple as it sounds. For investors in Thomas H. Lee Equity Partners Fund VI, it's become a waiting game. The $8.1 billion vehicle has maxed out on the permitted annual percentage of secondary sales for 2009 and is waitlisting all interested sellers until 2010, according to a source familiar with the situation. The fund closed in December 2007 alongside a $2 billion co-investment vehicle, but plenty of it had been deployed prior to the final close. THL Partners Fund VI includes such mega-deals as Univision, Clear Channel and Ceridian. Given the well-publicized troubles of some of these companies (ahem, Clear Channel), it's no surprise that some investors are running for the door. The problem, of course, lies in a set of "draconian" regulations, which state (in over-simplified terms) that if more than 2% of a fund's LP stakes trade on the secondary market in a calendar year, the fund could be audited and deemed a publicly-traded partnership, or PTP. The PE fund then is no longer a flow-through vehicle and, as a result, end up having its returns taxed twice
