Paul Capital Partners, a private equity secondary and fund of funds specialist, has made a significant move in its third line of business through the securitisation of a collection of biopharmaceutical, medical device and diagnostic royalties.
The new securities, backed by Royalty Securitization Trust I, are being issued as $228.9 million (€170 million) in asset-backed notes. The notes represent 13 of 19 investments made by Paul Capital Royalty Fund I, which raised $300 million in 2000.
The notes, which received a financial guaranty policy from Ambac Assurance, have been assigned an Aaa rating by Moody’s and an AAA rating by Standard and Poor’s.
According to a press release, the assets contributed to the trust are diversified and enjoy the good credit quality of the licensee institutions.
Paul Capital, which manages a major secondary investment programme as well as primary funds of funds, was among the first and remains one of the only investors in the medical royalty market. The firm’s royalty team is led by Dr. Walter Flamenbaum and Dr. Gregory Brown.
In July 2003, the royalty team raised $656.5 million for Paul Royalty Fund II.
Former Hicks, Muse, Tate & Furst partner Charles Tate is currently raising a similar fund.
Many holders of medical royalties, such as universities, research labs, entrepreneurs and professors, are eager to gain liquidity for these assets, according to proponents of the strategy.