Side Letter: Mercapital founder Loizaga dies; fundraising continues; private debt’s advantage

One of Spanish private equity's founding fathers has fallen victim to the coronavirus. Here’s today's brief, for our valued subscribers only.

Just happened

Spanish PE veteran Loizaga dies

Sad news this morning: José María Loizaga Viguri, founder of Spanish PE firm Mercapital, died on Sunday, a victim of coronavirus. He was 84. Loizaga was a pioneer of Spanish PE, having founded Mercapital in 1985, a firm that merged with N+1 Private Equity in 2012. He led the business until 2008 and was most recently vice-president and board member of infrastructure company ACS Group.

Javier Loizaga, chairman of Moira Capital Partners, paid tribute to his father in a LinkedIn post in which he said he had “fallen victim to the cruel covid-19”. He wrote that his father had been “full of health, enthusiasm and the life force… and was strong as a bull only three weeks ago”.

“He was a reference for many, many Spanish professionals and taught me everything I know… and all this with an unwavering work ethic, while showing a humanity that touched everyone. I’ll miss him for the rest of my life.”

ACS also mourned the loss of Loizaga in a statement on Monday, noting he was one “of our great executives, who dedicated a very important part of his life to the projection and expansion of the group as a world leader in infrastructure”.

Getting over the finish line


Fundraising continues for those who have the momentum. On Friday we brought you news that tech specialist Hg had amassed around $8 billion across three funds and was approaching final closes for them all. Now we hear that Apax Partners SAS (the Paris-headquartered mid-market firm) has hit its €1.2 billion target for its latest flagship fund.

As we noted in our Friday Letter last week, the fundraising news flow will probably look surprisingly buoyant for the moment, as those firms that have already gathered momentum will continue press ahead using remote working technology. We will probably even be surprised by some very large closes. H2 will be a different story.

Private debt’s immunity

Our senior editor for private debt Andy Thomson gives some valuable insights into the shape of the relatively young private credit market as we head into this period of volatility. Some of the key points:

  • Distressed was the most popular private debt strategy last year in terms of capital raised last year (36 percent of the total). “With any timeline for recoveries so unpredictable – since no one really knows how long the coronavirus outbreak will last – there’s the danger of catching a falling knife,” notes Thomson.
  • Investors in private debt funds tend to pay fees only on invested capital. Amid an inevitable slowdown in dealmaking, “private debt LPs have less to worry about than investors in other asset classes when it comes to cash sitting idle”.
  • Managers focused on the smaller end of the market may get a boost. Says Thomson: “There is a growing belief that smaller companies in need of finance will turn increasingly to alternative credit.”

He said it

“This is EXACTLY how thriving businesses should help support their employees and the general economy in these trying times. So proud to be part of a company that puts its money where its mouth is and does its part to #humanizework.”

Jason Berkowitz, a senior employee at private equity-owned software business Jobvite, takes to Linkedin to heap praise on its sponsor K1 Investment Management for sending every portfolio company employee a $150 gift card.


Annex generation. It may feel like 2008 all over again, but GPs that need more time or capital for their portfolio companies now have options, says a note from law firm Dechert. These tools – developed post-GFC as well as more recently – are at the ready for GPs to produce better outcomes:

  • Annex funds: offered initially to existing investors on a pro-rata basis. All investors (existing and new) buy in at a negotiated valuation.
  • Co-investments: offered where follow-on capital is required.
  • Fund extensions: used for a more orderly realisation of divestments. Consider opening up to new LPs when more capital is needed.
  • Strip sales: typically involve a secondary buyer, so a disadvantage is that the fund’s shareholding will be diluted.
  • GP-led secondary transactions: LPs in the existing fund are given the opportunity to cash out or roll over into the new longer-dated continuation fund. (Find out the four factors that threaten the GP-led market here.)
  •  Cross trades or rollover co-investments: occur more frequently, but an independent valuation is essential. (More on that here.)

McKinsey’s playbook. Getting to grips with the post-coronavirus landscape will be easier said than done. McKinsey has compiled a playbook of key adjustments that need to be made. Crucial measures include taking care of staff, whether it’s by prioritising family health or virtual training; analysing which portfolio companies are in biggest need of resources or support; and supplementing market updates with communication to LPs on additional topics relevant to their board and public stakeholders.

The inspector calls (but not in person). The SEC’s Office of Compliance Inspections and Examinations (OCIE) has shifted to doing its work by correspondence, it said. Visit sister title Regulatory Complaince Watch to read the announcement in full.

He said it

“You don’t need a calculator to see that Action can hunker down for far longer than even the most pessimistic scenarios for covid-19.”

Simon Borrows, chief executive of 3i Group, discusses the cash and debt position of portfolio company Action, a European retailer that was the subject of a large single asset GP-led secondaries process that closed earlier this year. Secondaries Investor has the details.

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Today’s letter was prepared by Toby MitchenallIsobel MarkhamAdam LeAndy ThomsonRod JamesCarmela Mendoza and Alex Lynn.

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