Side Letter: PSERS postpones, Mid Europa eyes GP-led deal, Silver Lake debt play

ESG can mean the difference between receiving a re-up from a long-standing LP and potentially not, as one US buyout firm is about to find out. Here’s today's brief, for our valued subscribers only.

Just happened

PSERS’ tough call

Harrisburg, PA

Any GPs thinking ESG is simply a box-ticking exercise, think again. Pennsylvania Public School Employees’ Retirement has postponed voting on a commitment to Platinum Equity’s latest buyout fund over concerns. The issue is portfolio company Securus, which manages inmate phone systems for state prison systems and where overcharging has been alleged. PSERS will gather more facts, including from Platinum itself, before voting on the commitment, CIO James Grossman said.

Mid Europa eyes GP-led secondaries

Mid Europa Partners, which is in market seeking €800 million, is exploring liquidity options for its 2007-vintage fund, per sister title Secondaries Investor. The CEE-focused firm may give investors in the €1.5 billion Fund III the option to sell or roll into an extension vehicle and has brought in advisor Evercore to help. Fundraising in the region plummeted 83 percent last year to $250 million. Yet its growth prospects remain good: in 2018, Poland, Romania and Hungary’s economies grew by more than 3 percent compared with an EU average of 2.1 percent, according to the IMF.

Silver Lake’s tech debt play

Silver Lake has collected around $2.5 billion for its first credit/structured equity fund, Silver Lake Alpine, to make non-control investments in tech companies, write our colleagues at Buyouts. The fund – which will focus primarily on the downside-protected portion of a company’s capital structure – has already made at least two investments and is run by the firm’s investment leadership.

Essentials

Warburg goes east. Warburg Pincus has more than doubled the target for its latest Asia-focused PE fund. The firm is seeking $4.25 billion for Warburg Pincus China-Southeast Asia II, up from the $2 billion it collected for its first China Fund. South-East Asia is attracting attention: CVC Capital Partners is expected to allocate half its fifth Asia fund to the region, having struck its first deals in Vietnam and Cambodia in 2017.

Better together. Direct equity partnerships are the lifeblood of the Ireland Strategic Investment Fund, the country’s €8.9 billion SWF. Without these, it would be impossible to deliver its mandate of supporting the economy through investments in SMEs, director Eugene O’Callaghan said in London last week. SWFs investing alongside other LPs is one trend that stands out; according to a report 211 such deals were recorded last year, versus 92 in 2017.

The case against C-corps. Are C-corp conversions good for all shareholders, or just a way for founders to maximise value before cashing out? Writing in the FT (paywall), Imperial College PE lecturer Sebastien Canderle posits it’s “only a matter of time” before one of private equity’s newly converted mega-firms runs into trouble, as corporate status can “amplify unprincipled behaviour”. Blackstone and Apollo Global Management made the switch this year, following in the footsteps of Ares and KKR.

Inside tip

Attending the HKVCA China Private Equity Summit in Hong Kong on Thursday? PEI reporter Alex Lynn would love to catch up with you there.

Dig deeper

Northern exposure. Canada Pension Plan Investment Board has boosted its allocation to private equity to 23.7 percent from 20.3 percent in Q1 2018, according to the pension’s latest annual report. Here’s a breakdown of the C$392 billion ($290 billion; €260 billion) pension plan’s investment portfolio. For more information on CPPIB, as well as more than 6,700 other institutions, check out the PEI database.

He said it

“There are no external investors and therefore no alignment of interest question of any kind. It is very different to the standard private equity house.”

BVCA director general Tim Hames responds to an FT editorial that Greybull Capital’s ownership of British Steel shows the ugly side of private equity (paywall).


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Today’s letter was prepared by Isobel MarkhamAdam LeRod JamesCarmela MendozaAlex Lynn and Preeti Singh.


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