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Terra Firma secures two-year fund extension

The Guy Hands-led firm has asked investors for more time to divest its 2002-vintage Fund II, exits from which could boost its expected fundraisings in 2014.

LPs in Terra Firma Capital Partners’ second fund have agreed to grant the firm a two-year fund extension, PEI has confirmed. 

The lifespan of Terra Firma’s second fund, a €2.1 billion, 2002-vintage, has been extended by two years to April 2016. It is understood 98 percent of LPs agreed to the extension in July, news of which was first reported by Bloomberg.

The extension should allow Terra Firma to maximise Fund II's returns ahead of two expected fundraises towards the end of 2014, one for a general private equity fund and one for a renewable energy infrastructure fund, according to a source familiar with the matter. At press time, it was unclear what size funds the firm plans to raise. 

Terra Firma declined to comment. 

Terra Firma will not charge its 1.5 percent management fee during Fund II's extension period. There are four investments left in Terra Firm’s Fund II; motorway services Tank & Rast; cinema group Odeon & UCI; energy generator Infinis; and aircraft leasing company AWAS.  “It would be best to increase value rather than selling them now,” said a source familiar with the matter.

The private equity firm has recently been busy with exits, having last month agreed to sell Fund II portfolio company Phoenix Group, a Northern Irish gas business. Also last month it floated Fund I portfolio company Deutsche Annington, a German property business, on the Frankfurt Stock Exchange.