Terra Firma to lose IR head

Veteran fundraiser Michael Hewett plans to leave the embattled firm, whose future is contingent upon deftly deploying Fund III’s €2.4bn of remaining dry powder.

Michael Hewett has resigned his post as Terra Firma's managing director of investor relations and will leave by year's end, PEO has learned. 

Based in London, Hewett originally joined the firm in 2004 as its European director of fundraising and IR efforts. He’d previously worked for Atlantic Pacific Capital and Morgan Stanley’s private funds group.

The firm’s IR team is led by Bill Miles in North America and Manabu Kurata in Asia. It is unclear how Terra Firma plans to replace Hewett, who was responsible for managing the team globally and is directly responsible for interacting with investors in Europe, the Middle East and Australasia.

Hewett could not be reached for comment and a firm spokesman declined to comment.

The precise rationale for his impending departure could not be determined at press time, though one source said Hewett felt “now was the right time to get himself out rather than commit to another five years at the firm and a tough fundraise”.

If we get [investing the remainder of Fund III] right we will raise another fund. If we don’t, we won’t. It is that simple.

Guy Hands 

Terra Firma founder Guy Hands has acknowledged that the firm’s troubled investment in music publisher EMI – which comprises 30 percent of the firm’s €2.2 billion second fund and 30 percent of its €5.4 billion third fund – has been a significant setback. As was the court case Terra Firma recently brought (and lost) against Citi, which it claimed had deliberately misled Terra Firma during the auction process. 

“EMI is where EMI is,” Hands said at a recent conference in Paris, according to the Financial Times. “There is nothing we can do about that.”

The firm’s focus now must be on portfolio management and investing the rest of Fund III’s some €2.4 billion in dry powder well, he said. “If we get that right we will raise another fund. If we don’t, we won’t. It is that simple,” Hands said.

Earlier this year, PEI spoke with Terra Firma limited partners and other market sources to resolve whether the failure of EMI could spell the end for the firm. As Hands has said, LPs’ reaction to any future fundraise will be contingent on the ultimate outcome of Fund III. “Unless they really prove they can turn around Fund III, they may not be able to raise Fund IV,” said one market source.

Another source, however, said Terra Firma’s track record was good enough to withstand a disappointing outcome for its third fund. “TFCP III is not looking good in absolute terms, but in relative terms it will look better than some, because it decided to sit on cash,” the source explained. “The overall track record of Terra Firma will still be top quartile.”

As of 30 June 2010, Terra Firma Capital Partners III was showing a return multiple of 0.27x and an internal rate of return of negative 47.7 percent, according to public documents from limited partner The Oregon Public Employees’ Retirement System.

The Canada Pension Plan Investment Board, also as of 30 June, was showing the $196 million it paid in to Terra Firma Capital Partners II at a reported value (including distributions) of $264 million. Its $300 million commitment to Fund III, of which $185 million had been paid in by the end of June, was being shown at a value of $57.5 million.

Should the firm raise a Fund IV, it is expected to to go to market in roughly 18 months or more.