THE ANNUAL REVIEW 2010 - PEI Media

page 24 private equity annual review 2010
s to r i e s o f t h e y e a r
j a n | f e b | m a r | a p r | m a y | j u n e | j u ly | a u g | s e p | o c t | n o v | d e c
l p a p p e t i t e
Quality vs. quantity
A number of large LPs announced they would reduce
their GP base to improve performance
CalSTRS: eyes open to
‘less traditional opportunities’
The California State Teachers’ Retirement System took proactive
measures to manage its private equity portfolio in August
by cutting out underperforming managers and keeping its eyes
open for “new and potentially less traditional” opportunities.
The pension said it had “entered a period in which there
will be a net reduction in the number of its active general
partner relationships,” according to board documents. “Staff
is redoubling its efforts to monitor its existing partnerships
and detect those heading in errant directions.”
CalSTRS was not the only large limited partner who saw
value in fewer, better managers. In August, Credit Suisse,
which received a $150 million mandate for private equity
investing from The San Diego City Employees’ Retirement
System in 2009, said in a report that “one of the guiding
principles of [San Diego’s] programme will be to invest in
fewer better managers”.
Harvard University’s $27.4 billion endowment also
announced over the summer that it would continue to reduce its private equity relationships.
“The field of private equity has become more and more crowded – with capital, with
managers and with investors – over the last decade,” said Jane Mendillo, president and chief
executive officer of the Harvard Management Company. “Our expectations for this asset
class are that returns will be more muted going forward, and we are even more committed
to holding our fire for the best-in-class opportunities.” Her comments were published in
one of the endowment’s fiscal 2010 performance reports.
“We will continue to have a meaningful level of exposure to this asset class over the long
term … but we anticipate that the number of active relationships within our private equity
and venture capital portfolio will be reduced, while the concentration will be increased in
our highest conviction managers.” ■
Cashing out
The Royal Bank of Scotland
unloaded a number of noncore
businesses after being
forced to dispose of assets
by the European Union
After receiving a total £45.5 billion (€53.6
billion; $71.5 billion) in government bailout
funds – the largest bailout of any bank
worldwide – the Royal Bank of Scotland
was forced by European Union regulators
to sell off a number of assets, which it
did in August to the tune of roughly £3.2
billion.
The bulk of that sum came from the sale
of RBS WorldPay, its card payment subsidiary
business, to Advent International and Bain
Capital for an enterprise value of more than
£2 billion.
Government-owned RBS retained a
minority stake of 19.9 percent in WorldPay,
with Advent and Bain evenly splitting the
remainder. Approximately £299 million
of mezzanine finance was provided by a
consortium of lenders comprising Kohlberg
Kravis Roberts’ KKR Asset Management,
mezzanine specialist TCW/Crescent
Mezzanine and Bain Capital affiliate Sankaty
Advisors.
Within two weeks of selling off WorldPay,
RBS sold a portfolio of leveraged loans to
Intermediate Capital Group for £1.2 billion.
It went on to sell mental health and rehab
clinic group Priory to Advent in January. ■
Dwindling debt
The sale of a Spanish toll road operator to CVC
Capital Partners started as a €12bn LBO before
shrinking to a €1.7bn transaction
One of the summer’s hottest private equity infrastructure deals closed
in August when Spanish infrastructure group ACS sold part of its stake
in toll road operator Abertis to CVC Capital Partners for €1.7 billion.
The transaction had originally been conceived as a €12 billion
leveraged buyout involving Abertis’ main shareholders – La Caixa and
ACS – and CVC, with €8 billion of bank debt and €4 billion in equity
from the consortium members.
Mediobanca found it difficult to get banks to commit financing,
however, in part because of their reticence to being exposed to the
troubled Spanish economy, diminishing the original debt package down
to just over € 5 billion. In the end, even that amount proved troublesome,
prompting the deal to steadily mutate from a three-way leveraged buyout
to a stake sale from ACS to CVC.
At the height of the transaction, between 14 and 20 banks were
said to be looking at the deal, which was ultimately closed by a
four-bank syndicate. ■