NEW YORK: Blackstone Inc and Neuberger Berman are committing at least US$600mil to a deeply discounted multi-asset continuation fund from Trilantic Capital Partners that has been keenly watched by other firms unable to raise money for new deals.
Trilantic’s limited partner advisory committee approved the plan to move the assets in its 2017 vintage Trilantic Capital Partners VI North America fund to the new continuation vehicle, according to sources.
That will allow the firm to extend its hold on the fund’s assets for longer even as it seeks options to dispose of them, said the sources.
It’s not immediately known how many existing investors, known as limited partners, elected to cash out of the fund, the people said.
Neuberger Berman declined to comment. Blackstone and Trilantic didn’t immediately reply to messages seeking comment.
Buyout, an industry trade publication, reported earlier on Blackstone and Neuberger’s participation.
Blackstone’s Strategic Partners, the firm’s secondaries arm, will commit at least US$400mil to the continuation fund, at a discount of 40% to the net asset value (NAV) as of the first quarter, and Neuberger will kick in at least US$200mil.
That’s steeper than the 30% discount to NAV that buyers were offered earlier in the process.
The portfolio of roughly 16 assets will stay together, the sources said.
Trilantic hopes to raise US$1bil for the fund, which had a NAV of US$3.4bil, Bloomberg reported in July.
Evercore Inc, the adviser for the deal, will work to raise the rest of the capital through syndication, the people said.
Mid-size buyout firms such as Trilantic have been hit hard by a dealmaking rut and challenging fundraising environment.
For many, the inability to raise new capital means they can’t invest in new deals and earn fees or profits to retain talent or establish new growth strategies.
NAVs of zombie funds – those that outlived the typical 12-year lifespan for buyout funds – increased sharply as deal exits slumped.
The median NAV for buyout funds was close to 25% of committed capital as of last year’s fourth quarter, compared with percentages in the mid-to-low teens from 2016 to 2021, according to MSCI.
Even as the market for deals opens up, it will take several years to clear the backlog, exacerbating the challenges for these firms, the sources said.
The private equity industry is closely monitoring the Trilantic deal because it could provide a road map for several firms in a similar situation, according to several market participants.
Many of the firms still own assets that could appeal to secondary buyers.
But capital is scarce, with prospective buyers spoiled for choice by the influx of single-asset continuation funds for high quality assets whose owners aren’t struggling for cash.
“Since it began the process earlier this year, Trilantic sold energy-transition business Intersect Power and partially divested cloud-services platform Tercera,” the sources said.
The firm also wrote off its investment in Powin, an energy-storage business that filed for bankruptcy. — Bloomberg
