Australia’s Anchorage closes special situations fund at $266m
Anchorage Capital Partners has closed its third fund, which will make special situations and turnaround investments in Australia, New Zealand and Southeast Asia, at A$350 million ($266 million).
The Sydney-based GP said in a statement that the fundraising process took approximately three months and the vehicle was considerably oversubscribed. Australian institutional investors account for 40% of the corpus, with the rest coming from LPs in Asia, Europe, the Middle East and the US.
Anchorage closed its second fund at A$250 million (then $260 million) in 2013, with domestic investors contributing more than 50% of the total. The firm raised A$200 million for its debut vehicle in 2010.
The mandate for Anchorage Capital Partners Fund III is consistent with that of its predecessors. The fund will make controlling investments in underperforming businesses with enterprise valuations of A$30-250 million. The GP takes a hands-on approach to deals, including the establishment of a turnaround committee at each portfolio company.
Fund II investments include the footwear and outwear businesses of Pacific Brands, children’s footwear retailer Shoes & Sox, a carve-out of Mark Group’s Australia solar installation business, and the privatization of childcare operator Affinity Education Group. Most recently, Anchorage acquired TJS Services Group, a facilities maintenance and cleaning services provider.
The GP also attracted attention last year after Dick Smith Electronics entered receivership. Anchorage bought Dick Smith in 2012 for A$20 million, turned the company around, listed it in late 2013 at a valuation of A$520 million, and exited 10 months later. Various parties expressed skepticism at the speed of Dick Smith’s rise and fall, but Anchorage insisted the business was profitable and sustainable at IPO and at exit.
Anchorage is not the only in-demand private equity firm in Australia’s special situations space. Allegro Funds reached a first close of more than A$200 million on its third fund in October and is expected to close at the hard cap of A$290 million in December. The GP is also raising a committed sidecar vehicle of up to A$100 million.
Turnaround investors have also been encouraged by changes to insolvency legislation in Australia. Specifically, directors will no longer be held personally liable for debts incurred while a company is insolvent – provided debts are incurred as part of efforts intended to help the company – and moratoriums can be imposed during voluntary administration to give businesses more time to explore a turnaround.
The new regime, which is modeled on the Chapter 11 system in the US, is expected to create investment opportunities for distress specialists as more companies seek third-party investors to provide capital and transformation plans rather than proceeding directly to liquidation.
MVision served as placement agent for Anchorage Capital Partners Fund III, with MinterEllison acting as legal advisor and EY as tax advisor.
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