CVC’s second Asia fund sees value drop by 10%

One person familiar with the situation told the Financial Times that the performance of CVC Capital Partners Asia Pacific II has been "terrible." In contrast, the private equity firm's fourth European fund, which was also raised in 2005, had a valuation of almost 1.6x the original cost at the end of September.

The second Asia fund has invested $1.78 billion, realized $543 million, reported $220 million in other income and is valuing the remaining portfolio at $836 million.

CVC's first Asia fund, raised in 1999, more than tripled its $750 million corpus. A third fund closed at $4.12 billion in 2008 and this vehicle compares more favorably to the fifth European fund with a valuation of 1.1x cost versus 1.3x.

While the private equity firm is expected to have little problem raising the more than EUR10 billion ($13 billion) targeted for its next European fund, the poor performance of the second Asia vehicle may prove a drag on future fundraising activities in this region.

The private equity firm's investment in Nine Entertainment has reportedly been written down close to zero. Other problem deals in Australia - where a host of PE players have struggled recently with consumer sector transactions - include travel booking and hotel group Stella and diagnostic imaging business I-MED.

The JPY380 billion ($3.19 billion at historical rates) investment with Nomura Principal in Japanese restaurant chain Skylark, touted as one of the highest-priced private equity deals ever seen in the country, also fared poorly.

Separately, Reuters reported that CVC has once again shelved plans to restructure A$2.6 billion ($2.7 billion) in debt on Nine Entertainment's books. A proposal tabled last month for a two-and-a-half-year extension on the debt, due in February 2013, in order to give time for advertising revenues to improve was abandoned following a lukewarm response from creditors. Now a plan to divide the debt into two categories, one allocated to banks and the other to hedge funds, has also been dropped.

A key challenge for CVC is that it requires 100% lender approval to extend the life of the debt and two-thirds approval to amend covenants. Hedge funds, which now control 50-60% of the debt and are eying cut-price equity stakes in Nine Entertainment should it teeter on the brink of default, therefore have the power block any changes.

Loans traders expected A$200-300 million in senior debt to change hands this week, with hedge funds the principal buyers. Apollo reportedly picked up A$112 million of senior debt sold by Bank of Scotland earlier this week and National Australia Bank is said to be in discussions with potential buyers about offloading a further A$87 million.

CVC remains an active player in Asia, this week making a MYR5.24 billion ($1.65 billion) joint bid with Johor Corp. for QSR, the holder of fast food chains KFC, Pizza Hut and QSR Brands in Malaysia.

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• Topics
• Performance
• Australasia
• Media
• Financing
• Restructuring
• CVC Capital Partners
• Performance
• Australia
• Japan
• TMT
• Structured finance