Australia’s Ironbridge drops staple from LP secondary exit deal

The original proposal, tabled last autumn, drew criticism from some existing investors because rolling over their holdings in the Australian GP's first and second funds was conditional on participating in a new blind pool. It was subsequently amended so the stapled secondary was no longer obligatory.

According to a source familiar with the situation, Ironbridge has a secondary investor - described as a global player with primary and secondary strategies and an office in Hong Kong - lined up to cover at least A$200 million ($182 million) in positions other LPs have expressed an interest in exiting rather than rolling over into the new secondary vehicle.

The final size of the deal is unknown but syndication to other secondary investors is seen as unlikely.

Ironbridge may yet return to the market at a later date and raise a new primary fund, but the failure of the stapled secondary underlines how complicated these deals can be.

To most secondary specialists, the preferred deal structure is an LP stake in a fully funded and full capitalized portfolio. There are several layers below that - including entering funds and providing fresh capital but only to service existing portfolio companies - before reaching the stapled secondary, which ranks near the bottom.

At issue are the risk and economics of a blind pool, with one industry participant telling AVCJ that he generally doesn't touch standard secondary positions unless they are at least 50% funded. By entering an existing portfolio, the investor draws comfort from knowing the assets and entering further along the j-curve when these assets are closer to realization.

A stapled secondary is usually only deemed worthwhile if the investor has a high opinion of the manager and a strong liking for the existing portfolio.

One notable transaction in Asia is said to have seen an LP interest in a Morgan Stanley Private Equity Asia vehicle picked up by AlpInvest Partners and LGT Capital Partners from Morgan Stanley, with the two investors making a commitment to the GP's latest pan-regional fund.

In the case of Ironbridge, it was originally envisaged the rollover vehicle would include approximately 10 assets estimated to be worth around A$600 million.

A couple of these come from Ironbridge's A$450 million debut vehicle, which reached a final close in 2004 and engaged in buyouts at the peak of Australia's boom market. Several portfolio companies struggled as a result of the financial crisis that followed. The rest of the assets are in the GP's second fund, a 2006 vintage vehicle with a corpus of A$1.05 billion.

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• Topics
• Secondaries
• Secondaries
• Australasia
• LPs
• Secondaries
• LPs
• Australia
• Ironbridge Capital