
Ironbridge's creative liquidity solution
Stapled secondaries and GP restructurings have become common parlance as Asia's private equity investors grapple with a challenging fundraising environment, even though talk still overshadows action. In each case, new investors come in to replace old, creating much needed liquidity for funds nearing the end of their lives - and providing impetus for future capital raising efforts.
Somewhat uniquely for the region, Ironbridge Capital is offering a combination of the two.
The Australian GP has set up a new vehicle to absorb the remaining assets in Funds I and II, estimated to be worth around A$600 million ($556 million), with existing LPs given the choice of rolling over their positions or exiting. Those that opt to participate are also being asked to contribute to a A$250 million fund that will make fresh investments
"It's a smart move on their part," an LP familiar with the situation told AVCJ. "They were seeing a lot of secondary activity in their funds anyway, and instead of not getting anything from this activity, they have turned it into a GP restructuring and are looking to get more primary capital. If they came back to market with a primary fund now it would be difficult to raise - this way they get some money time and some more money."
Time is important to Ironbridge because the firm's problems, according to investors, are largely focused on its debut fund.
The A$450 million vehicle, which reached a final close in September 2004, engaged in buyouts at the peak of Australia's boom market and several portfolio companies struggled during the global financial crisis that followed. Yacht manufacturer Riviera entered receivership in 2009; Barbeques Galore and Super A-Mart, were merged under an entity and then partially exited at a loss to Quadrant Private Equity last year.
The second fund, a 2006 vintage vehicle with a corpus of A$1.05 billion, is in much better health. If Ironbridge is able to fully exit Fund I and show further progress on Fund II - 7-8 investments have yet to be realized - then another, larger fundraise a couple of years down the line would likely be better received. Three of four exits are expected this year, the LP said.
This approach has been employed in the US, but as far as AVCJ can tell, never in Asia - although there have been some variations on the theme. Farallon Capital Management, for example, previously offered an exit to hedge fund LPs with exposure to the illiquid side of its business in Asia by setting up a new vehicle to acquire the existing assets. Apparently there were few takers at the proposed price.
Earlier this year, Advantage Partners closed a JPY20 billion ($200 million) bridge fund intended to help the Japanese GP win back investor confidence following a trouble-hit fourth fund. Like Ironbridge, there was a sense that Advantage would struggle to raise a full-size fund; instead the GP plans to return to market, its reputation restored, in 12-18 months time.
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