They would be paying cash at this Drawdown B but proportionally less than the new investors. So there is actually no cash payout to the original investors as a result of the re-balancing. In reality, it is likely that, in addition to attracting these new investors, the GP issues a Capital Call Notice to all investors for a drawdown at this 2nd closing on 30th June. Note that, so far, it appears that the fund does not receive cash on 30th June the net effect of the cash flows shown is zero as the flows simply re-balanced the investor’s capital. ![]() The outcome should be that, having re-balanced contributed capital, the amount of uncalled capital for each partner is consistent with the % ownership of each partner after this, the 2nd, closing. Effectively, the original investors are credited as compensation for having their % holding diluted. The total amount required from LPs 6,7 and 8, is apportioned across the original investors based on their % holding after the initial closing. This ‘true-up’, has the effect of putting all investors on an equal footing and it’s called equalisation. The new investors make the following payments to the fund: So he is required to pay 8.08% of something, but of what? 8.08% of Drawdown A that is, 8.08% of $50 million. For example, based on the commitment of $30 million, LP8 owns 8.08% of the fund. The amount of cash they are required to pay is determined by their % ownership of the fund based on commitment amounts after this 2nd closing. LPs 6,7 and 8 need to pay cash to the fund straight away on 30th June. These subsequent investors are coming into the fund at this 2nd closing on 30th June 2014. The GP has attracted a further $90 million from 3 new investors, LPs 6,7 & 8. This post considers what happens when there is a subsequent closing and, in particular, what is meant by equalisation (the ‘true-up').Ĭontinuing our example of the DesTek Fund, there is another round of financing and so a subsequent closing. This is the fourth in a series of posts on private equity fund accounting.įor the third post, Drawdowns, click here. This is truly a reflection of the dedication and hard work of our Funds team in not only consistently providing high-quality advice to our clients, but also in helping to shape the market when it comes to fund formation.Private Equity Fund Accounting - Subsequent Closings & Equalisation Bluegem Capital Partners on the structuring and fundraise of its new mid-market PE fund, Bluegem IIIĬommenting on the win, Funds Partner, Sam Kay, said: "I am delighted that our team has once again won the Legal Fund Formation Award at the Drawdown Awards.The fund was raised virtually during the global pandemic, launching in March and closing in June Elysian Capital LLP on its third vintage private equity fund Elysian Capital III LP.EQT AB, the largest alternative investment fund manager in the Nordic region, on the strategic sale of its Credit business segment to Bridgepoint.on the spin-out of the Irish private equity investment team from The Carlyle Group in early 2020 forming Melior Equity Partners and the subsequent fundraising and closing of Melior Equity Partners II.As well as advising on these mandates, the award recognises the team for its work to innovatively shape the market with new liquidity options available to private funds, from LP tender offers, to fund recaps, preferred equity transactions and NAV-based lending. The team advised on mandates from leading UK, European and global private equity funds, from venture through to growth, mid-market and larger buyout firms. ![]() The team was recognised for its work supporting clients on over 20 fundraisings with aggregate commitments of multiple billions. ![]() The judging panel for this year's awards was made up on leading private capital fund COOs, CFOs, CCOs, GCs and CTOs. The service provider awards celebrate a wide range of suppliers and vendors that have demonstrated expertise and top-class client services standards in their provision of services and advice to the private equity fund community. The Drawdown Awards celebrate excellence and innovation within private capital fund operations. Derivatives & Structured Finance Disputes
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