Bain Capital offers to cut fund size

Bain Capital is offering investors the chance to reduce their commitments to a $1.8 billion co-investment fund, as first reported last week by peHUB, an affiliate publication to PE Week.

Under terms of the offer, each limited partner would be allowed to cut back its commitment by up to 50%, assuming that a majority of investors ratify an amendment to the original fund documents. LPs also would have the option to increase their commitments by acquiring another investor’s discarded position.

Bain closed the co-investment fund in late 2007, as a sidecar to what became an $11.5 billion general fund, called Bain Capital Fund X. If each LP takes advantage of the offer, it would reportedly reduce the co-investment fund’s size to just $900 million. Still sizable, but nowhere near the $5 billion Bain had originally planned to raise. At the time the firm was raising the fund, Bain had been targeting $10 billion for the general fund.

Bain does not charge management fees on uncalled capital in the co-invest fund.

The firm had intended to use the co-investment fund for North American deals in which Bain’s equity portion exceeded $650 million, with the general and co-investment funds to split the remainder 50/50. It also could theoretically be used for deals out of Bain’s European and Asian funds.

Since the co-investment fund was raised, however, it has only been tapped twice.

The first investment was in the $17.9 billion buyout of Clear Channel Communications in July 2008. Bain followed that with its $3.5 billion buyout of The Weather Channel in September 2008, using a combined $100 million from the co-investment fund.

All of Bain’s subsequent deals have been too small to trigger the co-investment, including the $418 million infusion late last month of the Chinese electrical appliance maker GOME. —Dan Primack