Conversus Capital, a publicly traded fund of funds in the Channel Islands that is principally owned by asset manager
Conversus also announced a tender offer of up to $75 million to buy back as much as 3.75 million units through Feb. 22. The company said it will pay $20 to $22 for each unit of its stock through a modified Dutch auction. The units traded in mid-January at $17.50. The company says the net asset value of the units is $27.03, as of Dec. 31.
Bob Long, the president and CEO of Conversus Asset Management, called the buyback the most efficient use of capital for Conversus Capital. “Looking forward, we expect Conversus to continue as a permanent capital vehicle seeking to maximize per unit NAV and unit price over the long term,” Long said in a press release. “Consistent with those goals, we will allocate capital between new investments and returns of capital to unit holders.”
Added to previous repurchases, this offer could bring Conversus’s total in the last six months to $105 million, or more than 8 percent of the outstanding units. Oak Hill, Bank of America and management will not participate in the repurchase, the company said.
The company is forecasting “significant net portfolio cash flow” in 2011, which in turn is expected to generate “substantial capital to deploy,” according to a presentation on its Web site.
Conversus Capital, with $2.6 billion of assets under management, has been in a net debt position for most of the last two years, as the economy slumped and its fund investments returned little capital. The company said it had crossed back into a net cash position in the fourth quarter of 2010, ending the year with net cash of about $75 million. Distributions in 2010 were $522 million compared to capital calls of $168 million.
The company adopted a “realization strategy” in the second quarter of 2009, substantially ending new investments and conserving its cash for calls by existing commitments. As a result, Conversus Capital reduced the fees that it pays to
CORRECTION: Conversus Capital LP has $2.6 billion of assets under management. A version of this story posted on Jan. 31, 2011, misstated the number.