CSFB To Buy Angel Portfolio

The secondary market for venture portfolios has been touched by an angel. Credit Suisse First Boston (CSFB) is poised to buy the remaining portfolio assets of Angel Investors pending approval of the venture firm’s investors, according to internal documents leaked to the San Jose Mercury News.

CSFB will buy the remaining portfolio of the Angel Investors II fund for about $7.8 million, according to the sale document as well as a letter sent to the backers of Angel Investors by General Partners Bob Bozeman, Ron Conway and Casey McGlynn.

The agreement was reached on April 22, according to the documents. A notice was sent out last week to backers for their approval.

CSFB would purchase the assets through its CSFB Strategic Partners II fund. About $1 million in funds from the sale will be placed in an escrow reserve. Angel Investors also has stock worth about $1.4 million that will be liquidated.

Conway says that the firm has no comment. CSFB did not return calls.

The Angel Investors fund closed in 2000 with $125 million. It had a hit with Google (Nasdaq: GOOG) and includes other successful companies, such as Loudeye Technologies [(Nasdaq: LOUD) and PayPal (which went public in 2002 and was acquired by eBay that same year]. But the fund was unable to generate more than 52% of its capital to its backers, according to an email that Angel Investors sent April 13.

In the GPs letter, the three emphatically endorsed the proposed sale. “We are STRONGLY in FAVOR of this transaction,” the letter reads (emphasis theirs). “We find this attractive since it will save several years of additional expenses, allowing us to maximize your return.”

Spending money on managing the remaining assets “will just erode the cash remaining in the fund,” the letter says.

Angel Investors notified its investors in its April 13 email that it had signed a letter of intent with a secondary buyer. It predicts that the balance of future returns will be a low $5 million due to subsequent company financings that caused a dilution in ownership and loss of liquidity preferences for the firm.

Conway announced last year that the firm would not make any new investments.