GCM Grosvenor leads restructuring of Denham Capital IV

  • Denham raised Fund IV after spinout from Sowood
  • Deal moves remaining assets into continuation fund
  • One of several energy-focused deals on market

GCM Grosvenor led a deal to pull remaining assets out of Denham Capital’s 2005 fund and move them into a new pool that gives the GP more time to manage the investments, sources told Buyouts.

Denham is one of several energy-focused private equity firms using the secondary market to deliver liquidity to investors in older funds while giving the GP more time to manage assets. Others working on or exploring processes include ArcLight Capital and Panda Power.

Grosvenor was the sole buyer on the Denham deal, which had a total value of about $120 million. The number includes new capital from the buyer to facilitate the investment as well as the total value of the fund.

The deal enabled existing LPs in Fund IV to cash out or roll their interests into the new fund. It’s not clear how the LP base broke down in terms of sellers and those sticking with the GP. Also not clear is the price at which existing LPs could cash out of the fund. 

Lazard was secondary adviser on the transaction.

Krystal Patout, spokeswoman for Denham, did not return a request for comment.

Denham Commodity Partners IV had about $1.24 billion in 2005, according to a San Diego County Employees Retirement Association investment report. The firm spun out of hedge fund Sowood Capital and became independent in 2007, retaining about $2.3 billion formerly managed by Sowood.

It’s not clear how much of that went into Fund IV, which has external investors.

Denham closed Fund V on $2 billion in 2008 and raised $3 billion for its sixth fund in 2012.

Rather than raise a seventh flagship, Denham in 2015 began the process of splitting its business into three distinct strategies: oil/gas, mining and power. The firm planned to bring three funds to market for each strategy.

Denham last year closed its first mining fund on $558 million. The mining fund is led by Managing Partner Carl Tricoli as well as Managing Directors Bert Koth and Rob Still.

Denham Oil & Gas Fund was targeting $2.5 billion, an SEC Form D filing from 2015 shows. That fund had raised $657.6 million as of 2016, but it’s not clear whether the pool held a final close. Oil & Gas is led by Founder and CEO Stuart Porter and Managing Partners Jordan Marye and Tricoli.

Finally, Denham International Power collected about $316.4 million as of November, according to a Form D. Power is led by Porter, Managing Partner Scott Mackin and Partner Justin DeAngelis.

ArcLight, meanwhile, has been thinking about running a liquidity process on its fifth fund, which closed on $3.3 billion in 2011. Panda Power Funds has been working with Evercore to set up a restructuring process for its older funds, Buyouts reported.

Energy & Minerals Group is working with Park Hill Group on what could be the largest-ever secondary process, an up to $5 billion process to move assets out of older funds and into a new pool that the GP would continue to manage.

Action Item: Check out Denham’s Form ADV here: https://bit.ly/2HvZiIa