Princess Borrows More, Sets Stage For Commitments

Listed fund-of-funds manager Princess Private Equity holding Limited has boosted its liquidity levels with a new three-year credit facility and the sale of its listed private equity investments during 2009, setting the stage for fresh commitments to U.S. and European buyout funds.

The board of directors has signed a new three-year credit facility set at €40 million ($53.9 million), with the potential to increase to €90 million. The purpose of the new credit facility is to meet the funding obligations under Princess’s commitment strategy, following the expiration of the previous credit facility on Dec. 31, 2009. As of that data, Princess had drawn down €20 million under the credit facility.

Also contributing to the vehicle’s enhanced liquidity was the sale in mid-2009 of Princess’s listed private equity investments. Princess managed to profit from the rebound in share prices in the months before their sale, generating €7 million. Some of these investments had already been sold in multiple transactions prior to 2009, and the remaining positions as of the end of 2008 amounted to only 1.2 percent of the total NAV of the vehicle. The Princess fund of funds, advised by Partners Group, of Switzerland, is fully invested, with an investment level of 100.5 percent.

Brian Human, chairman of Princess’s board of directors, said in a prepared statement: “With the new extended credit facility in place and unfunded commitments reduced, Princess is well positioned to capitalize on attractive investment opportunities and to benefit from the re-opening of the exit window for its existing portfolio companies.” The board also is considering a restructuring of the Princess fund of funds, which trades at a significant discount to NAV, although details aren’t expected to be revealed until a second-quarter board meeting at the earliest. One option that is being considered is a change in the capital structure to provide shareholders with the ability to buy and sell shares at NAV on a monthly or quarterly basis.

In 2009, Princess funded €47 million in capital calls and received €42 million in distributions. Unfunded commitments at the end of 2009 totalled €284 million, down from €375 million at the end of 2008 through drawdowns for new investments and also through the divestment of selected partnerships with high unfunded commitment levels. Direct investments in 2009 accounted for 15 percent of total assets at the end of 2009, up from 13 percent in 2008.

Primary fund commitments still accounted for the majority of the portfolio at 83 percent, down minimally from 84 percent in 2008. Secondary commitments accounted for 2 percent of the total portfolio.

Accounting for 64 percent of the portfolio, the pool’s buyout fund allocation was up slightly compared to the end of 2008, with a major focus on the small-cap to mid-cap market (35 percent). The allocation to the large-cap and mega-large-cap funds accounted for 29 percent of the portfolio. Venture capital fund commitments were down to 21 percent at the end of 2009 from 24 percent at the end of 2008. Special situations accounted for 15 percent of the portfolio by value (14 percent in 2008).

In terms of geography, Princess’s allocation to Asia and the rest of the world was up to 10 percent at year-end, against 7 percent in 2008. North America remained unchanged at 57 percent and Europe was down to 33 percent from 36 percent.

US buyout funds in Princess’ portfolio include American Securities Partners III, Apax US VII, Apollo Investment Fund V, Blackstone Communications Partners I, Carlyle Partners III, Clayton, Dubilier & Rice Fund VII, Clayton, Dubilier & Rice Fund VIII, Draper Fisher Jurvetson Fund VII, INVESCO U.S. Buyout Partnership Fund II, Providence Equity Partners IV, Providence Equity Partners VI-A, TPG Partners III, TPG VI, Vestar Capital Partners IV and Warburg Pincus Private Equity X.

Princess is an investment holding company founded in 1999 and traded on the Frankfurt Stock Exchange and on the London Stock Exchange.