Silver Lake heads for big fundraising haul as market slows

Silver Lake, one of the few brand-name managers expected to raise its fund amid the economic downturn, could collect at least $10 billion over the next two months, sources told Buyouts.

The haul would reinforce an expectation that, while private equity fundraising is expected to slow to a crawl in the pandemic-inspired market dislocation, brand-name firms will still be able to attract capital from LPs.

Silver Lake started raising Fund VI earlier this year. Fund VI had not settled on a final target, but sources have said the fund will try to raise at least $16 billion.

Park Hill Group is working as placement agent on the fundraising.

The initial fundraising haul is expected to be at least $10 billion and will come mostly from existing investors, with some new limited partners in the mix, the sources said. A Silver Lake spokesperson declined to comment.

“There’s some big investors in there writing big checks,” said a LP who is exploring a commitment to the fund.

Silver Lake closed its last flagship fund on $15 billion in 2017. Fund V was producing a 12.04 percent internal rate of return and a 1.1x multiple as of June 30, 2019, according to performance information from Washington State Investment Board.

While fundraising is off to a strong start, it could become more challenging, as Silver Lake has a few investments especially vulnerable to the covid-19 lockdown, such as entertainment companies Endeavor Group and AMC Entertainment.

Standard & Poor’s downgraded AMC Entertainment’s credit rating earlier this month with the expectation the company’s 630 locations would have to remain closed beyond June. Silver Lake invested $600 million in the company in 2018.

AMC had to temporarily shut down its locations in March due to the covid-19 outbreak. S&P said AMC, which is also backed by China’s Dalian Wanda Group, may not have enough cash to cover loss of revenue, according to a ratings statement April 3.

S&P expects a liquidity shortfall for AMC in the next six months without additional financing, and also sees the potential for a distressed debt exchange over the next six months, the statement said.

The ratings agency also dropped Endeavor’s credit rating earlier this month. Endeavor owns a talent agency, event hospitality business and UFC, a mixed martial arts events company. Silver Lake formed Endeavor in 2014 by combining talent agency WME and IMG Academy.

Also this month, Silver Lake and Sixth Street Partners invested $1 billion in home rental company Airbnb.

Action Item: Check out Silver Lake’s Form ADV here: https://bit.ly/2xo2dAg