Adams Street leads consortium on ABS staple – exclusive

Adams Street Partners has led a group of at least three buyers who acquired stakes in ABS Capital Partners‘ 2009 and 2012-vintage funds and also committed to the Baltimore firm’s latest vehicle, Secondaries Investor has learned.

Credit Suisse ran a tender offer process to offer liquidity to investors in the $418 million ABS Capital Partners VI and $531 million ABS Capital Partners VII funds, according to two sources familiar with the deal. The transaction was worth around $150 million in total, with Adams Street the main buyer.

The secondaries to primary stapled ratio was about two to one, with the buyers committing to ABS Capital Partners VIII, according to one of the sources. Fund VIII launched in July 2015 and had raised $149.8 million of its $400 million by July this year, according to PEI data.

It is understood the deal closed in September.

“This is an example of a thought-leading GP sponsoring a liquidity solution for LPs who could not re-up in their new fund, while identifying buyers who were happy to support the new fund,” Mike Custar, managing director in Credit Suisse’s private fund group, told Secondaries Investor. He declined to comment on specifics of the deal, but added: “We believe this is how the secondaries market will continue to expand, as GPs take a more proactive role in managing natural attrition in their investor base by seeking creative alternatives to identifying replacement capital.”

While it is not clear which fund Adams Street used for the deal, it is understood the firm has finished investing from its Adams Street Global Secondary Fund 5, a 2012-vintage vehicle that closed above target on $1.05 billion. It is understood the firm will return to market with Fund 6 next year.

ABS’ Fund VI was 97 percent called and had a 1.0x return multiple as of 31 March, according to online private equity marketplace Palico, which noted its net internal rate of return was 0.0 percent as of 30 September 2015.

Fund VII was 81 percent called and had a 1.3x return multiple as of 31 March, with an 8 percent net IRR as of 30 September 2015, according to Palico.

Employees’ Retirement System of the State of Hawaii committed to both fund VI and VII, and other limited partners in the funds include Pennsylvania State Employees’ Retirement System and Maryland State Retirement and Pension System respectively, according to PEI data.

Bloomberg first reported that ABS was running a tender offer on Fund VI.

Stapled deals have attracted recent criticism from regulatory bodies due to perceived conflicts of interest – a criticism that may be warranted in some cases according to some industry participants. Molly Diggins, general counsel at advisory firm Monument, recently told Secondaries Investor general partners may be incentivised to mark the NAV of a portfolio at the lower end of the spectrum in stapled deals, particularly if the new capital is being used to seed a new fund.

ABS invests in later-stage growth companies in the business services, healthcare, media & information and communications technology. The firm was founded in 1990 and has $1.1 billion in assets under management, according to PEI data.

Adams Street declined to comment. ABS did not return a request for comment.