Arcus Infrastructure seeks replacement LPs for Fund 1

The London-based infrastructure firm is seeking a fund extension for its €2.2bn fund and needs enough LPs – existing or new – to agree.

Arcus Infrastructure Partners, a London-headquartered European infrastructure specialist, is attempting to replace limited partners in its 2007-vintage fund as it seeks an extension for the vehicle, Secondaries Investor has learned.

The investment manager wants to extend its 2007-vintage €2.2 billion Arcus European Infrastructure Fund 1 (AEIF 1) and is looking for secondaries buyers in a process run by Campbell Lutyens, according to three sources familiar with the matter. The process began last year.

“Most people knew this was coming,” one of the sources told Secondaries Investor. “[LPs] have been in it for a long time, most of them saw in the downturn [the fund] went backwards. There have been a few problems in the portfolio and it hasn’t run as they’d expected.”

The plan is to find a sole buyer who will lead the purchase, although multiple buyers may be sought depending on the size of the deal. AEIF 1’s limited partnership agreement is unusual because it specifies a liquidity solution would be offered for LPs wanting to exit the fund near the end of its agreed term, one of the sources said.

InfraNews first wrote about the process.

About 70 percent of LPs in the fund need to agree to an extension of up to 10 years, and some of the LPs are not willing to allow an extension. Less than half of the LPs need to be replaced for the extension to be granted, according to one of the sources.

Around $1.6 billion worth of infrastructure stakes traded last year, a 16 percent drop from the previous year, according to a report by Setter Capital released in February. Secondaries in the asset class can trade at up to a 25 percent premium, and the high prices for stakes should encourage LPs in AEIF 1 to sell, according to one of the sources.

AEIF 1 closed in November 2007 after six months of fundraising, according to Infrastructure Investor Research & Analytics. Investors in the fund include Swedish insurance firm Lansforsakringar, the UK’s Clwyd Pension Fund and Australia’s Queensland Investment Corporation.

The fund had a total enterprise value of €13.6 billion as of 30 September and holds at least six assets including port, train, toll and communications towers operators such as Euroports, one of the largest dry bulk port operators in continental Europe, and Angel Trains Group, one of the UK’s biggest train leasing companies, according to Arcus’ website.

Stakes in the fund have already traded hands. Last year, SL Capital Partners acquired interests in the vehicle in two separate deals from German asset manager KGAL and Finnish pension fund Keva, as Secondaries Investor previously reported. It was not clear if these transactions were related to the current process.

Arcus was formed in 2009 through a management buyout by senior officials of the European infrastructure team of Babcock & Brown, the now-defunct Australian financial services provider.

Arcus and Campbell Lutyens did not return requests for comment.