News & Analysis

Dyal shelves GP-led process on Fund III, closes $1bn securitisation

The Neuberger Berman unit has securitised future cashflows from underlying GPs' management fees to return distributions to its LPs.

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Dyal Capital Partners, one of the biggest names in the GP stakes business, has shelved its plans to run a GP-led secondaries process on its 2015-vintage fund.

The Neuberger Berman unit on Tuesday closed a $1 billion securitisation that will be used to return distributions to LPs in its Dyal Capital Partners III fund, according to a source familiar with the matter. The securitisation bundles future cashflows from the management fees of the fund’s 10 underlying GPs and was backed by 20 investors, mainly large US insurance firms.

Dyal had been working with advisor PJT Park Hill on a potential secondaries process as of March, sister publication Buyouts reported. It is unclear how far that process progressed.

Fund III holds minority stakes in firms including Vista Equity Partners, Silver Lake and HIG Capital.

Dyal initially sought $500 million for the securitisation and had as much as $1.5 billion of interest, the source added. The bonds, which were rated “A-” by Kroll Bond Rating Agency, pay a 4.4 percent coupon per annum for 10 years with a maximum of 20 years.

Goldman Sachs advised on the process, which was a private placement under section 42 of the Companies Act, 2013. The structure is non-recourse in that the underlying GP stakes cannot be claimed by the lenders in the event the securitisation does not pay out.

Reuters first reported on Dyal’s securitisation transaction.

Fund III is a $5.3 billion vehicle that closed in 2017 after three years of fundraising, according to PEI data. The vehicle had already made investments in six GPs at the time of closing, including EnCap Investments, Starwood Capital Group and KPS Capital Partners, according to a statement about the fund’s close in 2017.

Cerberus Business Finance, Platinum Equity, Energy Capital Partners and Sixth Street Partners are also understood to be an investment held in Fund III.

Secondaries Investor understands that Dyal will continue to consider GP-led secondaries processes, such as strip sales, as options to provide liquidity to its LPs.

A spokesman for Dyal declined to comment. A spokeswoman for PJT Park Hill did not return a request for comment.