Deutsche Bank‘s private equity unit is about to close a deal to restructure healthcare-focused Enhanced Equity Funds‘ two vehicles including its poorly performing sophomore fund, Secondaries Investor has learned.
DB Private Equity expects to close the deal this week in a process run by Park Hill, according to three sources familiar with the matter. The deal involves around $200 million of net asset value in Enhanced Equity’s 2005-vintage and 2010-vintage funds and follow-on capital will also be provided, two of the sources said.
Hamilton Lane and its clients account for around 70 percent of the two funds’ investor base by commitments, according to two of the sources.
Secondaries Investor understands most of the 10 assets held in the two funds will be moved into a new vehicle that will form Enhanced Equity’s third fund. At least two of the assets will not be moved into this new vehicle because they are expected to be realised outside of the restructuring processes.
PE Hub first wrote that DB Private Equity was the backer in the fund restructuring.
Enhanced Equity Funds is the private equity arm of New York-headquartered Enhanced Capital Partners. The unit’s debut vehicle, Enhanced Equity Fund, closed on $225 million and has exited five assets with four remaining: Aphena Pharma Solutions, MHS, NextCare and Triton Technologies, according to the firm’s website.
Enhanced Equity Fund II closed on $380 million and holds six assets including clinical laboratory services provider VantagePoint and primary and chronic care service provider WhiteGlove Health. As of March 2016 it had a 0.6x net multiple and a negative 21.1 percent IRR, according to online private equity marketplace Palico. Its sole exit was the 2013 sale of specialty pharmacy firm AcariaHealth to strategic buyer Centene Corporation.
In addition to Hamilton Lane, Los Angeles City Employees’ Retirement System and Public Employee Retirement System of Idaho have committed to both of Enhanced Equity’s funds, according to PEI data. LACERS committed $10 million to each vehicle, and Idaho committed $40 million and $20 million respectively.
Other limited partners in Fund II include Teachers’ Retirement System of Louisiana, which committed $30 million, Indiana Public Retirement System, which committed $12.5 million and fund of funds manager Private Advisors, which committed $10 million, PEI data shows.
The deal comes four months after Secondaries Investor reported DB Private Equity and Park Hill were closing a similar deal to restructure Swiss investment firm Zurmont Madison’s sole fund. That transaction involved moving at least three assets into a new vehicle to give additional time and to find exits and fresh capital.
DB Private Equity is investing its 2014-vintage DB Secondary Opportunities Fund III, which closed above its $1 billion target on $1.7 billion after eight months of fundraising, PEI data show.
DB Private Equity, Park Hill and Hamilton Lane declined to comment. Enhanced Equity Funds did not return a request for comment.