One of mainland China’s largest general partners has closed a restructuring on its crisis-era fund.
The remaining assets in Legend Capital Fund IV have been moved into a $200 million continuation vehicle backed by Hamilton Lane and other institutional investors, according to a statement obtained by Secondaries Investor. The vehicle has a duration of five years.
The deal gives Beijing-headquartered Legend Capital the opportunity to “maximise the value potential of the remaining portfolio” through active management, with the help of follow-on capital, the statement noted.
Campbell Lutyens advised on the deal with Ropes & Gray providing legal representation.
According to a source familiar with the transaction, the portfolio consists of 12 China-headquartered companies. A quarter of the $200 million is follow-on capital. The deal priced at a discount to net asset value.
“A lot of [Chinese companies] are really dependent on IPOs and the Hong Kong IPO market has been shut down for the last few years,” the source said. “The companies are decent but have struggled with exits.”
The follow-on capital will help investors overcome deadlock in relation to the portfolio companies, they added.
The transaction provided “flexibility for the GP to continue to build value in the companies without the time constraints of an expiring fund”, said another source with knowledge of the deal. [It] was structured to provide strong alignment and an attractive valuation for all parties.”
Founded in 2001, Legend Capital manages several renminbi- and dollar-denominated funds with total assets under management of around $7 billion, according to PEI data. The firm ranked 251st in the most recent PEI 300 ranking of the largest private equity firms.
LC Fund IV raised $350 million by final close in March 2008. Investors include Adams Street Partners and CDC Group, according to PEI data.
Hamilton Lane is targeting $3 billion for its fifth secondaries fund, which has been in market since the fourth quarter of 2018, Secondaries Investor reported.