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Strat Partners, GSAM complete $350m recap of TCW/Crescent funds – exclusive

A group of secondaries firms purchased LP interests in two special situations funds for a single-digit discount to net asset value.

A group of secondaries buyers led by The Blackstone Group’s Strategic Partners and Goldman Sachs Asset Management has completed a $350 million recapitalisation of two TCW funds that are sub-advised by Crescent Capital Group, Secondaries Investor has learned.

The other buyers included Committed Advisors, Pomona Capital and Singaporean sovereign wealth fund GIC, according to three sources with knowledge of the situation. The deal closed at the end of 2014.

All five buyers declined to comment.

Crescent hired UBS last year to advise on the restructuring of the two special situations funds it sub-advises: $248 million, 2002-vintage TCW Shared Opportunities Fund IV and $510 million, 2005-vintage TCW Shared Opportunities Fund V.

Both Crescent and UBS declined to comment.

It is understood that Crescent and TCW merged in 1995 and announced their decision to separate in 2010. Investors agreed to allow Crescent to sub-advise the two funds once the spin-out was completed in 2011.

Limited partners in the funds include the Australia Post Superannuation Scheme, the Illinois State Board of Investment and Vancouver-based MJ Murdock Charitable Trust, according to PEI’s Research and Analytics division.

As part of the secondary recapitalisation, LPs in the two funds were offered the option to sell their stakes or to maintain their position and roll into a new vehicle, which serves as a new entity for the remaining assets in both Fund IV and V. Crescent will manage the new entity but it is unclear how the economic terms of the funds were reset.

The vast majority of LPs took the liquidity option, accepting an offer price that was a single-digit discount to net asset value (NAV), two sources said. The price is estimated it to have been roughly 96 percent of NAV.

The deal also included unfunded commitments in the form of a stapled commitment of primary capital and a recycling provision. It is understood the buyers agreed to recycle capital from future distributions, up to a certain level, back to Crescent, sources explained.

The commitments will help Crescent launch a follow-on fund in the future, when market conditions are more favourable, one source said. The firm considered launching another special situations fund in 2011 but the impact of its split from TCW was uncertain at the time. Since then its assets under management have nearly doubled to an excess of $16 billion.

Crescent was founded in 1991 and invests in senior bank loans, high yield bonds, mezzanine debt and distressed debt securities of mid-market companies, according to its website.

Its special situations team invests in distressed debt of mid-market companies and is led by managing directors Richard Stevenson and Jason Breaux, and vice-president Eric Hall, according to the firm’s website.