European LP News, December

Caisse Closed to Private Equity

Caisse de dépôt et placement du Quebec, Canada’s largest pension fund, has slashed its alternatives exposure, selling part of its $800 million private equity portfolio to Swiss-listed Partners Group.

Partners paid $250 million for a package of funds. The price included a 5% discount on net asset value, according to the Wall Street Journal.

The sell-off makes little dent in the $130 billion of assets that Caisse manages, although private equity was among its best performers in 2010, returning 15% in the first half of the year.

While it is unknown which funds that Partners Group picked up, in Europe, Caisse has backed BC Partners, Accel Partners and AXA Private Equity.

The Journal reported in early October that Caisse is looking to sell off all of its private equity portfolio. —Alex Derber

Terra Firma May Tap LPs to Recover from EMI Deal

Terra Firma investors may be asked to dip into their pockets again after the private equity giant lost its fraud case against Citigroup over the $6.5 billion purchase of music label EMI.

EMI is currently worth half of its 2007 purchase price, but the Daily Mail reports that Terra Firma is determined to hold onto the company despite slashing the fair value of its investment to zero.

Terra Firma backer Canadian Pension Plan is thought to have approved the EMI purchase, but after court revelations that the private equity house forwent normal due diligence checks in its rush to buy EMI, even the most sympathetic limited partners may resist calls for further investment.

After alleging that Citigroup banker David Wormsley had tricked him into overpaying for EMI, Terra Firma boss Guy Hands had sought damages of up to $8 billion—cash vital for Terra Firma to meet its debt obligations.

Citigroup provided $2.6 billion to fund the EMI purchase, but with Terra Firma unlikely to meet its next covenant, the bank could take control of the music label and proceed to sell it off either whole or broken up.

Terra Firma is trying to renegotiate its debt with Citi, but relations soured following the fraud allegations, so there appears little prospect of the bank conceding much ground.

Warner Bros has emerged as the most likely buyer of the recorded music arm of EMI, while previous approaches have been made by Providence Equity Partners and Apax Partners. —Alex Derber

Permira’s Gains Boost SVG Capital

Big gains at Permira portfolio companies Hugo Boss and Valentino have helped boost net asset value by almost one-fifth at SVG Capital, Permira’s largest investor.

The third quarter gains were reflected in a 16% return on investment as SVG shares hit a two-year high, doubling the value of Coller Capital’s 18% stake in the fund-of-funds.

Improved operating performance caused SVG to write up many of its most valuable portfolio companies, such as Galaxy Entertainment, Arysta LifeScience and Hugo Boss. —Alex Derber

CDC Anchors Lok Fund Targeting India

U.K. government fund-of-funds the CDC Group has pledged $10 million to an Indian microfinance fund. The investment coincides with consultations by the government on reform of the development finance body, following criticism about the conduct of senior employees.

The fund, Lok Capital II, will support small banks and financial institutions that lend to small businesses and is targeting a first close of $52 million on its way to a full fund-raising of $82 million.

“India’s microfinance industry has huge potential with estimates putting the current annual microcredit demand in the country at around $22 billion,” Venky Natarajan, managing director of Lok Advisory Services, said in a statement. “But the supply from microfinance institutions was only about $7 billion last year.”

Along with the U.K.’s anchor investment, the fund has seen commitments from the International Finance Corp. and European development finance bodies.

It is the second fund from New York’s nonprofit Lok Foundation.

CDC’s investment is the largest so far in Lok Capital II and brings the development finance body’s total microfinance commitments to $120 million since 2003. —Alex Derber