Apax Partners will seek an investment extension for its €11.2 billion Apax Europe VII in the next few weeks as it plans to deploy a further €1 billion from this fund, according to a source familiar with the matter.
It is understood Apax will ask its investors for permission to extend the current investment period of Apax Europe VII by a year, to March 2015. The current investment period expires in March 2014.
Apax declined to comment.
The extension would allow Apax Europe VII, a 2007-vintage vehicle thought to be nearly deployed, the capacity to invest certain recycled capital as well as various reserves.
It is understood Apax has a provision in its fund agreement to deploy further capital however it is unclear how much of the €1 billion comes from recycled proceeds and how much would come from reserves.
Recycling proceeds is commonly written into LP agreements, according to one legal source. Additionally, fund agreements typically have an expense recycling provision, which is when GPs use capital from the fund for expenses. When they return that money to investors as part of an exit, that amount of the returned expenses can be redrawn, the source said.
Further, if a GP sells a portfolio company within 12 months of investing and returns the proceeds to LPs, most fund agreements state the GP can redraw the amount of the original investment, known as a ‘quick flip provision’, to deploy it again as long as it's within the investment period.
Apax’ extension request, which was first reported by Financial News, comes a few months after the firm closed the next in its fund series, Fund VIII, on $7.5 billion. As such, if Apax receives approval from LPs to lengthen the investment period of Apax Europe VII, it is likely the firm could deploy capital from both Apax Europe VII and Apax VIII in certain deals, according to the source.
Apax is not the only firm that has sought to extend its investment period in recent months. Over the summer, London-headquartered Bridgepoint secured a 12-month fund extension from investors for its current €4.84 billion Bridgepoint Europe IV. It asked for more time to invest after it became apparent it would not need to fund as many add-on acquisitions as initially planned.