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Candover LPs approve fund suspension, fee cut

As it looks to gain ‘firm financial footing’, Candover will suspend its 2008 buyout fund’s activities for up to six months and has confirmed its strategic review could result in selling the firm.

Beleaguered buyout firm Candover has officially suspended investments from its 2008 Fund and agreed to a reduced fee structure with the fund’s limited partners.

The company’s board “is committed to putting the company on a firm financial footing so that the value in our funds, including Candover's share of the carried interest in those funds, can be maintained and realised for shareholders. We have now reached formal agreement with the limited partners of the 2008 Fund for that fund to suspend its investment activity for up to six months while we explore all the strategic options available and continue to stabilise our financial position,” Gerry Grimstone, Candover’s chairman, said in a statement.

Those options may include selling the business, though Candover stressed there can be no certainty over the outcome of any potential take-over discussions.

Additionally, the firm said it had agreed with the 2008 Fund’s LPs that during the six-month “standstill period”, it will charge fees based on the fund’s existing portfolio company, Expro International, rather than on the total commitments made to the fund.

Candover has written down its Expro investment by 50 percent. It paid £70 million for a 40 percent stake in the oil and gas services company as part of a £1.8 billion consortium deal led last year.

In early March, Candover said it would embark on a strategic review following year-end results which saw Candover Investments, its listed fund of funds vehicle and parent company, slash the value of the quoted fund's portfolio by about 50 percent and temporarily suspend Fund 2008’s investment activities.

The listed fund had said in February it would have to “significantly” reduce its €1 billion commitment to Candover’s 2008 Fund, which had raised €3 billion of its initial €5 billion target. Candover subsequently began talks with limited partners as to reducing the fund’s size as well as revising its investment strategy “in light of both a smaller fund and the significant changes in the global economy in the last six months”, the firm said at the time.

A dramatic decline in Candover Investments’ share price, which between October and February lost around 84 percent of its value, has been linked to concern over its over-commitment strategy. Many listed vehicles, including Permira investor SVG, have pursued such a strategy, whereby the investor’s ability to honour its capital calls is reliant on receiving ongoing distributions from existing commitments, which in the current market have slowed considerably.

Candover Investments' share price has been climbing since Friday, when it was revealed Candover had retained Goldman Sachs to sell Wood Mackenzie, an energy research company on which Candover has already recouped its initial investment. At press time shares in Candover Investments were trading at 131 pence per share, up nearly 22 percent from their opening price and giving it a market capitalisation of roughly £29 million.

Candover did not immediately return a request for comment.