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Candover suspends 2008 fund investment, starts job cuts

The long-standing fixture of the UK buyout landscape has told its new teams in Asia and Eastern Europe to either raise their own funds or face closure, as the firm seeks to slash costs.

Candover, the 29-year old buyout firm, has written down the value of its portfolio by 50 percent and will temporarily cease investing from its 2008 vehicle as it discusses with its limited partners how to take the fund forward.

Candover Investments, the London-listed vehicle that owns Candover and makes majority investments in its funds, is “not currently in a position to make any further commitment” to Candover 2008, the group revealed in its annual results this morning.

In February the listed entity warned shareholders that its €1 billion commitment to the fund, which had by then attracted €3 billion in commitments, would have to be reduced “significantly”, prompting a revision of the fund’s investment strategy.

So far the fund has made just one investment, the £1.81 billion (€2.04 billion; $2.57 billion) take-private of Dutch oil services company Expro, in which Candover Investments invested £70 million.

The firm is now in discussions with the 2008 fund’s other LPs to decide whether to temporarily suspend its investment period.

Candover will reduce its headcount during 2009 as it seeks to put itself on a more secure financial footing.  It has effectively told its Asian and Central and Eastern Europe teams – both added within the last 12 months – to either raise their own funds and become self-financing or face closure.

Candover opened its Asian office in Hong Kong in February last year with the hire of 3i’s Jamie Paton. The firm’s CEE team, which comprises four professionals led by former JPMorgan Partners European head Lindsay Stuart, was unveiled in August.

Following a 90 percent decline in its share price since its high in September last year, Candover Investments now has a market cap of under £50 million.

The firm invested £168.8 million during 2008, and received distributions from realisations and refinancings of £47.4 million. It has an outstanding commitment of £90.4 million to the 2005 fund which may be drawn down over the next two years.

“The board’s main priority is to ensure that the company has the capital required to fund this commitment and to maintain headroom in the bond covenants,” said chairman Gerry Grimstone, in the firm’s results statement.