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Candover to wind down €3bn fund

The UK firm’s LP advisory board has moved to terminate the firm’s €3bn fund, which would keep €100m to help manage its sole portfolio company.

Candover Partners has moved a step closer to dissolving its 2008 fund, ending nearly a year of speculation over the fund’s fate.

The firm’s limited partner advisory board, which represents 70 percent of the fund in terms of commitment value, has backed a proposal to terminate the fund. The fund’s other LPs must approve the proposal, or further extend negotiations, by 8 January.

The California State Teachers’ Retirement System, the Alaska Permanent Fund and the Los Angeles Fire & Police Pension System are among the fund’s limited partners.

A statement from Candover explained that “investor commitments will be scaled back pro rata subject to an appropriate follow-on reserve of €100 million, which together with follow-on financing from the Candover 2005 Fund” will allow Expro, an oil and gas company both funds have invested in, to “take advantage of market opportunities”. 

The private equity firm’s listed parent, Candover Investments, will not contribute to the reserve.

The 2008 fund, which had raised €3 billion toward an initial €5 billion target, suspended investment activity in April following Candover Investments’ inability to honour its €1 billion commitment. Its liquidity issues were due in part to leverage on the fund, as well as an over-commitment strategy that relied on a constant stream of distributions.

“It’s terribly sad,” said one London-based market participant. “This is a business that has been going for 20 years and had a great reputation. People have been taken by surprise that it unwound so quickly.”

Analyst Henry Freeman at London-based investment bank Liberum Capital said in a client note this morning that the fund’s termination “should be viewed as positive news for [Candover Investments], putting the company in a much healthier position for the future”. It is the “last major remaining structural issue for the managers to address in order to ensure a future” for the listed company, he said.

Candover’s current team will remain intact and may consider raising a subsequent fund once its current issues have been resolved, according to a source close to the firm.