LPs in Terra Firma Capital Partners’ second fund have agreed to grant the firm a two-year fund extension, PE Manager has confirmed.
The lifespan of Terra Firma’s second fund, a €2.1 billion, 2002-vintage, has been extended by two years to April 2016. It is understood 98 percent of LPs agreed to the extension in July, news of which was first reported by Bloomberg.
The extension should allow Terra Firma to maximize Fund II's returns ahead of two expected fundraises towards the end of 2014, one for a general private equity fund and one for a renewable energy infrastructure fund, according to a source familiar with the matter. At press time, it was unclear what size funds the firm plans to raise.
Terra Firma declined to comment.
Terra Firma will not charge its 1.5 percent management fee during Fund II's extension period. There are four investments left in Terra Firm’s Fund II; motorway services Tank & Rast; cinema group Odeon & UCI; energy generator Infinis; and aircraft leasing company AWAS. “It would be best to increase value rather than selling them now,” said a source familiar with the matter.
As a number of boom-year vintages creep closer to their investment deadlines, more fund mangers are likely to request additional time to deploy capital. Some requests will be accepted, with many funds featuring built-in extension options to their LPAs. Others, meanwhile, will be denied by today’s weary limited partners. In a past commentary piece, PE Manager argued there may exist a middle groundbetween the two outcomes.
Indeed the news comes shortly after the revelation that TPG received its own extension on its investment period by one year to February 2015. TPG received approval for more time to deploy its sixth fund, in part by offering to use 100 precent of transaction fees on deals done during the extension period to offset the management fee.