SVG closes second CFO fund on €500m

SVG Advisers, the fund management business of London-listed private equity fund of funds SVG Capital, has closed a new collateralised fund obligation (CFO) vehicle on €500m.

SVG Advisers has closed SVG Diamond II, a CFO investing in private equity funds, on €500 million ($592 million). The fund comprises €325 million of investment grade bonds and €175 million of preferred equity shares and was designed to attract international fixed income investors keen to gain exposure to private equity.  

Diamond II issued four tranches of bonds denominated in euros and US dollars, which were rated by three rating agencies in the AAA, AA, A and BBB categories.   

The fundraising was advised by Key Capital, the Dublin-based corporate finance adviser and placement agent. Key managing director Conor Killeen said ‘preparatory work’ for the fundraising had begun in the middle of last year, but the process was officially launched in the fourth quarter.

Diamond II is the successor to SVG Diamond, SVG’s first CFO fund, which closed on €400 million in September 2004. Andrew Williams, CEO of SVG Advisers, told PEO the first fund has to date either invested or committed over €350 million.

Diamond II will be predominantly focused on buyouts – in the form of both primary commitments and secondary interests – and will have an over-commitment facility of 140 percent, allowing for a target investment capacity of €700 million. Due to the existence of a warehouse facility, the fund has already agreed to acquire interests worth €62 million. Williams told PEO he expected the amount invested or committed to reach around €200 million by mid-April 2006.

“Having devoted several years to the development of the SVG Diamond structure, we are delighted that the launch of SVG Diamond II has been well received by fixed income investors,” said Williams. “This should deliver a high level of security, a low cost of debt capital and potential to produce superior equity returns.”

Williams told PEO the bulk of Diamond II’s commitments will be invested/committed over the next 12 months and that the firm would be likely to add another two investment professionals soon to its current ten-strong team.

In a statement, SVG Capital said it had subscribed for preferred equity shares in Diamond II representing a commitment of €60 million.