By Sabrina Willmer
Of DOW JONES PRIVATE EQUITY ANALYST
Funds-of-funds group Key Capital Corp. is planning a spinout
from parent bank KeyCorp (KEY), according to people familiar with
the situation.
Key Capital is headed up by Bart Shirley, who joined KCC in 2002
to manage the private equity fund portfolio. Shirley couldn't be
reached for comment.
Although it is unclear what will happen to Key Principal
Partners Corp., one limited partner told LBO Wire that the
direct-investing arm is engaging in a separate spinout. The limited
partner said KPP is deciding on a new name. A KPP spokesman
declined to comment.
Key Capital invests primarily in information technology and
health-care venture-capital funds as well as middle-market buyout
vehicles. It also makes secondary purchases in venture capital,
buyout and mezzanine funds as well as funds of funds. It manages a
pool focused on emerging buyout managers with less than $400
million and marketing a first or second institutional fund.
Key Principal, which is led by John Sinnenberg, makes mezzanine
and equity investments in middle-market businesses, with a focus on
the manufacturing, distribution and service sectors. Key
Principal's investments include bottled-water company Ice River
Springs Water Co., plumbing contractor AMPAM Parks Mechanical and
radiator supplier Trantech Radiator Products Inc.
The KPP LP described the as a name change, considering the
business unit has been acting as if it were independent for a
while.
For example, when the firm raised its third direct investing
fund in 2006, it raised a parallel vehicle for the bank's
commitment, this limited partner said. KPP Investors III LP raised
$500 million with KeyCorp, providing a $300 million anchor
commitment, LBO Wire reported in 2006. It couldn't be determined
what will happen to the bank's investments.
People familiar with the deals say the moves to spin out the two
groups come from regulatory pressures to offload riskier assets
such as private equity. New regulations that cap investments in
private equity, hedge funds, real estate and other private-fund
businesses have banks thinking about what to do with their private
equity holdings. Even without regulatory pressures, some banks that
invested in buyout funds to win lending business have moved away
from that practice.
(Dow Jones Private Equity Analyst covers fund-raising and other
news of interest to the private-equity community.)
-By Sabrina Willmer, Dow Jones Private Equity Analyst;
Sabrina.Willmer@dowjones.com
(Laura Kreutzer contributed to this article.)