Quarter End Review - 31 March 2008
May 19 2008 - 10:18AM
UK Regulatory
RNS Number : 7503U
Bear Stearns Private Equity Limited
19 May 2008
Bear Stearns Private Equity Limited ("BSPEL")
31 March 2008 Quarter End Review
Objective
BSPEL seeks to opportunistically build a well-balanced, diverse, global private equity portfolio through secondary investments,
co-investments, and selective primary fund allocations.
Launched - 30 June 2005
Company Summary
Equity Shares Zero Dividend Packaged Units
Preference Shares
Net Asset Value ("NAV") US$1.83 50.42p US$2.83
per share
No. of shares in issue 260.27 mm 59.20 mm -
Currency of Quotation US$ £ Sterling £ Sterling
Ticker BPLE BPLZ BPLU
Sedol B07V0H2 B07V0R2 B07V102
ISIN GB00B07V0H27 GB00B07V0R25 GB00B07V1026
Market Makers Cazenove ABN Amro Collins Stewart
Collins Cazenove Dresdner
Stewart Collins Stewart HSBC Bank
Dresdner Dresdner
HSBC Bank HSBC Bank
Winterflood
All figures as at 31 March 2008.
Company Description
Bear Stearns Private Equity Limited ("BSPEL" or the "Company") is a London Stock Exchange listed investment company that seeks to invest
with the world's leading private equity fund managers. BSPEL invests in private equity partnerships and direct investments primarily in
Europe, North America, and Asia. BSPEL pursues the following strategies to meet its investment objectives:
* Acquires secondary portfolios of direct investments, significantly invested partnership investments, and partially drawn
commitments, in order to accelerate NAV development
* Obtains exposure to individual companies by co-investing alongside private equity sponsors in companies that offer the potential
for substantial equity appreciation
* Opportunistically invests in buyout, venture capital, and other special situations funds and investments throughout the world
based on attractive transaction values, advantageous market conditions, and compelling risk-adjusted return potential
* Diversifies its portfolio by manager, industry, geography, investment stage, and vintage year
The Company's capital structure consists of two classes of shares: Equity Shares and Zero Dividend Preference Shares ("ZDP Shares").
Manager's Comments
Performance Through 31 March 2008
NAV of the Equity Shares has grown 79.4% since BSPEL's inception on 30 June 2005.
The Company's unaudited net asset value ("NAV") per Equity Share increased from $1.70 at the beginning of the quarter to $1.83 as at 31
March, representing an increase in NAV of approximately 7.6% for the quarter. The unaudited NAV of the ZDP Shares also rose during the
quarter, improving from 49.54p per share to 50.42p per share. Capital calls of $25.5 million outweighed distribution activity of $8.5
million over the quarter, although distribution activity since the quarter-end has increased.
During the quarter, BSPEL's Equity Shares reached an intra-quarter high of $1.57 per share. However, following the JPMorgan Chase & Co.
proposed merger announcement with The Bear Stearns Companies Inc., BSPEL's Equity Shares declined and ended the quarter unchanged at $1.49
per share. The stock has appreciated since quarter-end and traded at $1.68 as at 6 May 2008. This represented a 2.4% discount to the most
recently released NAV of $1.72 per share and placed BSPEL among the best performing listed private equity vehicles. BSPEL's Equity Share
price has risen 11.3% since 30 June 2007 versus a 19.1% decline in the LPX® Composite Index(1) over the same period.
BSPEL's portfolio benefited from positive performance across several investment strategies and geographic regions. In particular, the
significant exposure to special situations funds, which include mezzanine and distressed/turnaround strategies, proved to be a strong
counter against recent market turbulence. The portfolio's focus on both non-US investments and on the smaller end of the buyout market also
led to positive performance in a difficult market. Of particular note, BSPEL recently received a significant distribution from the sale of
Arysta LifeScience Corporation, resulting in greater than a 2.5x gain in less than a year, and a NAV gain of approximately $8.5 million. In
addition, the Company maintains significant Euro exposure and benefited from its continued appreciation against the US Dollar.
Due to various stresses in the global economy, BSPEL's real estate holdings, which comprise approximately 3.0% of private equity NAV,
continued to show weakness. Additionally, BSPEL's position in SCAN Geophysical, a publicly listed stock, lost significant market value when
it announced further delays in the delivery of new seismic acquisition vessels.
Overall, the Manager remains pleased with the continued performance of the portfolio. BSPEL's portfolio emphasises lower middle market
buyout and special situations funds - strategies that are somewhat insulated against the current credit tightening and economic slowdown.
Furthermore, the Company has avoided significant exposure to those private equity strategies that it believes are most susceptible to
various stresses in the global credit markets, including large cap US and European buyout and real estate funds.
1. See Listed Private Equity Index at www.lpx.ch. The LPX® Composite is a global Listed Private Equity (LPE) index with a broad number
of constituents. The index is well diversified across regions and LPE investment styles and represents the development of all LPE companies
covered by LPX that fulfill certain liquidity constraints.
Data as at 31 March 2008
Summary of Portfolio
as at 31 March 2008
Number of Funds 100
Buyout Funds 47
Special Situations 23
Venture Capital 23
Real Estate 7
U.S. Funds 61
Non-U.S. Funds 39
Co-investments 7
Source: Manager
Fund total includes 54 private equity fund interests (12 of which were already held by BSPEL) indirectly owned through the purchase of
secondary interests in Private Equity Access Fund II Ltd., Bear Stearns Global Turnaround Fund, L.P., Bear Stearns Private Opportunity
Ventures, L.P. and BoS Mezzanine Partners Fund, L.P.
Balance Sheet Information
as at 31 March 2008
Investments at Market Value US$478.2 mm
Bank Deposits US$60.5 mm
Net Asset Value US$536.1 mm
Source: Manager
Fund Level - Investment Strategy1
Leveraged Buyout 54.6%
Special Situations 31.3%
Venture Capital 11.1%
Real Estate 3.0%
Fund Level - Investment Type1
Secondary 62.6%
Funded Primary 18.1%
Co-Investments 12.5%
Primary 6.8%
Fund Level - Vintage Year1,2
1997 1.9%
1998 0.1%
1999 2.0%
2000 17.7%
2001 10.4%
2002 1.7%
2003 6.0%
2004 1.7%
2005 25.0%
2006 23.5%
2007 10.0%
Company Level - Geography1
Europe 54.4%
North America 26.6%
Asia 8.4%
Other 10.6%
Company Level - Industry Diversification1
Consumer Discretionary 17.1%
Industrials 14.9%
Media 13.5%
Financials 12.4%
Health Care 11.4%
Information Technology 8.7%
Materials 7.0%
Consumer Staples 6.8%
Energy 3.7%
Telecommunication Services 2.6%
Utilities 1.9%
1 The diversification charts above are based on Net Asset Value as at 31 March 2008 and use underlying company-level and fund-level
values. In addition, they include 54 private equity fund interests indirectly owned through the purchase of secondary interests in Private
Equity Access Fund II Ltd, Bear Stearns Private Opportunity Ventures, L.P., Bear Stearns Global Turnaround Fund, L.P., and BoS Mezzanine
Partners Fund, L.P.; BoS company-level exposure includes estimated pro rated fund-level leverage.
2. Excludes co-investments and debt-related strategies.
Source: Manager.
Investment Activity
During the quarter, the Company committed $48.9 million to 5 private equity fund investments. BSPEL focused its investing efforts on
expanding into strategies that may outperform in stagnant economic environments, as well as on acquiring assets in regions that may exhibit
more attractive growth characteristics in the near term. BSPEL expanded its global footprint to include more significant allocations to the
Middle East and Asia and believes it will benefit from growth and activity in those regions.
Secondary Commitments
BSPEL completed three secondary investments over the period, representing approximately 65% of the capital committed during the quarter.
The Company invested in Leeds Equity Partners IV, LP, a fund that focuses on investments in the education, training, and business services
industries. BSPEL invested in Bear Stearns Private Opportunity Ventures, LP, a fully invested, 2000 vintage year private equity fund of
funds. BSPEL was able to acquire this interest at a significant discount to unrealised value. The Company also made a significant investment
in Global Opportunistic Fund, which invests in equity and equity related IPO and pre-IPO securities across the Gulf Cooperation Council
countries. These investments were approximately 95% funded at close with seasoned assets.
Primary Commitments
The Company made two primary commitments during the quarter, both of which were 'funded primary' commitments with significant amounts of
capital already drawn. BSPEL committed capital to Hupomone Capital Fund, L.P., a lower middle market fund that focuses on China and
China-centric companies. At quarter end, this investment was approximately 60% drawn. BSPEL also committed capital to Global Buyout Fund,
L.P. This was completed in conjunction with the secondary investment in Global Opportunistic Fund, and at quarter end this investment was
over 35% drawn.
Upcoming Transaction - Macquarie Private Capital Group
On 18 February 2008, BSPEL announced that it had signed a conditional agreement to acquire all of the issued and outstanding stapled
securities of Macquarie Private Capital Group ("MPCG") in an all cash take-private transaction valued at AUD$115.5 million. MPCG is an
Australian Stock Exchange listed private equity fund (ASX: MPG) that invests in a broad range of unlisted companies and assets. Its
portfolio consists of exposure to 44 private equity fund managers and over 300 underlying portfolio companies.
The acquisition will continue to enhance BSPEL's geographic diversity and position its portfolio to capitalise on several favourable
current macro trends in the Australian and Asian markets. With approximately 62% of the underlying MPCG portfolio companies located in
Australia and Asia, the transaction will significantly enhance BSPEL's exposure to those regions. 14% of the underlying companies are in
Europe, with the remainder located in North America. The transaction is expected to close in June 2008.
Market Commentary
The quarter ended 31 March 2008 witnessed continued volatility and uncertainty amid a prolonged credit contraction. As liquidity issues
become more pronounced across the globe, the Company continues to observe an increase in unique secondary market deal flow. The Manager
believes that BSPEL's diverse investment mix that emphasises lower middle market buyout and special situations funds as well as its strong
pipeline of investments will continue to generate positive performance in the current environment.
The Bear Stearns Companies Inc. - Recent Events
On 24 March 2008, JPMorgan Chase & Co. (NYSE: JPM) and The Bear Stearns Companies Inc. (NYSE: BSC) announced an amended merger agreement
regarding JPMorgan Chase's acquisition of Bear Stearns. For further information on the merger, please visit www.bearstearns.com.
Company Actions
On 7 April 2008 and 11 April 2008, the Company sold from treasury 17,847,750 and 5,780,346 redeemable participating preference shares of
1 pence each designated as Equity Shares. The Equity Shares were each sold for cash at $1.72 and $1.73, respectively, and rank pari passu
with the existing Equity Shares in issue. As a result of the sale, the Company holds 1,397,764 Equity Shares and 274,822 redeemable
non-participating preference shares designated as zero dividend preference shares in treasury.
On 3 April 2008, BSPEL's Board of Directors announced that the Company's formal fundraising announced on 11 March 2008 would be
postponed pending the completion of JPMorgan Chase & Co.'s (NYSE: JPM) acquisition of The Bear Stearns Companies Inc. (NYSE: BSC).
On 2 May 2008, the Company issued 8,743,857 redeemable participating preference shares of 0.01 pence each designated as Equity Shares.
The Equity Shares were issued for cash at $1.75 each and will rank pari passu with the existing redeemable participating preference shares
in issue.
Contacts - Investment Manager
Troy Duncan
US (212) 272-9959
tduncan@bear.com
Rosemary DeRise
US (212) 272-8756
rderise@bear.com
Bear Stearns Asset Management Inc.
237 Park Avenue
New York, NY 10017 USA
BSPEL is managed by Bear Stearns Asset Management Inc. ("BSAM Inc."), a wholly-owned subsidiary of The Bear Stearns Companies Inc. BSAM
Inc. currently manages private equity portfolios that include over 175 separate private equity funds with total commitments of approximately
US $2.6 billion.
The Bear Stearns Companies Inc. (NYSE: BSC) serves governments, corporations, institutions and individuals worldwide. The company's core
business lines include institutional equities, fixed income, investment banking, global clearing services, asset management, and private
client services.
JPMorgan Chase & Co. (NYSE: JPM) is a leading financial services firm with assets of $1.6 trillion and operations in over 60 countries.
The firm is a leader in investment banking, financial services for consumers, small business and commercial banking, financial transaction
processing, asset management, and private equity.
Board of Directors
Chairman
Trevor Ash (Guernsey Resident)
Members
John Loudon (UK Resident)
Troy Duncan (US Resident)
Christopher Paul Spencer (Guernsey Resident)
All of whom may be contacted through
St Martin's House
Le Bordage
St. Peter Port
Guernsey GY1 4AU
SECRETARY, ADMINISTRATOR AND REGISTERED OFFICE
HSBC Management (Guernsey) Limited
St Martin's House
Le Bordage
St. Peter Port
Guernsey GY1 4AU
AUDITOR
KPMG Channel Islands Limited
2 Grange Place
PO Box 235
St. Peter Port
Guernsey GY1 4LD
SOLICITOR
Herbert Smith LLP
Exchange House
Primrose Street
London EC2A 2HS UK
REGISTRAR
Capita IRG (CI) Limited
1 Le Truchot, 2nd Floor
St. Peter Port
Guernsey GY1 4AE
This document may only be issued to or passed on to persons to whom it may be lawfully communicated pursuant to the Financial Services
and Markets Act 2000 (Financial Promotion) Order 2005, or otherwise only to professional clients and eligible counterparties and should not
be used for the purpose of an offer or solicitation in any jurisdiction or in any circumstances in which such offer or solicitation is
unlawful or unauthorised. In addition, this document may not be given to a U.S. citizen or resident who is not a "Qualified Purchaser"
within the meaning of the U.S. securities laws.
This document is issued on behalf of BSPEL and has been approved by Bear Stearns Asset Management Limited, which is Authorised and
Regulated by the Financial Services Authority ("FSA") in the United Kingdom. The information in this document is provided solely for
information, does not constitute investment advice or personal investment recommendations, and is neither an offer to buy or sell, nor a
solicitation to buy or sell, any investments or units or shares in BSPEL. To the extent that this document is issued in the United Kingdom,
it is being issued to persons who are professional clients or eligible counterparties for the purposes of the FSA's rules. Past performance
is not necessarily a guide to future performance.
Some information contained in this document may have been received from third party or publicly available sources that we believe to be
reliable. We have not verified any such information and assume no responsibility for the accuracy or completeness thereof. The information
stated and opinions expressed constitute best judgment at the time of publication, and are subject to change without prior notification. The
price of units or shares (and the income from them) can go down as well as up and may be affected by changes in rates of exchange. An
investor may not receive back the amount invested. Current tax levels and reliefs are liable to change and their value will depend on
individual circumstances. The market prices of units and shares in BSPEL do not necessarily reflect their underlying net asset value.
© Bear Stearns Asset Management. All rights reserved. No information in this document may be reproduced or distributed in whole or in
part without the express written prior consent of Bear Stearns Asset Management.
END
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