PE HUB Wire Highlights, 7.5.18

Photo of Luisa Beltran, PE HUB Senior Editor, courtesy of Buyouts Insider.

SEC slaps THL over accelerated monitoring fees; Bankrupt Rockport to sell to Charlesbank; Dyal invests in HPS, Round Hill

Is anyone there, Hubsters? Happy post-July 4th.

Accelerated monitoring fees are back in the spotlight. The Securities and Exchange Commission has fined Thomas H Lee Partners LP more than $6.5 million for allegedly failing to properly disclose information about fees it collected from its portfolio companies. Between 2013 and 2015, THL received accelerated fees from its portfolio companies, once when it sold a company and four times upon the IPOs of the companies, the SEC said in an administrative filing dated June 29. The funds in question are Thomas H. Lee Equity Fund V LP, a 2000 vintage, and Thomas H. Lee Equity Fund VI LP from 2006.

“By engaging in a practice of negotiating and receiving accelerated fees from portfolio companies without adequately disclosing this practice to all of the funds’ limited partners prior to their commitment of capital, certain statements by THL to the funds’ limited partners were made misleading, and thus THL negligently violated Section 206(4) of the Advisers Act and Rule 206(4)-8 thereunder,” the SEC said.

The $6.5 million includes a $1.5 million civil penalty, the filing said. I’ve reached out to THL for comment.

Monitoring fees are a big deal in PE. GPs collect monitoring fees from portfolio companies for advisory and related services that they provide, Buyouts has reported. With acceleration, monitoring agreements that terminate before the end of their term get accelerated to full payment upon exit of the investment, Buyouts said.

Blackstone in 2015 paid $39 million to settle an SEC investigation involving accelerated monitoring fees, among other things. A year later, in 2016, Apollo Global Managementponied up $52.7 million after the SEC alleged that the firm misled investors and failed to protect fund clients from inappropriate expenses, Buyouts said.

Deals: Rockport, the bankrupt shoemaker, is moving forward with its sale to Charlesbank Capital Partners. Rockport filed for Chapter 11 in May; Charlesbank was named the stalking horse bidder. Rockport did launch a court-approved marketing process, with qualified bidders required to make their proposals before 5 pm ET on Friday, June 29. Rockport didn’t receive any competing bids in advance of the deadline. So, Rockport said it’s going with Charlesbank. The Wall Street Journal said the PE bid $150 million for the shoe company. Read our brief here.

On Tuesday, right before the July 4th holiday, Dyal Capital Partners, a division of Neuberger Berman, announced two deals. Dyal is taking a passive, minority stake in Round Hill Capital, a London real estate firm, and in HPS Investment Partners, a credit investment manager.


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