Eaglehill seeks to cash out anchor LP Koch Industries from debut fund

  • Eaglehill hired Park Hill in August to explore options
  • Koch wants to get out of its LP stake in debut fund
  • Two Citi bankers raised debut fund in 2017

Eaglehill Advisors is working to replace its anchor investor in its debut fund, Koch Industries, in a secondary transaction, sources told Buyouts.

Eaglehill hired Park Hill Group in August to explore secondary options, Buyouts previously reported. Koch wants out of Eaglehill’s debut fund, which closed on $250 million in 2017, after one of Eaglehill’s two founders, Mike Zicari, suddenly left the firm last year. It’s not clear why Zicari departed.

Pricing on the anchor stake is higher than some secondary buyers felt was justified considering one of the founders left. Koch wants to get at least par for its stake, while buyers expect to see a discount on the stake, sources said.

Zicari and Jason Cunningham, both longtime Citi bankers, formed Eaglehill in 2014. Koch provided a $100 million anchor commitment to Fund I.

Eaglehill lends to North American middle-market companies backed by PE firms. One recent deal came in March when Eaglehill participated in financing Wind Point Partners’ acquisition of Ox Engineered Products, which makes sheathing and thermal insulation building products.

Jason Cunningham, Eaglehill Advisors,
Jason Cunningham, founder and managing partner, Eaglehill Advisors. Photo sourced from Eaglehill’s website.

It’s not clear whether Zicari’s departure triggered a provision that would enable investors in Fund I to immediately stop the GP from investing their money. The so-called key-man provision is generally triggered after one or more key executives leave a firm.

Most PE funds have 10-year fund lives plus two one-year extensions, though credit funds often have shorter terms. Eaglehill set up provisions if Fund I lasts into its extension periods, a source said.

For Eaglehill, the fund’s management fee would drop from 1.75 percent on invested capital during the harvest period to 1.25 percent on invested capital during the first one-year extension, Buyouts previously reported. If the fund was extended for another year, the fee would drop to 0.75 percent of invested capital.

Cunningham and a Koch spokesperson did not respond to a request for comment. A spokesperson for Park Hill declined to comment.

Update: This story was updated to clarify the rationale behind the proposed secondary transaction. 

Action Item: Check out Eaglehill’s Form ADV here: https://bit.ly/2jbW0Qk