Goldman, Neuberger lead J.H. Whitney fund restructuring

  • J.H. Whitney Fund VII closed in 2010
  • Was targeting $700 mln
  • GP-led deals help bolster total activity

Goldman Sachs and Neuberger Berman are lead investors in the restructuring of J.H. Whitney & Co’s seventh fund, according to three people with knowledge of the deal.

The restructuring was in its election period, one of the people said. This is when LPs decide whether to approve the deal overall, and whether they want to sell their interests in the fund or stick with the GP in a new vehicle that houses remaining portfolio companies.

The exact structure of the restructuring process is unclear. Fund VII had gross asset value of about $702.4 million, according to J.H. Whitney’s most recent Form ADV filed March 30, 2016. The firm was targeting $800 million, the firm’s Form D filing from 2010 shows. How much it eventually raised when it closed that year is also unclear.

J.H. Whitney didn’t return a request for comment. Spokesmen for Goldman and Neuberger declined comment.

Lazard is leading the restructuring process, two sources said.

Sources said that earlier this year J.H. Whitney considered restructuring two funds but didn’t get enough support for the larger process. Eventually the firm decided to move forward targeting only Fund VII, sources said.

The firm in its current form has been around since 2004, but predecessor entities have been in business as far back as 1946, according to J.H. Whitney’s Form ADV. J.H. Whitney is owned by Paul Vigano, Robert Williams and Michael Salvator, the Form ADV said.

J.H. Whitney managed about $955.2 million as of Dec. 31, 2015, according to the Form ADV.

As of Dec. 31, 2015, J.H. Whitney VII was generating an 11.6 percent net internal rate of return; Fund VI was producing a 2.2 percent net IRR and Fund V was generating a 23.1 percent net IRR, performance information from Los Angeles City Employees’ Retirement System shows.

The firm lost at least two high-ranking executives in recent years. Brian Cherry, a senior managing director who was with the firm since 2000, joined Oak Hill Capital Partners in 2014. James Fordyce, co-chief executive of Stone Canyon Industries, left in 2014 after working at the firm since 1996.

GP-led processes like fund restructurings have helped bolster total deal activity in the secondary market, even as traditional fund sales activity falls.

Traditional fund sales were down 18 percent to $12.5 billion in first-half 2016 from $15.3 billion in first-half 2015. First-half direct secondaries increased 10.9 percent from the year-earlier period to $6.1 billion, secondary intermediary Setter Capital’s first-half activity report shows.

A Setter survey found that 49.3 percent of 83 respondents said more GPs had attempted to liquidate or restructure older funds in the first half compared with the year-earlier period.

Action Item: Setter Capital’s first-half report:

The Edouard Manet painting “Les Courses au Bois de Boulogne” is sold at Sotheby’s in New York on May 5, 2004, for $26.3 million. Photo courtesy Reuters/Chip East