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TH Lee megafund restructuring nears finish line

  • Fund VI LPs voting whether to sell or roll
  • Total deal valued just under $800 mln
  • Voting period ends this week

After a delay, the restructuring of Thomas H. Lee Partners’ credit-boom-era sixth fund is heading for the finish line.

LPs in the fund this week are voting on whether to sell their stakes in the pool or roll their interests with the manager into a continuation vehicle, two sources told Buyouts.

The voting, known as the election period, ends this week, the sources said. The Fund VI LP advisory committee already approved the proposed restructuring, one of the sources said.

The deal involves five portfolio companies from Fund VI, with a total value of just under $800 million, sources said. Current Fund VI LPs can choose to sell their interests at a price close to par value as of a reference date of Dec. 31, 2018, one of the sources said.

The continuation vehicle will have a five-year term, sources said.

The restructuring is led by Neuberger Berman, along with Coller Capital, GIC and BlackRock. Lazard is secondary adviser on the transaction.

TH Lee closed Fund VI on $8.1 billion in 2006. The fund was generating an 8.1 percent net internal rate of return and a 1.6x net multiple as of Sept. 30, 2018, a person with knowledge of the firm said.

For TH Lee, the Fund VI revamp has been in the works since last year. Secondaries Investor reported in February 2018 that the GP was in preliminary talks with the Fund VI LPAC on a potential secondary process.

The fund-restructuring process stalled earlier this year as buyers pulled back to consider repricing the deal. The deal had formerly been priced near par as of a reference date of Sept. 30, 2018, Buyouts reported.

The repricing was due to what sources called a material adverse event. Several sources said this was because of the declining performance of one of the assets in the portfolio, Univision Communications.

Another source said the delay related to Univision’s nine-month dispute with Dish Network. Univision had blocked some of its channels from appearing on Dish starting in June 2018. The two sides reached an agreement in March, according to a joint statement.

For the first quarter, Univision reported total revenue decreased 8.2 percent to $611.9 million from $666.2 million in Q1 2018. The company attributed declining revenue in its media networks to falling advertising, as well as lack of exposure on Dish, the company’s earnings report said.

Univision decided to sell its English-language digital assets in 2018 as part of a strategic review, the report said.

TH Lee’s restructuring is one of several high-profile GP-led fund restructurings on the market this year. Others include Ares Management, Oaktree Capital Group, Avenue Capital and Bain Capital Credit.

Update: This report was updated to include more updated performance information for Thomas H. Lee Fund VI. 

Action Item: Check out TH Lee’s Form ADV here: