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Guy Hands’ Terra Firma holds first close on debut independent fund

1 Nov 2002

Terra Firma Capital Partners, Guy Hands' fledgling buy-out firm, has held a first close with E1bn of commitments for its first independent fund since spinning out from Japanese bank Nomura.

The fund has a target of E3bn and began fundraising around six months ago.

A spokesman for the firm said it hoped for a second close with another E1bn of commitments towards the end of the first quarter of 2003 and a final close around the middle of the year.

Guy Hands was the head of Nomura’s principal finance group, where he earned a glowing reputation for pioneering the securitisation of the cash flows of large-scale businesses in low-growth sectors, such as pubs.

He has already invested around E10m of his own money in the fund and committed to injecting one per cent of the final close. The firm’s staff have together now invested E100m.

Fund-raising for the firm has been difficult, reflecting both the prevailing market conditions but also a marked scepticism among many institutional investors towards private equity groups with a heavy emphasis on financial engineering over proven operational expertise.

Terra Firma is currently looking at a handful of potential investments in the UK and Germany but is unlikely to complete anything before the start of next year, the spokesman said. It will aim to make just two or three investments a year.

Over 30 institutional investors around the world, including NIB Capital Partners and CPP, the Canadian national pension fund, have invested in the fund. Nomura itself has agreed to invest ten per cent of the fund’s total capital.

The firm’s strategy is to focus on out of favour sectors and low growth companies in Asia and Western Europe.

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