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KPS and Graphite Capital offer top-up funds to investors

26 Aug 2009

Two major private equity groups are raising top-up funds, according to the Wall Street Journal.

New York’s KPS Capital Partners is seeking $800m to enhance the buying power of its third fund, KPS Special Situations III. The fund wrapped up at $1.2bn in 2007.

In London, meanwhile, private equity group Graphite Capital Management is expecting to raise £30m (€34.2m) to back a fund of £555m (€632.5m) that closed in 2007.

Each top-up fund was raised for different reasons, the report said. While KPS told investors the additional money would allow them to take advantage of unprecedented opportunities resulting from the economic downturn, Graphite said it wished to finance larger equity contributions in deals now that debt markets have taken a plunge. Graphite also wants to back larger deals without exceeding limits on the amount of equity it can invest in a single transaction.

While the report said top-up funds like these are increasing in popularity, they are not a new concept. In 2005, CVC Capital Partners raised €4bn to top up its CVC European Equity Partners IV, a €6.5bn buy-out fund closed by the firm earlier that year.

The report pointed out that times have changed, however, and these funds may not receive the same positive reception they did four years ago.

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