Investors push for bigger concessions in PAI fund cut talks


Limited partners in PAI Partners’ €5.4bn buy-out fund have opposed the firm’s offer to let them halve their commitments, saying it does not go far enough. According to Reuters, a group of investors including the $123.8bn Canada Pension Plan Investment Board, the second-largest investor in the fund, are pushing for reductions of up to 63 per cent, which would cut the fund down to €2bn.

Investors first sought to reduce their capital commitments to the fund when Lionel Zinsou took over as CEO in July, replacing long-standing CEO Dominique Mégret and senior PAI executive Bertrand Meunier, who was expected to succeed him. Mégret had been with the company for 35 years and Meunier for 27. The shock departure of two of the senior management team triggered a key man clause, which allows investors to renegotiate their commitments to the fund.

PAI reportedly offered to reduce the fund to €3.1bn in September, then to €2.7bn last month in the face of demands for a 70 per cent reduction from CPPIB and other investors. Other sweeteners on the table include lower management fees and the reduction of the threshold of investor votes required to open or close a fund from 80 per cent to 60 per cent. PAI has invested €800m of the fund so far.

Other firms that have reduced fund sizes in the face of limited partners’ liquidity constraints and over-allocation to the asset class due to the denominator effect include Sun Capital, TPG and Permira.

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