JC Flowers Said to Hold Fund Recapitalization Talks With Collerby
Flowers working with Credit Suisse Group to find new backers
Pool exposed to several faltered deals, including MF Global
Coller Capital Ltd., the U.K.-based investment group, is in talks to lead a recapitalization of JC Flowers & Co.’s underperforming 2006 fund, people with knowledge of the matter said.
Should an agreement be reached between the two parties, investors will be made an offer for their stakes in the pool, said the people, who asked not to be identified because the information is private. No price has been agreed and Flowers may still decide to halt the deal, the people said.
A recapitalization would give existing backers the option to exit the fund, which has exposure to several faltered deals including bankrupt derivatives broker MF Global Holdings Ltd. It would also rule them out of committing to an extension of the fund’s lifespan, while waiting for the remaining deals to be sold.
Flowers is not the first well-known firm to offer long-standing backers an exit. Terra Firma’s founder Guy Hands also hired Credit Suisse last year to look into offering investors the chance to cash out of its 2007 pool, people with knowledge of the matter said at the time. That fund has struggled to generate returns after losing 1.7 billion pounds ($2.4 billion) on its investment in music publisher EMI Group Ltd., after Citigroup Inc. seized control of the company in 2011.
Flowers’s 2006 fund is generating a negative return of 12.4 percent, according to data compiled by Bloomberg, putting it among the bottom quartile of funds of a similar size and region raised that year. The firm sold the fund’s stake in retirement-savings provider Ascensus Inc. in September last year for $750 million, which generated a profit, the people said.
Representatives for JC Flowers and Coller declined to comment.