Castle Harlan to Explore Liquidity Options for Remaining Funds

  • Firm said to have decided against PJT, in talks with advisers
  • Offering would give executives new capital for deals

Private equity firm Castle Harlan is considering making changes to its remaining funds, allowing existing backers to exit as it seeks to bring in cash for new deals.

Executives told backers this month the firm may seek new investors for its 2003 and 2010 vintage pools so that it can make new investments, a spokesman for the firm said. Existing backers would be offered the chance to participate in the offering, retain their stake or sell out, the spokesman said.

No decision on whether to proceed has been made and further details won’t be forthcoming because of U.S. Securities and Exchange Commission rules on public marketing of fund investments, the spokesman said.

The firm is talking with several advisers about the mandate for the possible offering, the spokesman said.

Castle Harlan was previously working with PJT Partners Park Hill Group on the feasibility of the offering, said three people with knowledge of the matter. The New York-based firm decided to look for other advisers after the arrest of one of PJT’s executives on fraud charges, said two of the people, who asked not to be identified because the information is private.

PJT decided not to pursue a mandate after gauging investors’ appetite for committing to the funds, another person familiar with the situation said.

A spokesman for PJT declined to comment.

Fund Returns

Castle Harlan’s 2003 pool was generating a 15.2 percent of rate of return as of Sept. 30, 2015, putting it in the third quartile of similar funds raised that year, according to data compiled by Bloomberg. The 2010 pool was generating 26.4 percent rate of return as of the same date, putting it top quartile.

Andrew Casperson, a former executive at PJT’s Park Hill business who worked on fund modifications and restructuring, was arrested and charged with defrauding investors of $95 million in March. During its first-quarter results this month, PJT founder Paul J. Taubman said the the impact of the case on the firm was “extraordinarily modest,” resulting in a $3.3 million charge.

A number of private equity firms have looked to use the secondaries market to gain additional time or capital for investments. JC Flowers & Co. held talks with Coller Capital about a deal to recapitalize its 2006 fund, while Yucaipa Cos., led by billionaire Ron Burkle, is also holding talks with potential new backers.

Castle Harlan, which was founded in 1987, has not raised a dedicated pool of capital since 2010. CHI Private Equity, which included several Castle Harlan executives as staff members, abandoned plans to raise a $1 billion fund in 2015 after failing to gather sufficient commitments.

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