A July 5 article published by The Wall Street Journal Pro Private Equity titled “Fund Recapitalizations Grind to Halt as Pandemic Upends Valuations,” reports that the previously robust market for general partner-led secondary deals has been impacted by the coronavirus pandemic, quieting what had been the fastest-growing segment of the secondary market.
In the piece asset management partner Isabel Dische discusses how COVID-19 has caused a spike in the use of fund-level financing, such as preferred-equity transactions, and how some sponsors are using preferred equity as a bridge to help keep them capitalized during the downturn. These types of transactions allow private-equity funds to raise money after they have drawn all the capital from investors. Preferred equity “can be expensive capital,” but for many sponsors “it’s the best option they’ve got,” said Isabel. Some sponsors have been using preferred equity as a bridge to keep them capitalized until the GP-led market reopens and they can run a proper fund restructuring, she said.
Stay Up To Date with Ropes & Gray
Ropes & Gray attorneys provide timely analysis on legal developments, court decisions and changes in legislation and regulations.
Stay in the loop with all things Ropes & Gray, and find out more about our people, culture, initiatives and everything that’s happening.
We regularly notify our clients and contacts of significant legal developments, news, webinars and teleconferences that affect their industries.