Limited partners in Meridiam funds have completed a major sell down of their interests, while a complex sale of shares linked to a EUR 184.7m performance fee has also been approved, according to sources and documents.
The sale of shares in Meridiam’s first two funds – which largely hold stakes in PPPs – was approved at a general meeting last month attended by its limited partners as well as representatives from the Paris-headquartered manager, headed by its CEO and founder Thierry Deau.
The process – codenamed Project Louvre – included the sale to undisclosed investors of around EUR 200m LP interests in the manager’s first fund, Meridiam Infrastructure (SCA) SICAR, and EUR 100m of commitments in the second fund, Meridiam Infrastructure Europe II (SCA). Meridiam itself approved the share sales at the meeting.
Ran by Campbell Lutyens and Clifford Chance, the transaction involved investors bidding for LP commitments in the two funds based on their December 2018 fair value. The sale completed at a low double-digit premium to the fund’s fair value, sources said.
The fair value of the first fund – which owns stakes in 11 projects, including phase two of the Nottingham Tram PPP, the A5 highway in Germany and the Miami Port Tunnel – stood at EUR 1.39bn at the end of December, according to its annual accounts, compared to EUR 546.5m at final close in 2008.
The fair value of the second fund was EUR 1.03bn, compared to EUR 935m when the fund reached final close in 2012, the accounts also show.
The second fund, which has 21 investments, owns stakes in the EUR 1.5bn Nîmes-Montpellier Bypass HSR PPP, Poland’s A2 Swiecko – Nowy Tomysl Motorway PPP and Finland’s E18 Koskenkyla to Kotka Motorway Extension PPP.
Also as part of Project Louvre, last month’s board meeting approved the sale by Meridiam and other unnamed investors – but believed to include the EIB – of some of their own shares in the first fund.
The managers and these investors received these shares in the fund last December as their performance fee payment.
They were deemed last October to be eligible for this performance fee as the 25-year fund had met the requirement of hitting its 7% IRR hurdle rate by its twelfth year.
Having hit the 7%, the manager and these investors were eligible to receive 20% of the fund’s NAV minus 4.7%. According to Meridiam Infrastructure (SCA) SICAR’s accounts filed last week, this totalled EUR 184.7m.
As part of this process, last December Meridiam and the unnamed investors received class A and C shares worth EUR 184.7m in the first fund. At the general meeting last month the sale of some these shares was approved.
The remaining A and C shares – and hence Meridiam and the investors’ crystallisation of their performance fee – could be sold over a phased period into the future. Alternatively, they could be held until the fund matures.
The Project Louvre process followed the sale last June of around 25% of LP interests in Meridiam’s first fund to Blackstone’s Strategic Partners at a premium to fair value of at least 12%, sources said.
The deal netted exiting investors a 2.5x return on invested capital, according to a statement published by Meridiam at the time.
The European Investment Bank – one of the investors to partially exit its stake in Meridiam Infrastructure(SCA) SICAR last June – sold its EUR 50m commitment in Meridiam’s second fund, according to sources.
Meridiam offers LPs in its latest funds the right to sell commitments periodically. This right kicks in seven years after the fund’s initial fundraising close.
Meridiam and Campbell Lutyens declined to comment. The EIB did not respond to requests for comment.