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Q3 2020 - (released November 2020)

SA's quarterly Private Equity & Venture Capital magazine

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Local news

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In mid-September, PAPE Fund 3, the mid-cap South African private equity fund, announced the successful acquisition of 45% of the equity in the DDS Group of companies, a leading African beverage dispensing and refrigeration services provider. The DDS Group of companies provide beverage dispensing and refrigeration services on behalf of multinational distributors, as illustrated by the servicing of draught beer installations and coffee machines found in bars and restaurants. DDS also specialises in the sale, installation and servicing of refrigeration systems, ventilation systems, cold rooms and air conditioning units, as well as the sale and distribution of spare parts. PAPE Fund 3 has also provided loans to key members of the management team, to increase their equity stakes in the business.

 

Lelo Rantloane, CEO of Ata Capital, has been appointed Chairman of SAVCA. The Industry lobby group also announced that two new directors have joined the SAVCA board: Natalie Kolbe, Partner at Actis and Sthembile Nkabinde, Founder and CEO of Khulasande Capital.

 

Vantage Capital, Africa’s largest mezzanine fund manager, announced in early October that it has made a $28m equity investment to acquire a significant minority shareholding in the Cliniques Internationales du Maroc Group.

The business was founded in 1994 by Professor Assad Chaara, an internationally renowned cardiologist who pioneered coronary angiography and catheterisation in Morocco, and the company has since grown into one of Morocco’s leading healthcare groups.

International news

The New York Post reports that the prospect of a Joe Biden presidency has large swaths of corporate America scared, and none more so than the whipping boys who run private equity businesses.

If you read up on the exploits of the big PE firms — Blackstone Group, KKR, Carlyle Group, Apollo, etc. — in the liberal media, you would think that the guys running these outfits are modern-day robber barons. For every 10 success stories where workers’ jobs were saved, there is breathless coverage of one-off disasters (read up on Toys ‘R’ Us).

This is why, during every presidential election — and this one is no exception — PE becomes a target of progressives looking to give some opium to the masses by drumming up class warfare. They highlight allegedly unfair tax breaks and claim that PE destroys jobs. (Ed’s note: this story was sourced while Catalyst was being put to bed and the polls all had the blue wave crashing over the US, but Ed thinks Trump will surprise pollsters and markets again.)

 

The Financial Times reports that European private equity firms are testing investors’ appetite for returns with new sales of payment-in-kind bonds that offer juicy interest rates, but are among the riskiest deals since the COVID-19 crisis began.

The re-emergence of PIKs underscores how fixed-income investors are increasingly being asked to accept higher degrees of risk and more onerous terms from corporate bond issuers as soaring prices of higher-quality assets in recent months has deeply depressed yields.

A duo of highly-indebted borrowers are seeking to raise a combined $1bn through so-called PIK toggle deals, in which issuers are allowed to defer interest payments. The structure allows companies to pay interest using more debt, leading the amount that ultimately needs to be paid at the bond’s maturity to balloon.

Apollo and Platinum Equity, the private equity parents of the two issuers, will receive bumper payouts from the proceeds of the bond sales if they go through as planned, writes the FT.

The deals follow a flurry of so-called dividend recapitalisations through the loan market, where private equity owners have used borrowings to fund payouts from their portfolio companies.