When LPs Want Out: A Fund Restructuring Use Case
A nervous Limited Partner (LP) can throw a wrench into a General Partner’s (GP) best-laid plans for launching a new fund or restructuring an existing one. When the hypothetical firm featured in this fund restructuring use case scenario, Venture Capital GP A, faces a challenge with liquidity, it decides to work with a provider to develop secondary liquidity solutions that satisfy the needs of both their LPs and the GP.
The Challenge Faced by the General Partner: Venture Capital GP A
Venture Capital GP A plans to launch a new private equity (PE) fund while winding down an older fund. After selling off most of the companies, they want to transition the $50M private equity venture fund into a continuation vehicle to focus on a single portfolio company. All the organizational details are worked out and fundraising efforts are ready to begin. Unfortunately, several LPs decide they do not want to transfer to the continuation vehicle. To make matters even more urgent, Venture Capital GP A has a deadline of less than 60 days to complete the transaction. Venture Capital GP A has explored liquidity options but is unable to identify a counterparty who can satisfy their dual priorities of completing transactions with ~10% of their LP base within a 60-day time frame.
Ben's Customized Liquidity Solution for Venture Capital GP A
Intrigued by their mission to strive for simple, rapid, and cost-effective liquidity solutions, Venture Capital GP A engages with The Beneficient Company Group, L.P. (Ben). Ben quickly underwrites the fund and the remaining portfolio company to estimate future value so they can make two solutions available to the LPs to meet their individual liquidity needs: Ben LiquidTrust® (cash) below NAV and Ben ExchangeTrust™ (at NAV) liquidity through a debt security. The choice of liquidity options helps to differentiate Ben and enables the LPs to tailor the solution to their unique needs. Additionally, LPs who choose the LiquidTrust option can receive immediate cash liquidity delivered in less than 30 days. Finally, Ben provides Venture Capital GP A with a single document package which includes all the account and transaction information needed to facilitate the delivery of consideration, as well as a dedicated team to educate, onboard, process and close.
In finance, as in life, results are not guaranteed, but in this hypothetical use case, Ben’s approach ends up working out well for Venture Capital GP A and their LPs. Relationships with their LPs in the maturing fund are strengthened because they can respond to their needs in a fair and expedient manner, while also improving the fundraising for Venture Capital GP A’s newest fund by introducing a customized liquidity option at the onset.
No one understands your LP’s needs better than you do. And no one understands how to extract liquidity from alternative assets like we do. At Ben, we have crafted a unique suite of simple, rapid, and cost-effective liquidity solutions and other financial services for General Partners in the alternative asset space. Our process allows GPs to access hard-earned investment capital, with liquidity provided from our own balance sheet. Contact us today to schedule a consultation with our expert team.
"In finance, as in life, results are not guaranteed."