BCI Sells Majority Stake in Hayfin Capital Management
Already flush with cash, British Columbia Investment Management Corp. (BCI) is adding another billion dollars to its war chest.
The Victoria-based pension fund manager agreed Tuesday to sell its majority stake in European alternative asset manager Hayfin Capital Management. Dallas-based sports investor Arctos Partners will finance a management buyout that will see Hayfin’s leadership team become its new majority owners.
While the financial terms were not disclosed, a source familiar with the matter said the deal valued Hayfin at €1.2-billion, with BCI selling a 60-per-cent ownership stake. The Globe and Mail is not identifying the source because they were not authorized to speak publicly about the deal.
That would translate to €720-million in proceeds for BCI, which at current exchange rates is roughly $1.1-billion. Since BCI first acquired a majority stake in Hayfin in 2017, the source said, the value of the pension fund’s investment has more than tripled, as Hayfin’s total assets under management have grown from €8-billion to more than €31-billion.
The transaction represents the second billion-dollar windfall for BCI in recent months. In April, the fund manager sold more than US$1-billion of its stakes in private equity funds to French buyout firm Ardian SAS.
Last month, BCI reported a 7.5-per-cent return in its most recent fiscal year, as its total assets under management grew to $250-billion from $233-billion a year earlier. At the time, it said it was on the hunt for acquisitions, as higher interest rates had created a buyer’s market.
“We can be very, very aggressive in deploying in markets,” Ramy Rayes, BCI’s executive vice-president of investment strategy and risk, told The Globe at the time. “People might be forced sellers. That definitely won’t be our case, given our liquidity numbers, and we’re hoping to scoop some things on sale if they ever occur.”
BCI has been moving further into private investments in recent years. In addition to Hayfin, it has made direct investments in several other private companies, including insurance providers BMS Group and Compre Group, beverage companies Refresco and Waterlogic and investment adviser ZEDRA.
Private investments have proven to be an increasingly common strategy among pension funds and other larger institutional investors seeking to avoid the persistent volatility of public markets.
In its last fiscal year alone, BCI committed more than $15-billion to private market investments. The historic pace of interest-rate increases over the past two years, combined with the U.S. regional banking crisis, has been a major boon for private lenders. Investing in Hayfin allowed BCI to profit directly from that trend.
BCI also said Tuesday it will continue to invest in some Hayfin funds. Hayfin, which was founded in 2009 by former Goldman Sachs executives, raised more than €6-billion for its latest flagship European private credit fund.
Arctos is best known for having ownership stakes in the Boston Red Sox and the Paris Saint-Germain soccer team. It launched a new strategy called Keystone last year specifically to invest in asset managers, which led to the Hayfin deal.
Investments and Pensions Europe (IPE) also reports BCI sells majority stake in Hayfin Capital Management:
British Columbia Investment Management Corporation (BCI), a Canadian institutional investor, has struck an agreement with private investment firm Arctos Partners to sell its majority stake in Hayfin Capital Management, a European-focused alternative asset management firm.
Arctos, via its Keystone strategy, which provides strategic partnership to leading financial sponsors, through bespoke growth capital and liquidity solutions, has underwritten 100% of the funding and will facilitate the Hayfin team becoming the majority owners of the common equity.
Following the completion of the transaction, BCI will remain a significant and strategic limited partner in certain key Hayfin fund strategies, it was announced.
BCI acquired a majority stake in Hayfin in 2017, after identifying a compelling opportunity in the European market for private credit, driven by regulatory and structural demand trends.
During its ownership, BCI made significant strategic investments to support the continued growth of Hayfin’s strategies and worked with management to grow the investment teams and platform capabilities. Hayfin experienced strong sustained growth and momentum as a result, increasing assets under management from €8bn at the time of investment to over €31bn today.
Hayfin’s product offering spans direct lending, special situations, tactical solutions, high-yield/syndicated loans, healthcare opportunities, maritime yield and private equity solutions.
Overall, BCI’s investment is expected to generate a significant return on invested capital and a successful outcome for its pension plan and insurance fund clients, BCI stated.
Jim Pittman, executive vice-president and global head of private equity at BCI, said: “BCI’s successful private equity partnership with Hayfin’s management reflects our flexible, creative, and collaborative approach to investing.
Given our long-term investment horizon, we were able to spot an emerging trend early on in the cycle – in this case the growth of the European private credit market – and help scale Hayfin into the market leader it is today.” He noted that the partnership with Hayfin over the past seven years had “delivered significant growth in a critical period for the private credit market”.
“We remain confident in Hayfin, its management team, strategic vision and investment strategies and are pleased to remain as a significant limited partner in certain key funds,” Pittman continued.
Tim Flynn, co-founder and chief executive officer at Hayfin, said: “This is an exciting new chapter that will support Hayfin’s ongoing growth while preserving our core identity and operational autonomy.”
BCI’s private equity programme has a long-established presence in Europe through notable direct investments in multiple industry-leading companies such as BMS Group and ZEDRA, among others.
With a growing portfolio of companies and fund partners in Europe, BCI intends to continue accelerating the footprint of its private equity programme in this critical region, it added.
The transaction is subject to customary regulatory approvals and is anticipated to close in Q4 2024.
And Private Capital Journal reports BCI to sell majority stake in Hayfin to Arctos Partners:
British Columbia Investment Management Corporation (BCI) has entered into a definitive agreement with Arctos Partners to sell its majority stake in Hayfin Capital Management, as part of management buyout.
Arctos, via its Keystone strategy, which provides strategic partnership to leading financial sponsors, has underwritten 100% of the funding and will facilitate the Hayfin team becoming the majority owners of the common equity.
Following completion of the transaction, BCI will remain a significant and strategic limited partner in certain key Hayfin fund strategies.
Founded in 2009, Hayfin specializes in providing European and North American credit and private equity investment solutions to a global investor base. BCI acquired a majority stake in the firm in January 2017
The transaction is subject to customary regulatory approvals and is anticipated to close in Q4 2024.
Earlier today, BCI issued a press release stating it has agreed to sell its majority stake in Hayfin:
Will remain a strategic limited partner in certain Hayfin funds post-closing Initially invested in the leading alternative credit asset manager in 2017 and supported growth of the platform
VICTORIA (BC), LONDON & NEW YORK, July 30, 2024 – British Columbia Investment Management Corporation (“BCI”), one of Canada’s largest institutional investors, today announced it has entered into a definitive agreement with Arctos Partners (“Arctos”), a private investment firm, to sell its majority stake in Hayfin Capital Management (“Hayfin” or the “Company”), a leading European-focused alternative asset management firm. Following completion of the transaction, BCI will remain a significant and strategic limited partner in certain key Hayfin fund strategies.
BCI acquired a majority stake of Hayfin in 2017, after identifying a compelling opportunity in the European market for private credit, driven by regulatory and structural demand trends. During its ownership, BCI made significant strategic investments to support the continued growth of Hayfin’s strategies and worked with management to grow the investment teams and platform capabilities to ensure stable asset management and superior risk adjusted performance. Hayfin experienced strong sustained growth and momentum as a result, increasing assets under management from €8 billion at the time of investment to over €31 billion today. Hayfin’s product offering now spans direct lending, special situations, tactical solutions, high-yield/syndicated loans, healthcare opportunities, maritime yield and private equity solutions. Through the course of its ownership, BCI provided strategic input, industry expertise, capital support, and talent resources to help guide Hayfin towards achieving significant growth and scale over a seven-year period. Overall, BCI’s investment is expected to generate a significant return on invested capital and a successful outcome for its pension plan and insurance fund clients.
Jim Pittman, Executive Vice President & Global Head of Private Equity at BCI, said “BCI’s successful private equity partnership with Hayfin’s management reflects our flexible, creative, and collaborative approach to investing. Given our long-term investment horizon, we were able to spot an emerging trend early on in the cycle – in this case the growth of the European private credit market – and help scale Hayfin into the market leader it is today.”
Pittman added, “We are delighted to have reached this agreement with Hayfin and Arctos, delivering an excellent outcome for BCI’s pension plan and insurance clients. We’re extremely proud of the partnership we forged with the Hayfin team over the past seven years, which has delivered significant growth in a critical period for the private credit market. We remain confident in Hayfin, its management team, strategic vision and investment strategies and are pleased to remain as a significant limited partner in certain key funds.”
BCI’s private equity program has a long-established presence in Europe through notable direct investments in multiple industry-leading companies such as Hayfin, BMS Group, ZEDRA, Refresco, Compre Group and Waterlogic, where it can bring its capital and operational expertise to bear. With a growing portfolio of companies and fund partners in Europe, BCI intends to continue accelerating the footprint of its private equity program in this critical region.
The transaction is subject to customary regulatory approvals and is anticipated to close in Q4 2024.
Goldman Sachs International and Moelis & Company LLC served as financial advisors to Hayfin and BCI. Weil Gotshal & Manges LLP acted as legal counsel to BCI, Macfarlanes LLP and Cleary Gottlieb Steen & Hamilton LLP acted as legal counsel to Hayfin, Kirkland & Ellis LLP acted as legal counsel to Hayfin management and Skadden, Arps, Slate, Meagher & Flom LLP acted as legal counsel to Hayfin’s independent directors.
ABOUT BCI
British Columbia Investment Management Corporation (BCI) is amongst the largest institutional investors in Canada, with C$250.4 billion in gross AUM as of March 31, 2024. Based in Victoria, British Columbia, with offices in Vancouver, New York, and London, U.K., BCI manages a portfolio of diversified public and private market investments on behalf of its 29 British Columbia public sector clients.BCI’s private equity program actively manages a C$31 billion global portfolio of privately held companies and funds with the potential for long-term growth and value creation. Leveraging our sector-focused teams in business services, consumer, financial services, healthcare, industrials, and technology, media and telecommunications, we work with strategic private equity partners to source and manage direct and co-sponsor/co-investment opportunities.
Alright, so BCI finally sold its majority stake in Hayfin, one of Europe's leading alternative asset platforms.
BCI acquired Hayfin back in 2017 and I wrote about it here.
The investment in Hayfin goes back to when Jim Pittman and Gordon Fyfe were working at PSP and they bought the majority stake (from PSP, OMERS, Future Fund) knowing the company very well.
The rest as they say is history because Hayfin's assets mushroomed from €8 billion at the time of investment to over €31 billion today, reflecting the monstrous growth of private credit as an asset class.
Interestingly, BCI will remain a limited partner in certain Hayfin funds post-closing but the big money in Hayfin is realizing on its majority stake.
Why did BCI sell its majority stake now? Because now is the time to strike before a global recession sets in and private credit as an asset class gets dinged hard as defaults soar.
That's my feeling and while I'm sure Hayfin is an outstanding private credit shop, its assets under management aren't immune to a severe global contraction.
All this to say, in my opinion, BCI did the right thing to sell its stake in Hayfin now and this will be proven right three to five years down the road.
It can now use that realization to boost returns for this fiscal year in private equity, offsetting some losses from Thames Water, and put the money to work elsewhere where there are better long-term opportunities.
Or just sit and wait for the private equity tsunami to play itself out.
Either way, they held their stake for seven years and it was time to sell and realize on this investment.
Financial details of this transaction were not disclosed but according to the Globe and Mail sources, BCI netted more than 3X on the deal which sounds right to me.
Below, exactly a year ago, Tim Flynn, co-founder and CEO of Hayfin Capital Management explained the origins of private credit during the global financial crisis and regulatory change.
You can watch the full interview here (well worth it).
Comments
Post a Comment