Better Capital Funds Employ Unique Guernsey Structure

by Jason Gorringe, Tax-News.com, London

31 January 2012

Carey Olsen and Heritage International Fund Managers Limited have acted for Better Capital Limited, an existing Guernsey closed-ended fund listed on the London Stock Exchange (LSE), on its innovative conversion into a uniquely-structured protected cell company.

The conversion will facilitate the launch of a second fund, the Better Capital Fund II, with funding allocated under a 2012 cell, separate from the interests of the existing fund, and associated 2009 cell.

This is the first example of a closed-ended PCC with more than one cell having a full LSE listing. The innovative use of a PCC structure provides operational efficiencies and is also designed to separate the new portfolio of assets to be acquired by Fund II from the existing portfolio, thus providing enhanced shareholder benefits.

The 2012 cell has raised GBP169.9m (USD266m) of new money to invest in Better Capital Fund II. The new money was raised under a placing and an open offer to existing shareholders. Like the 2009 cell, the 2012 cell will invest principally in UK and Irish turnaround opportunities.

The use of a PCC in this way is also pioneering for private equity structuring as it provides the company with the scope to continue to raise further funds in distinct cells, as well as providing the legal segregation of assets and their allocation to each shareholder vintage through a clear separation of listed share classes.

From an operational stance, the unique aspects of the PCC structure reduce running expenses and enable strong corporate governance, as a single board of directors has oversight over the distinct fund vintages.

The team from Carey Olsen included corporate partner Tom Carey, who said: “The use of the PCC structure to create separate listed portfolios enables new money to be raised without diluting the existing portfolio and without complicating shareholder distribution rights at the end of the life of the original portfolio. Successive portfolios can be created, each being at a different stage in their lifespan and each benefiting from the experience of a single Board.”

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