JPM Private Equity to raise up to £40m ZDPs

It follows a successful ordinary share placing earlier this year which raised $93.4m, well above its original target of $40m to $50m. This issue was done to take advantage of investment opportunities and in the longer term drive up the trust’s share price, although dilutive in the short-term.

JPMorgan Private Equity’s (JPEL) manager Greg Getschow told Trustnet earlier this year it had opted for ordinary shares rather than ZDPs because it was not thought large amounts could be raised in this way.

However, since then there have been a number of large ZDP placings, including Ecofin Water & Power Opportunities’ £60m issue and Electra Private Equity’s £43m issue.

Getschow commented during the summer: "Two or three months ago the market for ZDPs was still pretty small. But as JZ Capital Partners has rolled over its zeros this may be an option."

This ZDP issue, which is looking to raise £40m to £50m, is also to raise additional capital to take advantage of the increased flow of secondary market investment opportunities. Getschow said although JPEL has recently raised $93m its deal pipeline is many times greater.

A Sterling denominated fund raising can be deployed quickly allowing the cover - the amount of assets needed to repay the final redemption value - to be grown quickly.

JPEL denominates its ZDP issues in Sterling because the main investor demand for these is in the UK, whereas there is greater demand for its ordinary share issues abroad so these are denominated in US dollars.

Getschow said another reason for doing a ZDP issue is because shareholders have been asking the trust if it is going to issue ZDPs.

The ZDP issue is in fact a relaunch of JPEL’s December 2008 ZDP issue which only raised £7.5m rather than the £40m to £50m JPEL had hoped for, for reasons including investor antipathy due to the financial crisis and Bernard Madoff hedge fund fraud. The plan was to fill out the issue at a later date.

Getschow also said that as it is a tap of an existing issue rather than a new issue it will not be placing will not be dilutive to its existing 2015 ZDPs. Share and warrant issues are opposed by some market participants because they are dilutive to existing shareholders.

The prospectus for the issue should be published by the end of this week with new terms. The ZDPs issued in December 2008 had a gross redemption yield of 8.25 per cent, but with a different market environment and good investor appetite for the share class Getschow hopes to price them lower, and said they are getting market feedback on this.

He anticipates a wider investor base than for past issues, typically bought by ZDP funds and private clients – due to the rise in the top rate of income tax to 50 per cent in 2010. Getschow also said that the existing 2015 ZDPs are currently trading at a premium to net asset value, while JPEL’s ordinary shares are on a discount of 3.5 per cent as of 29 October, according to WINS, in contrast to the private equity fund of funds average of 42.1 per cent.

The latest time and date for receipt of placing commitments is 17 November and admission to listing of the new shares is on 20 November.

Other investment companies planning to place ZDPs include: F&C Private Equity and NB Private Equity.