Buy-Out Fund in Default

Private Equity Fund Nautical Offshore (“SOS”), a SPV fund belonging to Affinity Equity Partners, had its controlling 54.8% stake in Singapore listed shipbuilder and offshore vessel owner/operator Jaya Holdings seized by its lenders after defaulting on the syndicated debt facility. Affinity Equity Partners is an independently owned buyout fund manager that was spun out of UBS Capital Asia Pacific – the private equity arm of UBS AG in March 2004. In 2006, SOS acquired a 29.3% equity stake in Jaya Holdings and subsequently raised its stake to a controlling 54.8%. A five year USD 233 million syndicated loan was utilised to finance the leveraged buyout.

According to Reuters, the syndicate of banks, as many as thirteen lenders, are in advanced discussions with several buyers. It is reported that SOS had attempted to offload its stake in Jaya as early in 2010, but few bids came in due to the bearish sentiments on the shipping market. Indicative pricing on SOS’s debt in the secondary market is priced 60 to 65 cents on the dollar today, which suggests that lenders would have to accept a haircut.

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