CMFG Life Insurance Co. is preparing on of the first securitizations of private equity funds since the financial crisis.
The deal, MCA Fund I Holding LLC, will issue three tranches of notes with preliminary ratings from DBRS totaling $270 million: DBRS expects to assign an A’ rating to the $130 million class A notes; a BBB’ rating to $100 million of class B notes, and a BB’ rating to $20 million of class C notes.
The notes are secured by a 100% limited partnership interest in MCA Fund I LP, a Delaware-based special-purpose vehicle that holds a portfolio of seasoned interests in leveraged buyout, mezzanine debt, real estate, energy and venture capital private equity funds.
Barclays Capital is the placement agent.
The deal also has a $20 billion liquidity facility provided by Barclays that can be drawn upon to fund distributions to the Class A and B notes in the event that there is a shortfall in expected distributions from the underlying funds. “While cash distributions to private equity limited partners have historically been relatively stable after a few years of seasoning, they are not contractual payments,” the rating agency notes in its presale report. It has assigned a provisional A’ rating to the liquidity facility.
Before the financial crisis, a number of private equity investors securitized their holdings as an alternative to selling the limited partnership interests in the secondary market. Since the crisis, there have been few such deals, and they have been offered privately without benefit of a credit rating.
CMGF is part of the CUNA Mutual Group, an insurance company focused on credit unions. An investment advisory affiliate, MCA will manage the funds in the securitization trust. MCA currently has approximately $11 billion of assets under management, 6% of which consist of private equity and other alternative investments, according to DBRS.