Pine Street I LLC: a case study in securitisation
Filip Henzler, Principal, Capital Dynamics*
Pine Street is a $1.0 billion securitisation collateralised by a diversified portfolio of limited partnership interests in 64 different private equity funds. Nine subsidiaries of American International Group, Inc. (“AIG”) sold parts of their private equity fund portfolios in exchange for cash and a majority of the subordinated securities issued by Pine Street. The transaction closed on December 31, 2002. AIG Global Investment Group, Inc. (“AIGGIG”), a subsidiary of AIG, and Capital Dynamics acted as advisors to the sellers and as structuring agents.
that distributions are only made to subordinated note holders if both over-collateralisation tests and a specially constructed liquidity test have been met. The portfolio consisted of limited partnership interests in 64 different private equity funds with a total exposure of $1.0 billion ($646 million of fair market value and $354 million of unfunded commitments). The portfolio is well diversified with its value split 61 per cent in buyout funds, 15 per cent in venture capital funds, 12 per cent in real estate funds and 8per cent in generalist vehicles. The commitments were spread over 11 different vintage years and had an average age of 5.5 years when weighted by asset value. The portfolio contained 910 underlying portfolio companies of which over $90 million were investments held in listed companies.
Chart 1: Capital Structure
Class $90 Liquidity Facility
Chart 2: Transaction Overview
Third Party Investors Note A Holders Class A Notes Cash Issuer Pine Street I LLC Servicer Capital Dynamics Participation agreement Intermediate Seller Pine Street I LLC Owns portfolio Private Equity Fund Investments Sells portfolio Seller/ Noteholder AIG Notes and Cash
The transaction is structured as a