We’ve never been big fans of the “sue your customer” business model, but times are tough.
Private-equity fund CapGen Capital believes it has been backed into that corner, though. The fund recently filed suit against two of its limited partners, seeking to force Chalice Fund and WK CG Investment to fund their capital commitments.
Chalice said the $800,000 it was late on was “pretty small beer” and will make the payment “as soon as possible within the constraints of [its] operations.” WK was equally flippant, saying its $200,000 payment was “on [the] list of things to get around to.”
The lawyers on the suit, plus BigLaw commentary, after the jump.
According to former WSJ Law Blogger Peter Lattman,
Andrew Wright, a New York-based partner for the law firm Kirkland & Ellis, said private-equity firms have several other options before resorting to a lawsuit. A firm can try to find a buyer for the limited-partner’s interest, help find a credit line for the indebted partner, or dock the limited partner for an amount equivalent to the cash owed, or more.
“The one advantage” of a lawsuit, said Mr. Wright, “is that it sends a message to other limited partners in the fund.”
Kirkland has more on the matter in its private equity newsletter.
Simpson Thacher’s Joseph McLaughlin (Fordham BA ‘85, JD ‘88) signed CapGen’s complaint, with local counsel from Richards Layton & Finger’s Raymond DiCamillo (Penn BA ‘90, Georgetown JD ‘93).
Simpson Thacher is probably the biggest powerhouse in private equity, with deep ties to KKR and Blackstone.
Clearly, the firm has decided that being exclusively on the GP side of the equation is more than enough to pay the bills.
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