Portland raises US$100m in first phase of Caribbean Fund III

Portland Caribbean Fund III has raised US$100 million under the first closing of the new fund.

The European Investment Bank, EIB, acted as a key investor in the first phase. The commitment by the bank, which is ultimately owned by member states of the European Union, played a “catalytic role” in attracting other investors to reach the fund’s first close, EIB said at the announcement made in early November.

Its backing of Portland Caribbean Fund III was done through EIB Global, which contributed a quarter of the funds, US$25 million, to the first round. EIB’s participation had previously been disclosed prior to its more recent announcement that the first round of financing had closed.

Its backing of Portland Caribbean Fund III was done through EIB Global, which contributed a third of the funds, US$25 million, to the first round. EIB’s participation had previously been disclosed prior to its more recent announcement that the first round of financing had closed.

The sources of the other US$65 million were not fully ascertained.

Douglas Hewson of Portland Private Equity told the Financial Gleaner on Thursday that the remainder was raised from “returning” limited partners aligned with Portland Caribbean Fund II, and others, including a significant commitment from the general partner team.

“I am not able to provide specific names at this time,” said Hewson.

“We have other investors in various stages of diligence – returning and new. We expect to have subsequent closes over the first half of calendar 2024,” he added.

EIB’s commitment was initially disclosed as US$35 million, but Hewson clarified that the the commitment for the first round was US$25 million, while the bank’s overall investment would later rise to US$35 million, or 10 per cent of the expected US$350 million fund.

EIB is limited to US$25 million for the first round to avoid breaching a covenant limit of 25 per cent in a fundraise, the Portland partner explained.

Fund III will invest in small and mid-size high-growth companies across the Caribbean. Its target is businesses in the financial, communications, consumer, and hospitality sectors. Businesses run or owned by women will be prioritised.

“Portland Caribbean Fund III will extend our firm’s leadership in key areas such as gender-lens investing and applying science-based climate targets to our investment operations,” said Chairman of Portland Private Equity Michael Lee-Chin in a joint statement with EIB.

“Portland Private Equity is proud of its long track record of doing good and doing well in this overlooked region,” Lee-Chin said.

The EIB and Portland described the Caribbean as being currently underserved by private risk capital, which hinders the potential of micro, small, and medium businesses from growing.

“Small and medium-sized businesses are an important driver for economic growth in Caribbean countries,” according to EIB Vice-President Ricardo Mourinho Félix. “Through our support for the private sector, EIB Global aims to boost socio-economic development, strengthen the equity ecosystem, and foster entrepreneurship in the region,” he said.

The first closing represents less than a third of the US$350 million the Fund III eventually expects to raise internationally. It’s an ambitious target within the context of the current business cycle, which saw Portland breaking up the fundraising into two phases. Capital markets have become riskier, including private equity, amid monetary tightening by central banks worldwide, which have been increasing interest rates to curb inflation.

The EIB has been supporting projects in the Caribbean since 1978, and Portland Private Equity since 2007. These investments included two of Portland’s previous funds, AIC Caribbean Fund and Portland Caribbean Fund II. These funds have sustained almost 18,000 jobs through their underlying investments across the Caribbean, the EIB said.

Portland Private Equity has injected a total of US$405 million into regional investments through Caribbean Fund I and II. A recent valuation of Caribbean Fund II hovers just below US$250 million, encompassing proceeds from divesting two out of its 10 equity stakes in private companies. Initially, Fund II was capitalised with US$180 million.

Caribbean Fund I directed US$225 million towards various investments, including Advantage General Insurance Company, telecommunications services providers Columbus International, construction firm Moya, beachfront development Las Olas, energy provider InterEnergy Holdings, and the soya bean enterprise World Food.

Although Fund II is slated to conclude in 2024, discussions are under way regarding a potential one-year extension. This extension aims to provide adequate time for divesting the remaining investments in private companies and underscores the impact of prevailing market conditions on capital flows.

steven.jackson@gleanerjm.com