* Nikki Finke: Teddy Forstmann is backing a new entertainment & media investment advisory. Details are a bit sketchy, but this could make Forstmann's annual Aspen event even better (now if only we could get a ticket). * How Jive Software adapted, following Sequoia Capital's graveyard presentation. * Morning Call: U.S. futures point higher, London shares up slightly before DoE rate decision (it's keeping them at 0.5%), Nikkei jumps on Japanese stimulus plan and Hong Kong rose 3% after CITIC Pacific's management shakeup. * Distressed M&A is at a record high. * David Weidner: "The Meredith Whitney myth might be in line for a downgrade." * At Google's Cambridge offices, the game of choice isn't Guitar Hero or Dance Dance Revolution. It's good old-fashioned ping-pong. * Fatburger puts its California and Nevada subsidiaries into Chapter 11. Seems the company defaulted on some loans to GE, and needs cheaper rents. But people in LA and Portland need their Fatburgers. Could a bailout be in order?
1 min read · 09 April 2009
Earlier this month, we reported that Levine Leichtman Capital Partners had sued Apollo Management, in relation to the collapse of retailer Linens ‘n Things. Our post focused on the suit's primary allegations, so we glossed over a tidbit about how Linens was obligated to pay Apollo millions in fees. From the complaint: Upon consummation of the Acquisition, the Company entered into a management services agreement with control person defendants Apollo Management V, an NRDC affiliate (NRDC Linens B LLC) and Silver Point. Under the agreement, the Sponsors agreed to provide to the Company certain investment banking, management, consulting, financial planning and real estate advisory services on an ongoing basis for a fee of $2 million per year. Under this agreement, Apollo Management V also agreed to provide to the Company certain financial advisory and investment banking services from time to time in connection with major financial transactions that may be undertaken by it or its subsidiaries in exchange for fees customary for such services purportedly after taking into account Apollo Management V’s expertise and relationships within the business and financial community. In addition, the Company paid a transaction fee of $15 million in the aggregate (plus reimbursement of expenses) to the Sponsors for financial advisory services rendered in connection with the Acquisition. Apollo and its co-investors bought Linens 'n Things in late 2005, which means that they owned the company for just over three years. That would work out to $6 million in management fees, plus another $15 million for the transaction fee. So Apollo bled its own portfolio company for at least $21 million, plus whatever Linens might have paid Apollo for "financial advisory and investment banking services... in connection with major financial transactions."
2 min read · 08 April 2009
Last Friday, we reported that oil and gas exploration company Terralliance is on the brink of implosion, despite $295 million in VC funding and an undisclosed amount of debt funding (which the equity backers were furiously trying to renegotiate). This morning, VentureWire’s Russ Garland moved the story forward, with the following three pieces of information: The debt funding amount was $150 million, from hedge fund Passport Capital. Terralliance has been in violation of the loan for months. Terralliance claimed that its mapping technology was 93% accurate, but that figure turned out to be massively inflated. As an aside, my understanding is that the numbers were initially correct (a few lucky strikes), but quickly debunked by Terralliance scientists. Terralliance began conducting its first-ever audit in December 2007, at the behest of a new potential investor. That final point about the audit is also what I’ve been hearing, and is why I originally suggested that the investors were “asleep at the wheel.” How do you not audit a company that has received around $450 million in capital, has scooped up oil and gas leases on several different continents and has purchased multiple Russian aircrafts
2 min read · 07 April 2009
1 min read · 07 April 2009
I’m pleased to announce that peHUB is (finally) hosting an event with some meaningful content. It’s called The Limited Partner Congress, and will take place on June 9 at Bond Street (one of New York's top restaurants). This will not be a typical industry “conference,” with vanilla outlook panels and warmed-over sirloin. Instead, it’s a series of off-the-record working groups and networking sessions, in which limited partners can discuss the myriad of challenging issues they currently face. The format was inspired by a World Economic Forum event I participated in last year, and is intended to help LPs foster both solutions and a better sense of community. A big caveat is that The LP Congress is an invite-only affair. I sent out an initial batch of invites yesterday via email, and will be sending out more today (each one is personalized, so it takes some time). If you have not received an invite but are interested in attending, please send me an email with your name, job title and place of work. I’m sure there are many worthy LPs who were unintentionally left off the initial list, and we obviously would like to see you there.
1 min read · 07 April 2009
* It's amazing to think that Chrysler is in a position to hand out corporate lifelines, but that may be the net effect of picking A123 Systems to make batteries for its 2010 line of electric vehicles. * Scott Moore's Bailout Art (h/t Ritholtz) * You're a journalist covering the pharma market. He's a pharma exec on the same flight, and you can see every word of a PowerPoint presentation "promising a 'deep dive' into how the company hopes to get insurance companies to pay for the drug." What do you do? * Morning Call: U.S. futures point lower, London down in early trading, European shares poised to drop for third straight day, the Nikkei and Hong Kong break winning streaks. * Japanese venture firms are in trouble, and another global buyout firm abandons the country. * ABC's Brian Ross finds Allen Stanford.
1 min read · 07 April 2009
Bain Capital joined the markdown parade this month, according to limited partners in the firm's past several buyout funds. It goes without saying that the numbers are ugly, but in context they're just homely. Or, if you like analogies: Bain Capital is to Terra Firma what Jerry Blank is The Wicked Witch of the West. Ok, moving on... The least ugly markdowns were for Bain Capital X, which is only around 25% invested. For the period ending Q4 2008, it was down approximately 10% quarter-over-quarter and 15% for the year. A bunch of companies in this portfolio are still being carried at cost, including Bright Horizons, Contec, Quintiles and The Weather Channel.
2 min read · 03 April 2009
* Quote of the Day, from an attorney at the Tulane M&A Conference (courtesy of Dealbook): An M&A deal is “like a birth. It’s the moment of conception. It’s exciting. It always holds so much promise. Of course, the kid can turn out to be a disaster later.” * Michael Mandel: The Reverse Black Swan, Part 1 * Morning Call: U.S. futures slide on pending jobs report, European shares lower at mid-day, the Nikkei hits 3-month closing high and Hong Kong does the same. * Sign of the Times: 2009 Milken Conference offering 15 free tix to "recently unemployed individuals." Painful part is that the application requires contact information for the person who fired you. * Speaking of free tickets, here's a chance for a first-time entrepreneur to attend the invite-only Nantucket Conference (where I'll be moderating a VC panel). Good luck. * When a company files for an IPO, it had a hard time admitting defeat. Paul's got a list of the 20 longest gaps between IPO filing and IPO withdrawal.
1 min read · 03 April 2009
Kleiner Perkins is on the verge of having a massive crater in its energy portfolio, but it has nothing to do with cleantech. Instead, the trouble involves Terralliance, a stealthy oil and gas exploration company that quietly raised $295 million in equity funding from KP and others. peHUB has learned that Terralliance has fired its founding CEO, laid off around 80% of its workers, closed offices and is desperately trying to renegotiate a massive debt-load. If it can't get the last piece done, then Terralliance might itself become a fossil fuel. "It's all about restructuring the debt, but the lender doesn't seem too eager to bail out the equity guys," says a source familiar with the situation. " feeling is, hey, the product works." That product is software that Terralliance says makes it easier and cheaper to locate oil and gas. The company then uses the software to do its own exploration, rather than simply selling it to third parties. Here is how Terralliance explained it, in a draft private placement memorandum dated April 2007:
4 min read · 02 April 2009
Bloomberg recently reported that Cerberus Capital Management is considering the creation of a "redemption fund," for investors who have asked to withdraw their money. It's basically a pay-in-kind solution to deal with Cerberus' lack of liquidity. Not ideal -- particularly if you want Cerberus to satisfy you like an ATM -- but at least the goal is to get everyone paid (eventually). For contrast, peHUB has learned that Wisconsin-based hedge fund manager Stark Investments has enacted a far more onerous pay-in-kind solution. In a March 23 letter, Stark informed investors that it has created new funds to hold its illiquid (read: toxic) assets. Redeemers now are eligible to receive just 50% in cash, and the other 50% as securities in the new toxic funds. As the letter read, in part:
2 min read · 02 April 2009
