Private Equity
As usual, we have a week’s worth of ratings actions on the debt of LBO-backed companies from Standard & Poor’s and Moody’s Investor Services. This week saw downgrades on yet another distressed debt exchange (Duane Reade) and a post-debt exchange upgrade. Rounding it out were a handful of bankruptcy-related withdrawals. Company: Duane Reade Inc. Sponsor: Oak Hill Capital Management Downgrade: S&P lowered its corporate credit rating on the company to 'CC' from 'CCC+' and lowered the subordinated debt rating to 'CC' from 'CCC-'. Moody’s downgraded the company’s probability of default rating to Ca from Caa2. Highlight: The downgrade follows Oak Hill’s announcement to launch a distressed debt exchange for the company. “We view this offer as being tantamount to default given that Duane Reade's highly leveraged capital structure that we believe may be unsustainable over the intermediate term, and the company's weak financial profile.”
3 min read · 10 July 2009
Given the massive layoffs, default spike and deal-making dearth, the term "distressed" doesn't begin to describe middle-market lending. At this point it's more like "freefall." No one's experienced that firsthand like Ian Fowler and Chad Blakeman of CastleGuard Partners, a new debt provider based in Chicago. The pair previously co-founded Freeport Financial five years ago with backing from hedge fund Start Investments. After spending months out of the market in 2008, in February Freeport laid off all but around four of its employees, who stayed on board to manage existing investments.
5 min read · 10 July 2009
Got Comments for Sheila Bair? Here's where you'll be able to submit ‘em and read others. (FDIC) The End of Retirement: Demography means virtually all of us will have to work longer. (Economist) Glass Boardroom: Do women in the board room help a company's stock price? Ask the anecdotal evidence: Lucy Kellaway. (FT) Lowbrow Connections: What does Paris Hilton have to do with Ponzi schemes? Well, it's a long story, but it involves a Miami fraudster, a movie about sororities and Paris shirking on the job. (AP) At It Again: Do we call him the Oracle because of his ridiculous metaphors (which all too often involve sex)? Warren Buffet is at it again, this time suggestion we need a second stimulus bill and comparing the first stimulus to half a Viagra pill (why half?) and candy (what kind? These things matter...). (ABC news)
1 min read · 09 July 2009
Unless you've picked up a box of Wheaties or browsed a Sky Mall lately, you may not have heard of Spira Footwear. It may be time to pay attention-its managers are attempting to position the company to "revolutionize the shoe world" with its WaveSpring technology. That is, "if we don't screw this up," said CEO and co-founder Andy Krafsur. Designed by a former aerospace engineer, the technology has been endorsed by Dick and Rick Hoyt and has even raised controversy over whether it was legal to wear in races like the Boston Marathon, given claims that it gives wearers an unfair advantage. The El Paso, Texas-based company has been slowly and steadily growing since it began in 2000. It's raised $8 million from angel investors to date and is seeking an additional $5 million from institutionalIt's raised $8 million from angel investors to date and is seeking an additional $5 million from institutional investors as it expands the use of its technology into work boots, military footwear and other types of shoes. The company had $6.4 million in revenue last year and expects $7 to $7.5 million this year. Spira's initial gross margins are 55%, which is higher than the industry average of 35%, Krafsur said.
2 min read · 09 July 2009
Now that the weather has finally warmed up, plenty of M&A bankers are hoping the market for deals will as well. We’ve noticed a few more targets coming to market in recent weeks and have compiled a list of some of those we’ve come across. Our sources are various news reports and the Buyouts “Seeking Buyers” list. The following companies (among many others) are either formally considering “strategic alternatives,” reported to be on the block or are rumored to be in sales talks. For prior lists, see below, and send any additions my way. Neo Material Technologies Inc., backed by Pala Investments AG, is believed to be an acquisition target, according to Dow Jones. Smith & Hawken, the luxury garden supply retailer owned by Scotts Miracle-Gro, will liquidate its assets. Noveko International Inc, a Canadian medical equipment maker, said it is considering all possible options for its Bolduc Leroux Inc unit.
3 min read · 09 July 2009
M&A may be ice cold in most sectors, but it's at least lukewarm in the world of middle market technology. Take for example, the recent heated auction for SumTotal Systems. There's also the go-shop struggle for Greenfield Online, and Symphony Technology Group's purchase of MSC Software. My eyes happen to be on Thoma Bravo's bid for Entrust, the fate of which will be decided by vote on Friday. Not because of Entrust's technology, per se, but because of the sale process' inherent conflicts of interest. The publicly-traded digital security business company received three bids during the go-shop period for its agreed-upon sale to Thoma Bravo. Notably, Thoma Bravo's already-sweetened bid for $1.85 per share is below a previously rejected $3 per share offer from an unnamed strategic. For unknown reasons, the board deemed those three go-shop bids inferior. Thomas Kirchner at Seeking Alpha suspects that that curious decision has everything to do with management. See, the deal was structured as what I've heard some analysts call a "BIMBO": Buy-In-Management Buyout.
2 min read · 08 July 2009
Private Equity Take A Gamble? Firms are shy no more regarding the online gaming sector, writes Mervyn Metcalf of Global Leisure Partners. (EGaming Magazine) Facebook: The Movie: There's a screenplay called "The Social Network" that's supposedly a tell-all of the inner workings of Facebook. Juicy... (CNET) Buck up! Hiring in finance is creeping back. (WSJ) Then again: Only the employed need apply-"many employers are bypassing the jobless to target those still working, reasoning that these survivors are the top performers." (WSJ)
1 min read · 08 July 2009
The final version of the FDIC's proposed rules for private equity investments in banks won't take effect for at least a month, but that won't stop news organizations from digging around. Today the NY Post contradicted our report from yesterday which quoted Wilbur Ross calling the FDIC roundtable discussion "highly productive." Ross seemed hopeful that the FDIC would grant a few concessions on the agency's strict proposed rules. The Post took a different bent, painting FDIC Chairman Sheila Bair as "unmoved" by the buyout firms' pleas. Citing an anonymous source, the story said "regulator has made her mind up when it comes to PE firms buying banks: Thanks, but no thanks."
3 min read · 08 July 2009
In the latest breaking development of the Case of the Stolen Secret Sauce, my colleagues at Reuters have alerted me to a mildly amusing Youtube video of Sergey Aleynikov, the Goldman Sachs programmer who was arrested for allegedly stealing proprietary trading code from the firm, performing a ballroom dance on a cruise. Since his arrest, Aleynikov has been released on bail, telling authorities "he had only intended to collect "open source" files on which he had worked but "later realized that he had obtained more files than he intended," according to Reuters. Watch him go ballroom after the jump:
1 min read · 08 July 2009
Ouch: Ohio's state "rainy-day" money has dwindled from $1 billion to 89 cents. (WaPo) So its true: Or at least appears that way. Companies file bad news on holidays. (Footnoted) Why the SBA's New Loan Program Stinks: It's tough to qualify for this $35,000 offer unless you're in immediate danger. (BW) Yikes: Now bankers, once the target market for some alcohol ads, are the butt of the joke. (Streetwise) Pope Speaks: He says the economic system is showing the effects of sin. (NY Times)
1 min read · 07 July 2009
