Private Equity
We’ve seen plenty of evidence that finance and rock music don’t mix: Take Terra Firma’s disastrous investment in music publisher EMI, which has led to a lawsuit from Pink Floyd, or Bank of America’s cringe-worthy U2 theme song, “One Bank”. But Sterling Partners is hoping to change that with its latest investment in The Paul Green School of Rock Music. The business is exactly what it sounds like—a training school for aspiring kid musicians. Founded in 1998, the Paul Green School of Rock requires its students to form bands and perform, which, according to CEO Matt Ross, is a highly effective method for motivating students. The school was the star of a documentary called “Rock School” and bills itself as the “apparent inspiration” for the hit comedy, “School of Rock,” starring Jack Black. (Paramount Pictures has not admitted to the inspiration, Ross noted.)
3 min read · 07 July 2009
The largest buyout of the year is now half as large, from the lead sponsor's point of view. Before even closing its agreed-upon $1.8 billion buyout of Korean beer-maker Oriental Brewery, buyout firm KKR has decided to sell half of the company to Asia-focused buyout firm Affinity Equity Partners. Affinity will help the firm bear the equity load and "share investment risks." The surprising part here is pricing-Affinity gets a 50% stake in Oriental Brewery for a mere $400 million. That's just 22% of what KKR paid for the company, meaning Affinity is getting a half-off discount to the total deal value. Why would KRR let Affinity in for such a cheap valuation? The answer lies in the debt. When you break down the company's capital structure, you find that Affinity is actually paying a small premium.
2 min read · 07 July 2009
Say Goodbye to 2%: That 20% is probably due to change soon too. (Bloomberg) Up a Down Staircase: A Deal feature looking at the Private Equity Deals of the Year. Basically it's a ranking of the most significant deals (which, to me, seem inextricably linked to either the biggest, most profitable, or least profitable, but the Deal professes they are not.) The headline says it all: Up a down staircase. Is that a reference to these poor ducks? (The Deal) But! Closing Bell Is Tolling for SPACs: Deadlines on shell companies loom large. (WSJ) Sell! Time to lighten up on junk bonds. (Aleph Blog)
1 min read · 06 July 2009
Centerbridge Partners, the somewhat secretive buyout firm that made headlines with its recent investment in BankUnited, last month closed on $460 million toward a “Special Credit Partners” fund with an undisclosed target. The fund had 37 investors at the time and serves as a follow-up to the firm’s first hedge fund-buyout fund hybrid vehicle, Centerbridge Capital Partners LP, a $3.2 billion pool raised in 2006. Somehow in the last few weeks, the firm has nearly doubled that amount, filing a Form D this week listing $850 million commitments from 40 investors. That’s just three more than its prior close, which indicates those three investors committed a total of $390 million. Not bad. The fund is designed to invest in distressed debt and according to a report, has a $2 billion target.
1 min read · 06 July 2009
5AM Ventures, an early-stage venture capital firm focused on life sciences, has passed $150 million fundraising target on its third fund, according to a regulatory filing. It now has $159.2 million in capital commitments from 34 accredited investors, compared to $119.25 million disclosed in an April filing. The firm's second fund closed in 2006 with $150 million. Based in Waltham, Mass., and Menlo Park, Calif., 5AM was formed in 2004, raising a $65 million fund. It’s led by managing partners Andrew Schwab, Scott Rocklage and John Diekman.
1 min read · 06 July 2009
Here’s a look at the past two weeks of scoops, opinions and analysis from the peHUB blogging team. LBO-Backed Bankruptcy List: On Pace to Double Last Year's Total Fund Performance Data Dump Fund Performance Data Dump (Part Deux) VC-Backed IPOs Rise Infinitely in Q2 Private Equity Activity Falls in Q2 Global PE Fundraising Rises in Q2 PCG Pays $2 Million To Escape New York Probe Escape from New York (Part II) 88% of PE Firms Have Cut Portfolio Company Headcount Los Angeles PE Firms To Buy Century-Old Tulsa Pipe Company Highland Capital Delays Fund Close Ashmore: Private Equity Is Deep Underwater Of Work Ethic and Private Equity Bain Capital Offers To Cut Size of Co-Invest Fund KKR Proposes A Double Secret Reverse IPO
3 min read · 02 July 2009
The Private Equity Council isn't going to let federal regulators off so easily this time around. Last month, the private equity lobby supported the government's requirement that buyout firms register with the SEC, even while arguing that "private equity firms do not create systemic risk." Today, however, the PEC came out against proposed FDIC guidelines for buyout firm investments in banks, saying that they go to far and would be counterproductive. "We hope that the comment period yields changes that facilitate the flow of private capital into the banking system, consistent with the Administration's other efforts to address the financial crisis," said PEC president Doug Lowenstein. To recap, the proposed rules include a minimum three-year hold time, capitalization requirements, cross-guarantees for firms with multiple banks in its portfolios, and extensive disclosures, particularly regarding ownership structures.
2 min read · 02 July 2009
Happy July 4th! Bloggers Gaining Steam: Goldman Sachs responds directly to blogger Zero Hedge. (Zero Hedge) Lists: Dumbest Moments in Business, Mid-Year 2009. I think we could add a few buyout moves to this list as well... (Fortune) Fighting Fund of Funds? "Private equity funds of funds are increasingly under fire. Not only do they reduce returns, but they do not minimise risks" (IP&E) Hours Versus Heads: The decline in aggregate hours worked has been frighteningly consistent over recent months. (Freakonomics) Student Loan Horror Story: How a law school grad that passed the bar is being denied admission because of his $400,000 student loan load. (Law Blog)
2 min read · 02 July 2009
As usual, we have a week’s worth of ratings actions on buyout-backed companies from Standard & Poor’s and Moody’s Investor Services. This week was slow with two little downgrades and two withdrawals. Company: Yell Group PLC Sponsor: Apax Partners Downgrade: S&P lowered its long-term corporate credit ratings to 'B' from 'B+'. Highlights: "The downgrade reflects our concerns about the faster-than-expected deterioration of Yell's operating performance and liquidity profile, which is no longer commensurate with a 'B+' rating," said Standard & Poor's credit analyst Manuela Gabetta.
2 min read · 02 July 2009
See you back here in a week! Claw it Back: The NY Post is pretty sure Apollo will be paying a few clawbacks in the coming quarters. (NY Post) Give Bankruptcy A Chance: Bear Stearns should have been allowed to go bankrupt. (Weekly Standard via Clusterstock) Green Shoot Myself In The Head: CNBC Europe is "sick" of the phrase green shoots. (Clusterstock) Who isn't? Even Maria Bartiromo is backpedaling on her gushing use of the phrase. Bank of AMerrilca: Bank of America Merrill Lynch has launched its new branding campaign, with the horrible tagline, "Signed, Sealed and Delivering." Merrill's famous bull logo is out (with apologies I'm sure to the Merrill Lifers who had it etched into their hot tubs and pruned into their gardens). (Dealscape)
1 min read · 22 June 2009
