Private Equity
Further proof that finance and rock music shouldn't mix: Pink Floyd is suing music label EMI and Terra Firma, its private equity backer. Terra Firma's ownership has been blamed for the departure of such acts of Radiohead and Paul McCartney from EMI's stable of artists. Now Pink Floyd, its second-best-selling artist (topped only by the Beatles), claims EMI miscalculated its royalty payments. EMI has certainly proven to be a nightmare for Terra Firma and perhaps the biggest misstep of its former leader Guy Hands' career. (Remember the attempted Music-Backed Securities?) He stepped down as CEO after the company was written down by half, causing the firm to take a €1.39bn loss in 2008. The move was regarded as largely symbolic
2 min read · 21 April 2009
The distressed mortgage fund managed by Pacific Investment Management Co. (Pimco) hasn't shown any signs of improvement in Q1. In fact, it declined ever-so-slightly again, according to confidential fund documents obtained by peHUB. Last month we reported that the fund had earned a return of -34.5 since its inception in October 2007. That included a 25% drop in the fourth quarter. Well, in the first quarter it fell another 12.7%, dropping the total loss to -35.5 percent. The total capital contributions to the fund's offshore feeder is $1.58 billion (the total fund is $2.866 billion). The NAV of those assets is $849 million. The firm's explanation isn't too different from its last one:
2 min read · 21 April 2009
Totally OK With This: Obama Administration's answer to "Chooch-gate." (CNN) Daniel Gross Asks: What's with all of this "green shoots" talk and does it mean anything? (Slate) Slighted: Financial journalists were given the short stick in Pulitzer-land, after spending a year covering the biggest story of many of their careers. (Clusterstock) Felix Salmon has a few theories as to why. (Reuters) Changing The Way We Raise Funds: As a result of this NY Kickback Scandal mess, Carlyle Group is ditching placement agents for future fundraising efforts. (FT) Sounds like a familiar idea... (peHUB) Leak Is A Hoax: Did a fake leak really cause the stock drop today? (Market Movers)
1 min read · 20 April 2009
Sun Capital’s annual investor meeting last week in Boca Raton wasn’t a very sunny affair, according to attendees who spoke with peHUB. The firm discussed its writedowns, including company-specific ones, and a plan to prop up its fourth fund with money from its fifth fund. We have all the details below. Fund To Fund Sun Capital was previously reported to be raising an annex fund to its fully deployed fourth vehicle, Sun Capital Partners IV. The word "annex" is not accurate, peHUB has learned, as the firm has told investors it would take too long to go through the formal process. Instead, Sun Capital has created an amendment to fund four. The plan is to commit $150 million to fund four from its existing funds and investors. Half of the $150 million will come from its
4 min read · 20 April 2009
Data Overload: Prequin has released its Q1 private equity report. I'll take a deeper dive into the 30-page report later, but you can view the entire thing here. (Prequin) Buyer and a Seller: A look at eBay's deal history reveals that "the corporate bosses at eBay's Silicon Valley headquarters must have their investment bankers on speed dial." (Dealbook) Still Dreaming of '06: Dominick DeChiara, who heads the private equity group at Nixon Peabody LLP, tells Suzanne Stevens that from lower prices, to financing outs, to more flexible material adverse change clauses, sellers need to adjust expectations in what remains a buyers market. (Dealscape) Drama: So, the liquidators (Hilco and Gordon Bros.) won the auction for Polaroid (with more than 30 bidders). Patriarch Partners' Lynn Tilton is not happy about it, saying the judge has overruled her bid because "she wasn't liked." (I'm not happy about it because I don't want Polaroid products to go away!) She went on CNBC to say she'll file a temporary restraining order (video posted below). Meanwhile, I'm not sure what to make of this but Dealbreaker unearthed some Christmas cards Tilton sent around to her clients in the 80s (Somewhat Unsafe For Work). High Profile Week: We get two IPOs and a Goldman follow-on and everyone's a bull. In its weekly scorecard, Thomson Reuters released some datapoints on public offerings from this week. (Thomson Reuters)
2 min read · 17 April 2009
Here's a look at the past week's scoops, opinions and analysis from the peHUB blogging team. This week there was a little more good news than last week (Steve Rattner nothwithstanding, we've outlined that coverage at the bottom). Our most underrated story of the week was news that Goldman's much-discussed $5.5 billion secondary fund was already marked down by 12%. Yikes. And covering eBay's M&A action and two PE-backed IPOs almost made us forget we're in a banking crisis and recession. Almost. On eBay, Dan interviewed Jim Breyer of Accel Partners, one of the investors helping StumbleUpon's founders to repurchase the company from eBay. Connie noticed that the company's new owners were quickly making their presence felt. Meanwhile, I closely followed the press leaks on eBay's potential sale of Skype to a consortia of PE firms. Soon after we learned that eBay would take Skype public, and that surprise, Skype is pretty damn profitable. On the IPO front, I learned that ABS Capital is poised to make 6x its money on Rosetta Stone, the firm's third successful education exit. Phil Clough of ABS provided some background on the deal. Elsewhere in PE-land, former Willis Stein and Bear Stearns pros launched their own placement agency, according to Buyouts magazine. Alex reported that LPs are fleeing Russia, and Nassim Nicholas Taleb lodged a controversial diss on private equity, calling LBOs "Ponzi-like" and launching a debate among our commenters. And as usual, we posted a week's worth of ratings downgrades on the debt of LBO-backed companies, thanks to S&P and Moody's. This week there were eight. On the PE fundraising side, we reported that Carlyle was near the halfway point of its Asian buyout fund and Mistral Equity is wrapping up its debut fund. I interviewed Quarry Capital, a new buyout firm, after it announced its first ever deal. Then Connie spoke with K9 Ventures, a new seed stake investor and Quest Venture Partners, a another new seed stage investor. In case you're wondering just how difficult that is, Connie interviewed with ex-Googler Aydin Senkut on founding a VC firm from scratch. Meanwhile venture fundraising was both down and up in Q1. Another VC firm, TransLink, may have to lower its fundraising target. Investment-wise, venture firms had a "terrible" quarter. We learned some venture industry entities are pushing for a Federal VC fund-of-funds. VC firm Highway 12 lauded the benefits of social networking as a way to communicate with LPs, and Madrona Venture Group hired Twitter Expert Damon Cortesi as an entrepreneur-in-residence. Dan reported that Inventables, a contract physical innovation center company, is trying to reinvent itself as an online B2B marketplace with a little help from VCs. Stealth-mode online ad company Dataxu raised some money. Green Accelerator launched a lighting startup and Kwiry, a young startup, decided to shut down. Without fail, the New York kickback scandal provided fertile story material. Even before news of Steve Rattner's involvement broke, Dan declared, "Its Time to Change The Way Funds Get Raised." You can read Dan's initial reaction to Chooch-gate (can I call it that?) and my assessment that Rattner's involvement "affects everyone." We asked, if Rattner gets removed from his "car czar" position, will he go back to Quadrangle? We also learned that the firm's investors will vote this week to determine the fate of their remaining funds in Quadrangle Capital Partners II. And of course, we couldn't resist posting the trailer for Rattner's masterpiece, "Chooch." On top of that, Dan posted the most recent Attorney General charges, and Buyouts' Bernard Vaughan got Aldus Equity to discuss its involvement in the case. Lastly, First Read and Second Opinion covered plenty of ground, including ethical companies, suing Blackstone, VC market timing, poison puts, bankers vs. economists, a "reality check" for private equity, Sam Zell on his Tribune mistakes, advice for unemployed MBA grads, and TARP's Elizabeth Warren on the Daily Show. Previous weeks: peHUB Rewind
3 min read · 17 April 2009
Update: The deadline for LPs to decide whether they will terminate their investment in Quadrangle due to Rattner's departure is one week from today, peHUB has learned. Plenty of people are wondering if Steve Rattner's involvement in the NY State Common kickback scandal will lose him his job as President Obama's top auto industry advisor. It seems obvious that he'd be shown the door, even if he told the U.S. Treasury about the investigation before Obama took office. It raises the question: Will he go back to Quadrangle? The firm recently put its fundraising on hold because of his departure. Meanwhile, he triggered a key man provision on older funds when he left (including Quadrangle Capital Partners II, the one under indictment). That key man provision requires a vote which had a deadline of April 24, a source said. LPs will be
2 min read · 17 April 2009
As usual, we have a week's worth of downgrades on the debt of private equity-backed companies from Standard and Poor's and Moody's. (Reminder: We'd call it an upgrade wrap-up if the ratings agencies ever issued on. In eight weeks of doing this column, we've seen one.) This week there are eight, including an unsolicited rating, which we welcome as a step in the right direction for the previously "censored" ratings agencies. Besides, as we pointed out last week, too many companies are asking the agencies to withdraw their ratings just because they don't like getting downgraded. Bain Capital and GS Capital were this week's repeat offenders. Company: Harman International Industries Sponsor: GS Capital and KKR Downgrade: Moody's lowered the comapany's corporate family and probability of default ratings to B1 from Ba2. Highlights: "The B1 Corporate Family Rating reflects further expected deterioration of Harman's operating performance and resulting credit metrics over the intermediate term from the significant reductions in demand for the company's products."
3 min read · 17 April 2009
In light of this morning's news, we wanted to share the gem that is "Chooch" once more. Below is the trailer for the cheesy movie that has found itself into the center of the New York pay-for-play pension scandal. State of NY’s Chief Investment Officer David Loglisci and his brothers reportedly took money from PE pros to produce "Chooch" in exchange for commitments to their funds. Now today we found out a Quadrangle Partners-backed company (which is now bankrupt) had purchased the distribution rights to the work of theatrical genius, which a RottenTomatoes.com review that called “an absolute chore to sit through."
1 min read · 17 April 2009
The ramifications of Steve Rattner's involvement in the New York kickback scandal have finally extended beyond the private equity world--this one goes "all the way to the top," as they say. As I try to wrap my mind around the potential ramifications of this development, I thought I'd share my list of who exactly Rattner's involvement, if proven, affects. Quadrangle Funds - This will surely affect the upcoming key-man vote on Quadrangle's second fund, a $2 billion pool closed in 2005. It had about 25% left to be deployed, and investors have had the option to rescind their remaining commitment since Rattner left his post at Quadrangle to be Obama's "car czar."
3 min read · 17 April 2009
