Private Equity
As you may remember, private equity firms need to be careful about the amount of secondary exchanges between their investors. If a firm exceeds 2%, a set of mildly draconian rules require it to register as a public partnership. As explained in a previous blog post, a firm can see up to 10% trade if it uses a qualified matching service, or QMS. With all eyes on the secondary market, it’s no surprise that QMS service providers have seen an uptick in business. Lawrence Allen, a managing member of QMS provider NYPPEX, estimates that 20% of all buyout funds have already hit their 2% target for this year. Meanwhile, he predicts that number will increase to 50% by June.
3 min read · 30 March 2009
Shrinkage: AIG's private equity funds have seen a decline as steep as that of Terra Firma. (WSJ) Everyone's Talking About: The worthlessness of MBAs. Matthew Stewart writes, "The economic crisis has exposed the myth of business-school expertise." (The Big Money) AIG Wife: "We Were Betrayed!" (Clusterstock) Editorial: The Deal's Robert Teitelman discusses the exit stage left of "equity culture" and incoming of populist culture. (Dealscape) Something About This Headline: GE Cap Tries To Reposses Jalopy Jet. As a lender to a bankrupt clothing company, the firm gets the exciting task of liquidating its near-worthless assets. (Dealscape)
1 min read · 27 March 2009
As usual, we have a week's worth of downgraded LBO-backed companies from S&P and Moody's. Only four -- which is the same number of withdrawals due to Chapter 11 or default. That latter group includes Charter Communications, backed by Kelso & Co. and Oak Hill, BI-Lo, backed by Lone Star Funds, as well as Indalex, backed by Sun Capital Partners. Company: Network Communications Inc. Sponsor: Citigroup Private Equity Downgrade: S&P lowered the company's corporate credit rating from lowered to 'B-' from 'B'. Highlights: "Revenue and EBITDA were down 20% and 38%, respectively, for the third fiscal quarter ended Dec. 7, 2008, largely due to a decline in ad pages at the company's largest publication, The Real Estate Book (TREB)."
2 min read · 27 March 2009
2 min read · 27 March 2009
George Siguler isn't too fond of Wall Streeters who complain that they're the target of populist rage. In a keynote interview at today's Buyouts East conference, he told the crowd, "The AIG concumstance ought to be a lesson to everyone in this room. There is a big part of America that doesn't think very highly of us." He later said of AIG, "When you look at the amount of wealth destruction, it's just out of whack. People in Detroit or St. Louis don't understand it, and they might work just as hard as we do, they just didn't have the same opportunities presented to them as we did. If the system feels unfair, sooner or later, people are doing to do something about it." Other highlights of his interview, which was conducted by Frank Morgan of Coller Capital, are after the jump...
3 min read · 26 March 2009
Reporting from the 21st Annual Buyouts East conference at the Grand Hyatt in New York, I bring you the highlights of this morning's LP panel. In a lightening round, panelists were asked if they would back a first-time fund this year. Here are their answers: Barry Gonder, Grove Street Advisors: Maybe. If it were a spin-out of a top tier manager who teamed up with some serial entrepreneurs, or a top decile manager. Kevin Kester, Siguler Guff: Maybe. We have in the past, so if it it within out funds-of-funds strategies, such as BRIC or distressed, then yes. Bill Walsh, Portfolio Advisors: Yes, we will probably do one or two. The host of those will be done through secondary deals, though. Charlie Van Horne, Abbot Capital: No, unless it was a spin-out. Other highlights from the panel, including the panelists' thoughts on the New York pension pay-for-play scandal and GP/LP relations, after the jump.
2 min read · 26 March 2009
Update: The story was updated to report that one person from Fifth Street's LA office was laid off, not two. When we wrote about the storm of layoffs at mid-market lending houses last month, we had covered just about all of the main players. We forgot one, though. Fifth Street Capital laid off a “small handful” of its staff in late February, the firm confirmed. The spokesperson attributed the layoffs to a “lack of deals and the current environment,” adding that the firm had hired analysts related to its IPO last year. The headcount reduction was four, leaving the New York-based BDC with an 18-person staff, according to its website. The spokesperson maintained that the firm continues to do origination out of its LA office, despite rumblings that that office, which saw one of its three employees cut, would close.
2 min read · 24 March 2009
Beyond the Money: "Surprisingly, some of the most important resources from a VC isn't the financial funding." (Web Strategy by Jeremiah) Help Wanted: Small advisory shops are still hiring, Dealscape reports. (Dealscape) George Soros: All This New Regulation Is Just ‘Tinkering' (Deal Journal) Scoops: Bain hired a restructuring adviser for portfolio company Ideal Standard. The company was purchased as recently as 2007. (Debtwire) A VC: On Financial McCarthyism. (A VC) Slow Descent Into Alcoholism: "Cocaine and martinis On Wall Street? Nothing new there. Masters of the Universe admitting they have an alcohol problem? Not so common." (Reuters)
1 min read · 24 March 2009
Courtesy of Churchill Financial's weekly "On The Left" newsletter, here is one senior GP's take on the difficulties of the market these days: “Remember your eighth grade algebra? Figuring out the buyout game today is like trying to solve a three-variable equation. Assume ‘x’ is the target’s earnings, ‘y’ is the purchase price multiple, and ‘z’ is your cost of capital. With three unknowns, you can’t solve the equation.” The entire newsletter is available here.
1 min read · 24 March 2009
Despite the past year’s spike in corporate bankruptcies, The Blackstone Group's Timothy Coleman implied that the number has actually been kept down by companies finding new alternatives. Coleman, who is the firm’s Co-Head of Restructuring and Reorganization Advisory, said he’s seen a shift in the nature of the restructuring process over the last year. The comments were made at this morning’s Reuters Private Equity and Hedge Fund Summit in New York. “We’ve seen an increase in the number of out-of-court deals,” he said. “People realize that just going into Chapter 11 isn’t the only way to go.” Coleman cited the example of C-BASS, a New York-based residential mortgage asset issuer that retained Blackstone Group’s restructuring group in 2007. He said the firm worked out a long term restructuring plan that TKKTKs for the next 25 years. “It’s a great example of a deal that before, we would have thrown the company into Chapter 11.”
2 min read · 24 March 2009
