Young guns blazing

Philipp Freise, a partner with New York-based investment giant Kohlberg Kravis Roberts (KKR) for eight years, believes private equity can save the world.

Freise, whose name was included on the World Economic Forum's 2009 Young Global Leaders list, insists that the private equity model of long holding periods for investments combined with good governance practices, can be a way for business to pull itself out of the economic downward spiral.

“The concept of patient, long-term investment is one that will be even more essential going forward,” Freise said during an interview. “We have demonstrated how we can be responsible owners of firms and have demonstrated significant commitments to our communities, and I think we can be partners with governments around the world during this period to take on significant responsibility beyond our traditional mandate.

“[Governments] are bailing out companies, banks, and they're helping to protect jobs, and ultimately I think they want to work hand-in-hand with people who do that for a living – investing and making companies better,” Freise said.

Freise was one of several private equity professionals on the list. Others included Ben Gray, managing director, partner and head of operations in Australia and New Zealand with TPG, and David Novak, a partner with Clayton, Dubilier & Rice.

Freise joined KKR's London office in 2001, prior to which he was co-founder of Venturepark, a Berlin-based early-stage venture firm sponsored by German media giant Bertelsmann, Goldman Sachs and the former DaimlerChrysler. He also worked for consultant McKinsey & Co.

Outside private equity, Freise is a member of the Atlantik-Brucke, a private, non-profit association that focuses on strengthening understanding between Germany and the US and developing programmes across a range of political, economic and social topics.

As a member of Atlantik-Brucke, Freise said he interacts with other young leaders in their fields and has been “advocating the ownership and incentive model of private equity and that it can be an important part of the potential solution for a lot of the problems we're living through”.

As senior members of private equity firms look to the next few years and some conclude that retirement is a preferable option to the slog that lies ahead, eyes inevitably turn to the younger generation as they seek to demonstrate that both they and the industry can emerge from recession with their reputations intact. Confidence in private equity's raison d'etre and transformational ability is a good start.

LEAVING LEVERAGE BEHIND
Pine Brook Road Partners has held a final close on $1.4 billion for its debut fund that will focus on the financial services and energy sectors. The firm, led by Warburg Pincus veteran Howard Newman, will provide capital to create and grow businesses and says it will not use financial leverage to bolster returns.

HYBRID FIRM HIRES GOLDMAN VETERAN
Hybrid firm Angelo Gordon has hired Goldman Sachs veteran Arthur Peponis to co-head its special situations and private equity group. The group closed its fourth fund on $650 million at the end of 2008 after about a year of fundraising. The fund includes many returning investors.

APOLLO EYES OIL AND GAS COMPANY
Apollo Global Management has offered $435 million to buy oil and gas company Legacy Reserves. The offer, equivalent to $14 per share, represents a premium of 42 percent over the closing price of the company's shares on 2 April. The company's board of directors must approve the transaction.

SK CAPITAL WANTS $500M FOR FUND II
SK Capital Partners, which spun out of Arsenal Capital in 2007, will begin raising its second fund targeting $400 million with a hard cap of $500 million later this year. The fund has already raised about $100 million in private capital and will approach institutional investors this autumn.

FIRMS BATTLE OVER LINENS
Levine Leichtman Capital Partners has sued Apollo Global Management, alleging the mega-buyout firm made false statements about the health of Linens ‘n Things prior to Levine Leichtman making a loan to the now-bankrupt retailer. One of Levine's leveraged loan funds held $43.5 million in senior secured notes in Linens ‘n Things.

FASB RELAXES MARK-TO-MARKET
The Financial Accounting Standards Board (FASB) has voted to relax mark-to-market rules that require assets to be valued at prices reflecting current market conditions, allowing firms to use “significant” judgment when determining the price of their investments. The new guidelines applied from the beginning of the second quarter.

PORTFOLIO ADVISORS RAISES $1BN
Funds of funds manager Portfolio Advisors has closed its fifth private equity fund of funds on $1.05 billion. The Connecticut-based advisory group raised $982 million for PAPEF IV in 2006 and 2007, and has also “essentially met” its target for its third real estate fund of funds, which has closed on $147 million.

WARBURG BUYS ICE
Warburg Pincus has bought the ice manufacturing business of diversified manufacturer Manitowoc for $160 million. Warburg bought the business line, which includes operating entities Frimont, Scotsman Group, CastelMAC and Ice-O-Matic, after Manitowoc was required to divest the assets in order to achieve US and European approval of its $2.7 billion acquisition of food equipment maker Enodis.

KKR JOINS MEZZANINE CLUB
Kohlberg Kravis Roberts will join the ranks of other private equity players looking to offer mezzanine financing, as it raises a fund targeting between $1 billion and $3 billion that will invest globally in large companies through senior notes, subordinated debt or preferred stock. The mega-firm has a dedicated mezzanine team to make investments in the asset class.

PLATINUM PURCHASES SAN DIEGO PAPER
Amid the current period of upheaval in the newspaper industry, distressed investor Platinum Equity has agreed to purchase the San Diego Union-Tribune for an undisclosed sum. Although the now-bankrupt Tribune Company, MediaNews Group and buyout firm Yucaipa all expressed interest since the paper was put up for sale, Platinum turned out to be the only serious bidder.

OAKTREE TARGETING $5BN FOR FUND
Oaktree Capital Management is targeting $5 billion for its fifth principal opportunities fund, which will focus on debt-for-control investments. Oaktree Principal Fund V held a first close in February and is expected to hold another in April, while the firm is also in talks to acquire the UK's largest estate agent, Countrywide.

GTCR ESTABLISHES PHARMA PLATFORM
Fresh from its $900 million exit from Ovation Pharmaceuticals, GTCR Golder Rauner has set up a $200 million pharmaceuticals platform with Abbot Laboratories veteran Ed Fiorentino that will be called Actient. To support Actient's acquisitions of speciality pharmaceutical companies and products, GTCR will invest up to $200 million in equity from its ninth private equity fund.

INDUSTRY CLOSES FIFTH FUND
Industry Ventures has closed its fifth fund on $265 million, more than doubling its pred cessor, which closed on $105 million in 2005. Originally targeting $200 million, the fund was granted limited partner approval to increase its size given investor demand and market dynamics, Industry said.

PE-BACKED CHARTER FILES CHAPTER11
Cable TV firm Charter Communications, whose debt holders include Apollo Global Management and Oaktree Capital Management, has filed for bankruptcy protection in an effort to unload at least $8 billion in debt. The company, whose debt load had grown to $21.7 billion by the end of last year, added that it does not intend to seek debtor-in-possession financing.

LEH MAN SPINOUT HAS$1.7BN
Trilantic Capital Partners, the firm that has emerged from Leh man Brothers Merchant Banking, has $1.7 billion of dry powder and will be looking for opportunities to invest in over-levered companies looking for equity capital. Trilantic will apply the strategy across various sectors, including energy, healthcare, financial services and consumer. The firm has three years left to invest its remaining capital. Trilantic officially spun out from Lehman Brothers Merchant Banking on 10 April. More than 300 limited partners in the merchant banking funds voted in March to approve the management spinout.

SUN HAS $150M FOR RE-INVESTMENT
Sun Capital Partners plans to use $150 million to re-invest in the portfolio companies of its $1.5 billion fourth fund. Half of the amount will come from the firm's most recent $6 billion fifth buyout fund. The money will be used “to complete the investments of the 43 portfolio companies of Fund IV”, according to a person with knowledge of the situation. Limited partner advisory boards for Funds IV and V approved the use of the money for growth and add-on investments.

HICKS SPORTS VEHICLE IN TALKS WITH LENDERS
Tom Hicks, co-founder of the Dallas buyout firm formerly called Hicks Muse Tate & Furst, has been served notice of default from a group of lenders of his Hicks Sports Group, which owns the National Hockey League Dallas Stars and the Major League Baseball Texas Rangers. Hicks Sports Group is negotiating with a group of 40 lenders to restructure its more than $500 million debt load. The default notice is the first step in a process that could put the professional sports teams in the hands of the lenders, a collection of large banks and smaller investment funds, according to the Wall Street Journal.

$5.5BN FOR GOLDMAN SECONDARIES FUND
Goldman Sachs Asset Management has raised $5.5 billion for its fifth secondaries fund with returning and new limited partners from the Americas, Europe, Asia and Australia. The fund, GS Vintage Fund V, will be used to acquire portfolios of private equity assets, including LP interests in private equity funds. The fund also will provide liquidity to LPs and GPs around the world. Goldman announced the fund's launch in May 2008 and said it would target between $3 billion and $5 billion, according to a private equity markets report from RR Donnelley.

TEXAS PENSION BACKS HELLMAN & FRIEDMAN
The Employees Retirement System of Texas has committed $100 million to Hellman & Friedman's seventh fund, which is reportedly targeting $8 billion and has so far raised $6 billion. The $21 billion pension made the commitment in February and released the information after a public records request. The pension also committed $100 million to Carlyle Group's fifth buyout fund, but declined to provide the date the commitment was made. Carlyle V closed on $13.7 billion earlier this year.