Side Letter: Rescue loan breakthrough, BlackRock and Goldman updates, Permira re-org

The debate around PE portfolio companies' access to rescue funding continues, with UK financial sponsors making some headway. Here’s today's brief, for our valued subscribers only.

Just happened

PEI bulks up

First some exciting news from Side Letter’s publisher PEI Media: from today we have a new hire in the form of editorial veteran Rich Melville. Melville, previously group editorial director, banking and capital markets at Arizent (formerly SourceMedia),  joins as editorial director US, based in our New York office. More details here.

Relief in the UK


PE portfolio companies in the UK and their sponsors can breathe a sigh of relief after the UK government on Thursday widened access to emergency funds to include private equity-owned companies amid the coronavirus crisis. Companies can borrow up to £50 million ($61 million; €56 million) as part of the Coronavirus Large Business Interruption Loan Scheme. The industry had been lobbying for access to such loans, designed to offer lifelines to businesses hit by the crisis. The devil is in the detail, of course – on Friday the British Private Equity & Venture Capital said it would study the government’s offer “very carefully”.

Who CARES about PE? 

In a column for the New York Times’ DealBook last week, corporate law professor Steven Davidoff Solomon writes that whatever critics think about “bailing out” PE funds (ie, allowing them to access funding through the CARES Act), public pensions rely on them for returns and portfolio company employees rely on them for jobs. In our view, this much is irrefutable. Those who wish to see the private equity industry reformed should concentrate on the “front end”: imposing any restrictions or regulations before investors have made commitments, before companies have been purchased. Punishing the industry for its perceived faults as managers scramble to shore up jobs and preserve investments only harms those very pensions and employees society is striving to protect. What are your thoughts? Let us know.

Earnings watch

Goldman Sachs and BlackRock held first quarter earnings calls last week. Here are the highlights:

– Goldman’s $19 billion private equity portfolio suffered $500 million in mark downs “reflecting the underlying operating performance of the businesses”, according to CFO Stephen Scherr. The firm generated $775 million through divestments.

– “About 20 percent” of the private equity portfolio is “directly impacted” by the virus, Scherr said.

– BlackRock recorded one of its best quarters for alternatives, raking in $7 billion across its secondaries and infrastructure funds. This was the bright spot: AUM dipped back below the $7 trillion watermark, down 12 percent to $6.47 trillion. Compared with the equivalent period the year before, Q1 earnings fell 23 percent.

He said it

“Broken deals are incredibly rare in secondaries, but they are happening now”

Steve Lessar, co-head of secondaries at BlackRock Private Equity Partners, on the state of the market.


Private markets fundraising: a mixed picture. Last week we published the fundraising data for Q1 and it painted a rosy picture as the fallout from the covid-19 crisis had yet to flow through to headline numbers. Elsewhere in private markets, the fundraising data was mixed. Private equity real estate numbers were bolstered by big closes from Blackstone and PAG, but were still on the low side. Q1 in infrastructure was the largest on record thanks in large part to a $20 billion Brookfield fund. Private debt recorded its slowest ever quarter, which follows a downwards trajectory since 2017,  as firms seek to deploy record volumes of capital raised in recent years.

Japan special. ICYMI: you can view our Japan special report here.

Permira re-org. Permira is combining its financial services and industrial tech and services teams into a single services unit to better access opportunities presented by the market environment, Philip Muelder, a partner at the firm and global head of the unit told PEI. There will be no reduction in staff and the effort is “pure business build”, we are told. In line with this, the firm aims to deploy €1 billion annually for services deals or “businesses that prove resilient to the covid-19 dislocation” via its €11 billion buyout fund Permira VII and its $1.7 billion growth opportunities fund. Permira announced the move to its investors in a memo on Friday.

What you’re reading

What were the three most eagerly consumed pieces of content across our titles last week?

1. In pole position was this 5-minute video, in which two recruiters talk Adam Le through the intricacies of a PE job market in which face-to-face meetings are off the agenda and budgets are under scrutiny.

2. The next most viewed was this discussion between infra investors from BlackRock, AMP Capital, Macquarie and Schroders on how their businesses are reacting to covid-19. Infrastructure Investor‘s annual Global Summit in Berlin has become the meeting place for the private infrastructure investment community. Usually in March, the in-person element of this year’s event has for obvious reasons been rescheduled to October. In the meantime, the II team is bringing subscribers Global Summit On-Demand, of which this 25-minute panel session is a part.

3. In third place: this analysis of which firms were the busiest in the depths of the last crisis from Carmela Mendoza. This insightful piece ranks the largest deals, the busiest firms by number of deals, the most active sectors and other key data points in the 12 months following the collapse of Lehman Brothers in 2008. Apposite intel as we head into the next great dislocation.

Dig deeper

LP meetings. It’s Monday, so here are some LP meetings to watch out for this week.

We would love your feedback to help us make this newsletter more useful; click here to give us your opinion.

Today’s letter was prepared by Toby MitchenallIsobel MarkhamAdam LeRod JamesCarmela Mendoza and Alex Lynn.

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