Private equity funds raised a record $59 billion for investments in emerging markets in 2007, a 78% increase over 2006, according to the Emerging Markets Private Equity Association (EMPEA).
Washington, D.C.-based EMPEA found that the private equity community has raised $118 billion for emerging-market investments over the past three years, compared to $13 billion from 2001 to 2004.
About 49%, or $28.7 billion, of the capital raised in 2007 went toward opportunities in Asia. Nevertheless, the amounts raised for Central and Eastern Europe grew more than 300% over 2006 levels, followed by a 71% increase in private equity capital for the Middle East and a 66% rise in capital for Latin America.
"2007 was a year of significant milestones for the asset class," said Sarah Alexander, EMPEA president. "What was once a primarily development finance-backed experiment is now, in many emerging markets, a credible, commercial asset class attracting sizable investments from well-known institutional investors, including public pension funds."
The average fund size for those focused on emerging markets also increased to $426 million, compared to $272 million in 2006. Funds concentrating on investments in natural resources, technology, infrastructure and agriculture also grew significantly, especially those focused on India.
"2007 seemed to be the year of infrastructure in some markets," said Alexander. "In India, investments in infrastructure will be vital to ensure that the pace of economic growth can be sustained. For investments in the industrial and agricultural sectors to bear fruit, India needs better roads, better ports and more reliable energy supplies, and private equity funds are gearing up to finance these projects."
In addition, EMPEA finds that dealmaking in emerging markets has not been affected by the credit crunch. "The markets need time to adjust to this new environment, but it's unlikely we'll see the same level of difficulties in getting deals done relative to the US and Western Europe, primarily because use of significant leverage is less prevalent in private equity deals in the emerging markets, and, when debt is used, it can often be provided by local banks that aren't affected by the credit squeeze," said Alexander.
The Only Banker Warren Buffett Likes
Is Goldman Sachs Group’s Byron Trott better than an investment banker?
Warren Buffett seems to think so. You see Buffett famously disdains investment bankers. He even boasts in his latest letter to investors of how his Berkshire Hathaway did its largest cash purchase in the company’s history—the $4.5 billion acquisition of a majority of Marmon Holdings from Chicago’s Pritzker family—while “employing no advisors” and that the price was arrived at “using only Marmon’s financial statements…no nit-picking.”
But that “no advisors” is open to interpretation, as Buffett singles out the participation in the deal of Trott, vice chairman of investment banking and the head of Goldman’s Chicago office and its Midwest banking group. While Trott technically was the Pritzker’s adviser, Buffett relies on him as well: “Byron Trott of Goldman Sachs–whose praises I sang in the 2003 report–facilitated the Marmon transaction. Byron is the rare investment banker who puts himself in his client’s shoes. Charlie and I trust him completely,” referring to Berkshire Vice Chairman Charlie Munger. In 2003, Buffett admitted that Trott “earns his fee.”
In the 2008 letter, Buffett also engaged in a little M&A mea culpa, admitting that his purchase of the Dexter shoe business in 1993–not a Trott deal–for $433 million was based on the evaporation in a few years of a competitive advantage he thought would be more durable. Compounding the error was using 25,203 of Berkshire A shares as currency. “That move made the cost to Berkshire shareholders not $400 million, but rather $3.5 billion. In essence, I gave away 1.6% of a wonderful business–one now valued at $220 billion–to buy a worthless business,” he writes. It was, he says, his worst deal yet, though he bets he will make more mistakes. His folksy explanation for it all: A line from a Bobby Bare country song: “I’ve never gone to bed with an ugly woman, but I’ve sure woke up with a few.”
Trott, a Midwesterner like Buffett, is one of Goldman’s longest-serving veterans, with more than 25 years at the firm, 14 of them at the partner level. He is one of the few pre-IPO partners still at Goldman. Buffett, 77 years old, is considering four Berkshire Hathaway candidates as successors. Will they need Trott’s deal-making acumen as well?
Warren Buffett seems to think so. You see Buffett famously disdains investment bankers. He even boasts in his latest letter to investors of how his Berkshire Hathaway did its largest cash purchase in the company’s history—the $4.5 billion acquisition of a majority of Marmon Holdings from Chicago’s Pritzker family—while “employing no advisors” and that the price was arrived at “using only Marmon’s financial statements…no nit-picking.”
But that “no advisors” is open to interpretation, as Buffett singles out the participation in the deal of Trott, vice chairman of investment banking and the head of Goldman’s Chicago office and its Midwest banking group. While Trott technically was the Pritzker’s adviser, Buffett relies on him as well: “Byron Trott of Goldman Sachs–whose praises I sang in the 2003 report–facilitated the Marmon transaction. Byron is the rare investment banker who puts himself in his client’s shoes. Charlie and I trust him completely,” referring to Berkshire Vice Chairman Charlie Munger. In 2003, Buffett admitted that Trott “earns his fee.”
In the 2008 letter, Buffett also engaged in a little M&A mea culpa, admitting that his purchase of the Dexter shoe business in 1993–not a Trott deal–for $433 million was based on the evaporation in a few years of a competitive advantage he thought would be more durable. Compounding the error was using 25,203 of Berkshire A shares as currency. “That move made the cost to Berkshire shareholders not $400 million, but rather $3.5 billion. In essence, I gave away 1.6% of a wonderful business–one now valued at $220 billion–to buy a worthless business,” he writes. It was, he says, his worst deal yet, though he bets he will make more mistakes. His folksy explanation for it all: A line from a Bobby Bare country song: “I’ve never gone to bed with an ugly woman, but I’ve sure woke up with a few.”
Trott, a Midwesterner like Buffett, is one of Goldman’s longest-serving veterans, with more than 25 years at the firm, 14 of them at the partner level. He is one of the few pre-IPO partners still at Goldman. Buffett, 77 years old, is considering four Berkshire Hathaway candidates as successors. Will they need Trott’s deal-making acumen as well?
Carlyle Hires UBS's Sarkozy to Lead Financial Unit
Carlyle Group, the Washington-based private-equity firm with $76 billion under management, hired UBS AG banker Olivier Sarkozy as co-head of financial-services investments.
Sarkozy, the half-brother of French President Nicolas Sarkozy, has been at UBS since 2003 and two years ago was named joint global head of the Zurich-based bank's financial institutions group. He will continue to work in New York, Carlyle said in an e-mailed statement today.
Carlyle, headed by David Rubenstein, started a financial- services group last year and has brought in executives including Sandy Warner, former chairman of New York-based JPMorgan Chase & Co., and David Moffett, ex-finance chief of U.S. Bancorp in Minneapolis. Sarkozy will run the group with David Zwiener, former president of Hartford Financial Services Group Inc.'s property and casualty insurance unit.
Sarkozy, 38, was at Credit Suisse Group prior to joining UBS. He worked on First Union Corp.'s 2001 purchase of Wachovia Corp., a transaction valued at $14.9 billion. He also advised ABN Amro Bank NV on its sale last year of LaSalle Bank to Bank of America Corp.
Carlyle's newly formed group has yet to complete a transaction.
Sarkozy, the half-brother of French President Nicolas Sarkozy, has been at UBS since 2003 and two years ago was named joint global head of the Zurich-based bank's financial institutions group. He will continue to work in New York, Carlyle said in an e-mailed statement today.
Carlyle, headed by David Rubenstein, started a financial- services group last year and has brought in executives including Sandy Warner, former chairman of New York-based JPMorgan Chase & Co., and David Moffett, ex-finance chief of U.S. Bancorp in Minneapolis. Sarkozy will run the group with David Zwiener, former president of Hartford Financial Services Group Inc.'s property and casualty insurance unit.
Sarkozy, 38, was at Credit Suisse Group prior to joining UBS. He worked on First Union Corp.'s 2001 purchase of Wachovia Corp., a transaction valued at $14.9 billion. He also advised ABN Amro Bank NV on its sale last year of LaSalle Bank to Bank of America Corp.
Carlyle's newly formed group has yet to complete a transaction.
Write-downs at a KKR unit
KKR Private Equity Investors, the publicly traded buyout fund of Kohlberg Kravis Roberts & Co., wrote down stakes in seven investments as a slowing economy hurt earnings and declining bond prices eroded the value of holdings, Bloomberg News reported Friday.
The fund marked down its stake in Dutch chip maker NXP by 25 percent and in ProSiebenSat.1 Media, the biggest broadcaster in Germany, by 27 percent, the company, listed in Amsterdam, said Friday. KKR also cut by more than 80 percent the value of its holding in ATU, the German car-repair company it bailed out last week.
"Capital is not nearly as plentiful as it was a year ago and the cost is much higher," Henry Kravis, a co-founder of Kohlberg Kravis, said during a conference call with investors. "It's possible to get deals done in this environment. It just takes more work and a lot of creativity."
Falling bond and loan prices indicate that private equity firms may struggle to profit from their investments, after a record $1.4 trillion of takeovers in 2006 and 2007. A slower U.S. economy is also hurting sales at the companies they own. KKR is raising €7.7 billion, or $11.7 billion, for its biggest European takeover fund.
Publicly traded private equity funds like KKR mark the value of their holdings to market each quarter and disclose the results, unlike traditional private investment partnerships.
The fund marked down its stake in Dutch chip maker NXP by 25 percent and in ProSiebenSat.1 Media, the biggest broadcaster in Germany, by 27 percent, the company, listed in Amsterdam, said Friday. KKR also cut by more than 80 percent the value of its holding in ATU, the German car-repair company it bailed out last week.
"Capital is not nearly as plentiful as it was a year ago and the cost is much higher," Henry Kravis, a co-founder of Kohlberg Kravis, said during a conference call with investors. "It's possible to get deals done in this environment. It just takes more work and a lot of creativity."
Falling bond and loan prices indicate that private equity firms may struggle to profit from their investments, after a record $1.4 trillion of takeovers in 2006 and 2007. A slower U.S. economy is also hurting sales at the companies they own. KKR is raising €7.7 billion, or $11.7 billion, for its biggest European takeover fund.
Publicly traded private equity funds like KKR mark the value of their holdings to market each quarter and disclose the results, unlike traditional private investment partnerships.
China Merchants Bank keen on buying into Visa IPO
China Merchants Bank is interested in buying into a planned U.S. initial public offering of shares by Visa Inc, the world's largest credit card network, but any deal would first need Chinese regulatory approvals, its president Ma Weihua said on Monday.
Merchants Bank, China's top credit card issuer, is also looking for major overseas acquisitions in which it could gain a controlling stake but it has no specific targets at the moment, said Qin Xiao, the bank's chairman.
"When we consider an overseas acquisition, we definitely want to buy a controlling stake or even 100 percent of the company," Qin said.
"However, we know that current U.S. regulations allow us to buy no more than a 20 percent stake (of a financial firm)," he added.
Despite U.S. restrictions, the bank is still interested in buying a portion of shares in Visa's proposed IPO, said Ma, in a move that could bolster the company's business ties with Visa and expand its card services in overseas markets.
Last month, Visa said it may raise up to $18.8 billion in the largest U.S. IPO, despite unsteady financial markets and a global credit crunch that could eat into transaction volumes.
"We are already a member of the Visa network ... We want to make a deal that can bring benefits to our bank," said Ma.
"But whether we can do this depends on Chinese regulations, so we have to seek approvals from the regulators first."
ON THE CARDS
Both executives were speaking to reporters on the sidelines of meetings of the Chinese People's Political Consultative Committee, a body that advises the National People's Congress, or parliament, whose annual session opens on Wednesday.
Merchants Bank had issued more than 20 million credit cards by the end of last year, accounting for about one-third of the domestic market.
Among Chinese lenders, Merchants Bank widely receives top marks from analysts for its retail banking services, partly due to its leading position in card services, although cash is still overwhelmingly preferred for most Chinese retail transactions.
Last month, Shanghai Pudong Development Bank a smaller rival, announced plans for a new share issue that aims to raise about 25 billion yuan ($3.52 billion) to boost its capital base and support rapid lending growth.
But Merchants Bank's Qin said: "We have no need to raise new funds unless we want to make big overseas acquisitions."
Ma said China's policy of monetary tightening would definitely have an impact on the entire banking sector, with demand for loans by Chinese enterprises still very high as Beijing seeks to use macroeconomic controls to cool down its potentially overheating economy.
Ma said his bank would have to obey guidelines and quotas for loan issuance set by China's banking regulator, which may slow its loan growth this year.
Merchants Bank, China's top credit card issuer, is also looking for major overseas acquisitions in which it could gain a controlling stake but it has no specific targets at the moment, said Qin Xiao, the bank's chairman.
"When we consider an overseas acquisition, we definitely want to buy a controlling stake or even 100 percent of the company," Qin said.
"However, we know that current U.S. regulations allow us to buy no more than a 20 percent stake (of a financial firm)," he added.
Despite U.S. restrictions, the bank is still interested in buying a portion of shares in Visa's proposed IPO, said Ma, in a move that could bolster the company's business ties with Visa and expand its card services in overseas markets.
Last month, Visa said it may raise up to $18.8 billion in the largest U.S. IPO, despite unsteady financial markets and a global credit crunch that could eat into transaction volumes.
"We are already a member of the Visa network ... We want to make a deal that can bring benefits to our bank," said Ma.
"But whether we can do this depends on Chinese regulations, so we have to seek approvals from the regulators first."
ON THE CARDS
Both executives were speaking to reporters on the sidelines of meetings of the Chinese People's Political Consultative Committee, a body that advises the National People's Congress, or parliament, whose annual session opens on Wednesday.
Merchants Bank had issued more than 20 million credit cards by the end of last year, accounting for about one-third of the domestic market.
Among Chinese lenders, Merchants Bank widely receives top marks from analysts for its retail banking services, partly due to its leading position in card services, although cash is still overwhelmingly preferred for most Chinese retail transactions.
Last month, Shanghai Pudong Development Bank a smaller rival, announced plans for a new share issue that aims to raise about 25 billion yuan ($3.52 billion) to boost its capital base and support rapid lending growth.
But Merchants Bank's Qin said: "We have no need to raise new funds unless we want to make big overseas acquisitions."
Ma said China's policy of monetary tightening would definitely have an impact on the entire banking sector, with demand for loans by Chinese enterprises still very high as Beijing seeks to use macroeconomic controls to cool down its potentially overheating economy.
Ma said his bank would have to obey guidelines and quotas for loan issuance set by China's banking regulator, which may slow its loan growth this year.
Barclays Acquires Russia's Expobank for $745 Million
Barclays Plc, the U.K.'s third-biggest bank, acquired Russian lender Expobank for $745 million in its first overseas acquisition since losing the bidding contest for ABN Amro Holding NV.
Barclays agreed to pay cash for Petropavlovsk Finance Ltd.'s 100 percent stake in Expobank, the London-based bank said today in a statement. Expobank has 32 branches concentrated in Western Russia, including St. Petersburg and Moscow.
Barclays already operates in Russia through its investment banking unit, Barclays Capital. The bank, which has lending units in Spain, Portugal and South Africa, offered about 65 billion euros ($99 billion) last year for Amsterdam-based ABN Amro before losing to Royal Bank of Scotland Group Plc. Barclays is paying about four times Expobank's book value of $186 million.
``It looks like they are paying a big number, but you have to keep it in perspective of the size of the group,'' said James Hutson, a London-based analyst at Keefe, Bruyette & Woods Ltd. ``It has strategic rationale and shows the direction they are going,'' said Hutson, who rates Barclays ``market perform.''
Barclays fell 3 percent to 462.75 pence at 10:25 a.m. in London trading, valuing the bank at 30.2 billion pounds. The shares are down 35 percent from a year ago.
Barclays seeks to increase overseas profit amid a deteriorating U.K. economy and the collapse of the market for credit-related securities, previously a growth engine for Barclays. Expobank, with one of the largest networks of automatic teller machines in Moscow, had assets of 29.8 billion rubles ($1.24 billion) as of Jan. 1.
Consumer-Lending Boom
Russian banking, dominated by state-owned giant OAO Sberbank, is in a consumer-lending boom, fueled by the country's 10th straight year of economic growth. Russia grew 8.1 percent last year, compared with 2.9 percent in the U.K.
Barclay's purchase of Expobank is the latest in a string of acquisitions by European banks. Societe Generale, France's second- biggest bank by market value, boosted its stake in OAO Rosbank, Russia's eighth-biggest, to more than 50 percent last month from about 20 percent and said it will increase its holding to 58.7 percent.
UniCredit SpA, Italy's biggest bank, raised its stake in ZAO International Moscow Bank to 100 percent last June. Raiffeisen International Bank, Austria's biggest by market value, paid $550 million for Russian lender Impexbank in 2006, making it the country's largest foreign bank.
The acquisition of Expobank represents a ``great opportunity'' as Barclays seeks to be become ``one of the leading retail and commercial banks in Russia,'' Frits Seegers, head of consumer lending at Barclays, said in the statement.
Barclays expects to complete the transaction by this summer and generate profit on the acquisition by 2011, according to the statement.
Barclays agreed to pay cash for Petropavlovsk Finance Ltd.'s 100 percent stake in Expobank, the London-based bank said today in a statement. Expobank has 32 branches concentrated in Western Russia, including St. Petersburg and Moscow.
Barclays already operates in Russia through its investment banking unit, Barclays Capital. The bank, which has lending units in Spain, Portugal and South Africa, offered about 65 billion euros ($99 billion) last year for Amsterdam-based ABN Amro before losing to Royal Bank of Scotland Group Plc. Barclays is paying about four times Expobank's book value of $186 million.
``It looks like they are paying a big number, but you have to keep it in perspective of the size of the group,'' said James Hutson, a London-based analyst at Keefe, Bruyette & Woods Ltd. ``It has strategic rationale and shows the direction they are going,'' said Hutson, who rates Barclays ``market perform.''
Barclays fell 3 percent to 462.75 pence at 10:25 a.m. in London trading, valuing the bank at 30.2 billion pounds. The shares are down 35 percent from a year ago.
Barclays seeks to increase overseas profit amid a deteriorating U.K. economy and the collapse of the market for credit-related securities, previously a growth engine for Barclays. Expobank, with one of the largest networks of automatic teller machines in Moscow, had assets of 29.8 billion rubles ($1.24 billion) as of Jan. 1.
Consumer-Lending Boom
Russian banking, dominated by state-owned giant OAO Sberbank, is in a consumer-lending boom, fueled by the country's 10th straight year of economic growth. Russia grew 8.1 percent last year, compared with 2.9 percent in the U.K.
Barclay's purchase of Expobank is the latest in a string of acquisitions by European banks. Societe Generale, France's second- biggest bank by market value, boosted its stake in OAO Rosbank, Russia's eighth-biggest, to more than 50 percent last month from about 20 percent and said it will increase its holding to 58.7 percent.
UniCredit SpA, Italy's biggest bank, raised its stake in ZAO International Moscow Bank to 100 percent last June. Raiffeisen International Bank, Austria's biggest by market value, paid $550 million for Russian lender Impexbank in 2006, making it the country's largest foreign bank.
The acquisition of Expobank represents a ``great opportunity'' as Barclays seeks to be become ``one of the leading retail and commercial banks in Russia,'' Frits Seegers, head of consumer lending at Barclays, said in the statement.
Barclays expects to complete the transaction by this summer and generate profit on the acquisition by 2011, according to the statement.
KKR’s Kravis: Don’t Worry, We’re Experienced
In May 2006, KKR raised $5 billion in an initial public offering in Amsterdam, more than three times what it expected. The successful offering gave the New York-based firm a permanent base of money to invest in deals. Now, two years later, it give us a lens into just how difficult the buyout business has suddenly become.
KKR Private Equity Investors, the Amsterdam-listed public company that invests in KKR funds and deals, announced feeble results this morning. It reduced the value of seven of its holdings, including European chipmaker NXP by 25%, German broadcaster ProSieben by 27%, and struggling German car-repair company ATU by more than 80%. Its rate of return for 2007 was negative 0.1%. In the fourth quarter, KKR fund’s net asset value fell by about $290 million. KPE, as it’s known, is now trading at a roughly 38% discount to its net asset value.
But if there’s one thing that Henry Kravis wants you to take away from the firm’s weak earnings results out of its publicly traded European investment vehicle, it is this: “KKR has been in business for 32 years across many economic cycles and market disruptions and we have steadily invested capital and generated strong returns for our investors throughout all periods.”
At least a half-dozen times throughout his 20-minute prepared speech on this morning’s call, Kravis mentioned that the firm has been in business for 32 years and performed well through all economic cycles. Not a group that normally trumpets its returns, Kravis reminded investors that the firm has generated 20% net returns over those 32 years and all 14 of its private-equity funds have handily outperformed the stock market. (KKR Trivia: Kravis pointed out that the only year failed to generate positive returns was in 1989, when it made its storied purchase of RJR Nabisco.)
Kravis took investors through a very clear explanation of the credit crunch (listen here) and how how in these illiquid times banks are hesitant to make any large loans to new transactions. While hedge funds and mutual funds have expressed some interest in financing new private-equity transactions. He said that “given the current supply demand imbalance and the market will take some months to stabilize.”
So will KKR be able to finance transactions in this environment? “The answer is in some situations yes and in some situations is no,” said Kravis. “While our track record and ls relationship with lenders gives us unique access to capital in the current market the capital is not nearly as plentiful as it was a year ago and the cost is much higher.”
Kravis highlighted Oct. 2007 as an example of a month in which it was able to put money to work. He boasted that in that month the firm announced $6.9 billion in transactions in total enterprise value of new private equity activity. The firm paid $1.4 billion deal for Turkish shipping firm UN Ro-Ro Isletmeleri financed with local Turkey and Greek banks; $2.3 billion for Northgate, in which it directly placed themselves a mezzanine portion of the capital structure with a group of private investors; and a $1.25 billion note it purchased in Legg Mason, a highly structured minority investment. “It’s possible to get deals done in this environment; it just takes more work and a lot of creativity,” said Kravis.
As for the KPE stock – which is down more than 35% since its IPO – Kravis expressed extreme disappointment. “This implies that we at KKR have seriously lost our way,” said Kravis. “Well the people have not changed, the process has not changed and we believe that the results will speak for themselves just as they have” . . . “for the past 32 years.”
KKR Private Equity Investors, the Amsterdam-listed public company that invests in KKR funds and deals, announced feeble results this morning. It reduced the value of seven of its holdings, including European chipmaker NXP by 25%, German broadcaster ProSieben by 27%, and struggling German car-repair company ATU by more than 80%. Its rate of return for 2007 was negative 0.1%. In the fourth quarter, KKR fund’s net asset value fell by about $290 million. KPE, as it’s known, is now trading at a roughly 38% discount to its net asset value.
But if there’s one thing that Henry Kravis wants you to take away from the firm’s weak earnings results out of its publicly traded European investment vehicle, it is this: “KKR has been in business for 32 years across many economic cycles and market disruptions and we have steadily invested capital and generated strong returns for our investors throughout all periods.”
At least a half-dozen times throughout his 20-minute prepared speech on this morning’s call, Kravis mentioned that the firm has been in business for 32 years and performed well through all economic cycles. Not a group that normally trumpets its returns, Kravis reminded investors that the firm has generated 20% net returns over those 32 years and all 14 of its private-equity funds have handily outperformed the stock market. (KKR Trivia: Kravis pointed out that the only year failed to generate positive returns was in 1989, when it made its storied purchase of RJR Nabisco.)
Kravis took investors through a very clear explanation of the credit crunch (listen here) and how how in these illiquid times banks are hesitant to make any large loans to new transactions. While hedge funds and mutual funds have expressed some interest in financing new private-equity transactions. He said that “given the current supply demand imbalance and the market will take some months to stabilize.”
So will KKR be able to finance transactions in this environment? “The answer is in some situations yes and in some situations is no,” said Kravis. “While our track record and ls relationship with lenders gives us unique access to capital in the current market the capital is not nearly as plentiful as it was a year ago and the cost is much higher.”
Kravis highlighted Oct. 2007 as an example of a month in which it was able to put money to work. He boasted that in that month the firm announced $6.9 billion in transactions in total enterprise value of new private equity activity. The firm paid $1.4 billion deal for Turkish shipping firm UN Ro-Ro Isletmeleri financed with local Turkey and Greek banks; $2.3 billion for Northgate, in which it directly placed themselves a mezzanine portion of the capital structure with a group of private investors; and a $1.25 billion note it purchased in Legg Mason, a highly structured minority investment. “It’s possible to get deals done in this environment; it just takes more work and a lot of creativity,” said Kravis.
As for the KPE stock – which is down more than 35% since its IPO – Kravis expressed extreme disappointment. “This implies that we at KKR have seriously lost our way,” said Kravis. “Well the people have not changed, the process has not changed and we believe that the results will speak for themselves just as they have” . . . “for the past 32 years.”
Can Private Equity Firms Do What JP Morgan Does?
JP Morgan has a strong stomach for leveraged loans; does Blackstone?
JP Morgan just decided to hold on to $4.9 billion of leveraged loans by reclassifying them from “held for sale” to “held to maturity.” Mike Cavanagh, the chief financial officer of the firm, considers the loans — currently dirt-cheap — to be “good long-term investments,” wrote Oppenheimer & Co. analyst Meredith Whitney, who attended the firm’s investor day. JP Morgan will set aside $500 million in loan loss reserves for the loans. The firm still has $21.4 billion of funded and unfunded loans that are classified held-for-sale, which means the bank is still planning to syndicate them. JP Morgan would have to take an $800 million writedown if the loans were marked down this week, said co-head of investment banking Bill Winters.
It all highlights the very reason that private equity firms will have trouble bypassing the banks, as Blackstone Group’s Tony James and Terra Firma’s Guy Hands said this week their firms will do. There’s a long-held, and probably accurate, assumption that size matters in the lending business: banks have a wide, global network of debt buyers to which they can distribute the loans; and if they can’t, they can hold them. If Blackstone is planning to finance deals of any size, it would have to run the same risk of being in the “storage” business.
This is something Steve Black knows. Black, co-head of investment banking for JP Morgan, sniffed at the investor day: “If they think they can do that themselves without the banks then God bless them. I don’t think that will work very well, but let them try.”
So there.
Maybe James should have talked it over with Black when they had dinner together last week; the subject wasn’t touched on before their public statements, Black said. Either way, if the private equity firms do bypass the banks, both sides lose a little something. JP Morgan would lose the estimated $412 million that Freeman & Co. estimates the bank earned from arranging loans last year. Blackstone would lose the market knowledge, structuring expertise and distribution network that a big bank brings — not to mention the money it would cost to start a lending operation and get the licensing from regulators.
So can’t we all just get along?
JP Morgan just decided to hold on to $4.9 billion of leveraged loans by reclassifying them from “held for sale” to “held to maturity.” Mike Cavanagh, the chief financial officer of the firm, considers the loans — currently dirt-cheap — to be “good long-term investments,” wrote Oppenheimer & Co. analyst Meredith Whitney, who attended the firm’s investor day. JP Morgan will set aside $500 million in loan loss reserves for the loans. The firm still has $21.4 billion of funded and unfunded loans that are classified held-for-sale, which means the bank is still planning to syndicate them. JP Morgan would have to take an $800 million writedown if the loans were marked down this week, said co-head of investment banking Bill Winters.
It all highlights the very reason that private equity firms will have trouble bypassing the banks, as Blackstone Group’s Tony James and Terra Firma’s Guy Hands said this week their firms will do. There’s a long-held, and probably accurate, assumption that size matters in the lending business: banks have a wide, global network of debt buyers to which they can distribute the loans; and if they can’t, they can hold them. If Blackstone is planning to finance deals of any size, it would have to run the same risk of being in the “storage” business.
This is something Steve Black knows. Black, co-head of investment banking for JP Morgan, sniffed at the investor day: “If they think they can do that themselves without the banks then God bless them. I don’t think that will work very well, but let them try.”
So there.
Maybe James should have talked it over with Black when they had dinner together last week; the subject wasn’t touched on before their public statements, Black said. Either way, if the private equity firms do bypass the banks, both sides lose a little something. JP Morgan would lose the estimated $412 million that Freeman & Co. estimates the bank earned from arranging loans last year. Blackstone would lose the market knowledge, structuring expertise and distribution network that a big bank brings — not to mention the money it would cost to start a lending operation and get the licensing from regulators.
So can’t we all just get along?
Morgan Stanley to assume Robeco's US fixed-income assets
Morgan Stanley will assume $4.8 billion (€3.16bn) in taxable US fixed-income assets from Robeco Investment Management as a result of a definitive agreement between the two, marking the exit of Robeco from the US fixed-income business.
Officials from Morgan Stanley Investment Management and Robeco have confirmed that the Morgan Stanley takeover of the funds—subject to client consent—will start as soon as they close the deal, which they expect will happen in May.
Financial terms of the deal were not disclosed.
Robeco’s clients in US fixed income are primarily institutions, including insurance companies and Taft-Hartley schemes, which are funds overseen jointly by multiple employers to provide health care benefits to employees. The US fixed-income assets are currently managed by Robeco Weiss, Peck and Greer.
Robeco Investment Management, the US asset manager of the Netherlands-based Robeco Groep, is leaving the US fixed-income market because "sufficient scale was not achieved to provide a platform for significant long-term growth," according to a press release from the company. Robeco Groep is owned by Rabobank.
Robeco will focus its fixed-income efforts on Europe, where it has fixed-income portfolios totaling $60 billion.
The transaction will also pave the way for Robeco to move forward with plans to focus its US business exclusively on investments in equities and alternative assets, which Robeco officials said represents $18 billion in client assets.
Robeco has also entered into final negotiations to sell its US municipal, or tax-free, fixed-income business to an unnamed party, according to Robeco officials. This second deal is expected to close during the first half of this year. Robeco’s municipal business manages about $3bn, a Robeco spokesman said.
Putnam Lovell is serving as Robeco’s financial advisor on both sales. Robeco is getting legal advice from Moses & Singer. Davis Polk & Wardell provided legal advice for Morgan Stanley.
In addition to its US asset management arm, Robeco oversees about $200bn in assets globally from its headquarters in Rotterdam in The Netherlands.
Morgan Stanley's investment management division is responsible for $600bn in assets worldwide, as of last November
Officials from Morgan Stanley Investment Management and Robeco have confirmed that the Morgan Stanley takeover of the funds—subject to client consent—will start as soon as they close the deal, which they expect will happen in May.
Financial terms of the deal were not disclosed.
Robeco’s clients in US fixed income are primarily institutions, including insurance companies and Taft-Hartley schemes, which are funds overseen jointly by multiple employers to provide health care benefits to employees. The US fixed-income assets are currently managed by Robeco Weiss, Peck and Greer.
Robeco Investment Management, the US asset manager of the Netherlands-based Robeco Groep, is leaving the US fixed-income market because "sufficient scale was not achieved to provide a platform for significant long-term growth," according to a press release from the company. Robeco Groep is owned by Rabobank.
Robeco will focus its fixed-income efforts on Europe, where it has fixed-income portfolios totaling $60 billion.
The transaction will also pave the way for Robeco to move forward with plans to focus its US business exclusively on investments in equities and alternative assets, which Robeco officials said represents $18 billion in client assets.
Robeco has also entered into final negotiations to sell its US municipal, or tax-free, fixed-income business to an unnamed party, according to Robeco officials. This second deal is expected to close during the first half of this year. Robeco’s municipal business manages about $3bn, a Robeco spokesman said.
Putnam Lovell is serving as Robeco’s financial advisor on both sales. Robeco is getting legal advice from Moses & Singer. Davis Polk & Wardell provided legal advice for Morgan Stanley.
In addition to its US asset management arm, Robeco oversees about $200bn in assets globally from its headquarters in Rotterdam in The Netherlands.
Morgan Stanley's investment management division is responsible for $600bn in assets worldwide, as of last November
Goldman Sachs makes first pension buyout
Goldmans Sachs has made its first foray into the growing pension buyout market through its wholly owned subsidiary Rothesay Life, which has agreed to take on the pension assets and liabilities of Rank Group.
Rank, the second largest UK casino and bingo company, has a final salary pension scheme with around 19,000 members and a fund size of £700m (€914m), making the transfer the largest pension buyout to date by an insurance company.
The transaction was agreed following a competitive process arranged by investment consultancy Mercer, which acted both as broker for the deal and as actuarial and investment adviser to the scheme trustees. HSBC Actuaries and Consultants advised Rank as the employer and sponsor to the pension plan.
David Ellis, principal at Mercer, said Goldman beat off competition from more than 10 other providers and investment banks offering longevity swaps.
He said: "Our client wanted bulk annuities from a regulated life insurer."
The deal will secure in full the accrued benefits for scheme members and will remove all Rank's remaining financial risks and liabilities relating to the scheme - including the cost of rising longevity.
Upon completion of the transfer, which is anticipated in June following clearance from the tax authorities, Rank also expects to receive a cash payment of at least £20m.This represents the company's allocation of the expected surplus within the pension plan after an appropriate sharing with the pension plan members and any anticipated costs—including tax—associated with the transfer. The cash payment will be used to reduce group borrowings.
Peter Gill, finance director of Rank, said: "With the financial benefits that this transfer provides, Rank will be better placed to address its near-term challenges and to grasp its long-term opportunities. In addition, members of the pension plan will benefit from the high level of security provided by Rothesay Life."
Goldman Sachs registered Rothesay Life with the Financial Services Authority last July after hiring two executives from UK insurance company Friends Provident.
Keith Satchell, formerly chief executive at Friends, has become chairman of Rothesay Life, and David Jackson, who was group finance director at the insurer, joined Goldman Sachs as a non-executive director. Addy Loudiadis, the bank’s former co-head of European investment banking, is Rothesay's chief executive.
Loudiadis said: "The market for insurance based buyouts of large pension schemes is developing rapidly. Companies and trustees are increasingly looking for effective solutions to transfer pension liability risk to specialist insurance providers."
According to research by pension consultants Aon, the value of assets transferred to pension insurers more than doubled to £1.9bn in the final three months last year, with the value of potential new deals rising to more than £40bn. Completed deals include ferry group P&O, oil exploration group Lasmo and engineering firm Weir Group.
Rank, the second largest UK casino and bingo company, has a final salary pension scheme with around 19,000 members and a fund size of £700m (€914m), making the transfer the largest pension buyout to date by an insurance company.
The transaction was agreed following a competitive process arranged by investment consultancy Mercer, which acted both as broker for the deal and as actuarial and investment adviser to the scheme trustees. HSBC Actuaries and Consultants advised Rank as the employer and sponsor to the pension plan.
David Ellis, principal at Mercer, said Goldman beat off competition from more than 10 other providers and investment banks offering longevity swaps.
He said: "Our client wanted bulk annuities from a regulated life insurer."
The deal will secure in full the accrued benefits for scheme members and will remove all Rank's remaining financial risks and liabilities relating to the scheme - including the cost of rising longevity.
Upon completion of the transfer, which is anticipated in June following clearance from the tax authorities, Rank also expects to receive a cash payment of at least £20m.This represents the company's allocation of the expected surplus within the pension plan after an appropriate sharing with the pension plan members and any anticipated costs—including tax—associated with the transfer. The cash payment will be used to reduce group borrowings.
Peter Gill, finance director of Rank, said: "With the financial benefits that this transfer provides, Rank will be better placed to address its near-term challenges and to grasp its long-term opportunities. In addition, members of the pension plan will benefit from the high level of security provided by Rothesay Life."
Goldman Sachs registered Rothesay Life with the Financial Services Authority last July after hiring two executives from UK insurance company Friends Provident.
Keith Satchell, formerly chief executive at Friends, has become chairman of Rothesay Life, and David Jackson, who was group finance director at the insurer, joined Goldman Sachs as a non-executive director. Addy Loudiadis, the bank’s former co-head of European investment banking, is Rothesay's chief executive.
Loudiadis said: "The market for insurance based buyouts of large pension schemes is developing rapidly. Companies and trustees are increasingly looking for effective solutions to transfer pension liability risk to specialist insurance providers."
According to research by pension consultants Aon, the value of assets transferred to pension insurers more than doubled to £1.9bn in the final three months last year, with the value of potential new deals rising to more than £40bn. Completed deals include ferry group P&O, oil exploration group Lasmo and engineering firm Weir Group.
China appoints JPMorgan as primary dealer
China's ministry of finance (MoF) has appointed JPMorgan as a primary dealer of Chinese government bonds. The appointment will allow the US bank to underwrite government bonds issued by the MoF onshore. The move comes after JPMorgan received approval from the China Banking Regulatory Commission to establish a locally incorporated bank in China last July.
“We are very active in the secondary market, but for the first time now we have access to participate in the primary market. Underwriting government bonds also gives us better information and good assessment of the market environment,” says Carl Walter, chief executive of JPMorgan Chase Bank China. “Moreover, there are very few foreign financial institutions that are primary dealers and this is an indication that the capital markets will continue to open. Our business here is based on that.”
Over the past few years, JPMorgan has expanded its trading capacity in local currency products, foreign exchange and risk-management instruments.
“Up until three years ago, there were no products in the Chinese domestic market that enabled the hedging of foreign exchange or interest rate risk,” continues Walter. “But lately we have seen the growth of an interest-rate swap market, and we expect financial futures products to be launched soon. Our operation is also growing rapidly and will be a significant contributor to JPMorgan’s revenues in China and elsewhere in the region over the next few years.”
Walter comments that the yield curve, which is the basis for the pricing of bonds and swaps, is a work in progress and a deep government bond market is the foundation of that. As foreign institutions become more involved, so will the bond market evolve and the interest rate environment will gradually become more relaxed.
JPMorgan is the first US bank to be appointed primary dealer. Other dealers of government bonds are HSBC, which was appointed three years ago, and Standard Chartered which was appointed alongside JPMorgan.
“We are very active in the secondary market, but for the first time now we have access to participate in the primary market. Underwriting government bonds also gives us better information and good assessment of the market environment,” says Carl Walter, chief executive of JPMorgan Chase Bank China. “Moreover, there are very few foreign financial institutions that are primary dealers and this is an indication that the capital markets will continue to open. Our business here is based on that.”
Over the past few years, JPMorgan has expanded its trading capacity in local currency products, foreign exchange and risk-management instruments.
“Up until three years ago, there were no products in the Chinese domestic market that enabled the hedging of foreign exchange or interest rate risk,” continues Walter. “But lately we have seen the growth of an interest-rate swap market, and we expect financial futures products to be launched soon. Our operation is also growing rapidly and will be a significant contributor to JPMorgan’s revenues in China and elsewhere in the region over the next few years.”
Walter comments that the yield curve, which is the basis for the pricing of bonds and swaps, is a work in progress and a deep government bond market is the foundation of that. As foreign institutions become more involved, so will the bond market evolve and the interest rate environment will gradually become more relaxed.
JPMorgan is the first US bank to be appointed primary dealer. Other dealers of government bonds are HSBC, which was appointed three years ago, and Standard Chartered which was appointed alongside JPMorgan.
PE: Much Ado About Nothing?
When Buffets Holdings went bankrupt this past January, critics of the private equity industry likely let out a soft cheer. The Chapter 11 filing showcased what can happen when a leveraged buyout, dividend recapitalizations, and excessive expansion conspire to drag a company into the red. And if it was a larger company, it's probable that the politicians and the unions would have already integrated the story into their stump speeches castigating corporate greed.
A new study out of Europe, however, underscores that while private equity activity is garnering headlines, the asset class still holds little sway as it relates to the economies of the world.
Dr. Oliver Gottschalg, a professor in Insead's Department of Strategy and Management, conducted the study for the European Parliament, researching various topics, such as the time horizons of the asset class, conflicts of interest, transparency and the impact of private equity on financial stability.
What he found was that the asset class, while a force in M&A, barely appears on the radar when viewed in the context of the broader economy.
Using data from PricewaterhouseCoopers and Thomson Financial, the study noted, "The amount of equity invested by European buyout funds has increased substantially in recent years, but still represents less than 0.5% of the European GDP."
The aggregate value of PE-owned companies worldwide, meanwhile, corresponds roughly to the balance sheet of just one bulge-bracket investment bank, the study said.
"The red thread throughout the data reveals that the perceived wisdom around the asset class is not in line with the hard facts," Gottschalg says. He notes as another example that private equity returns, after fees, on average fare worse than the broad stock market average.
"People only see the exceptions. They see one deal generating a 50% IRR or they see the bankruptcies and the writeoffs," he says. "It makes private equity the perfect scapegoat, because people are either getting tremendously rich or, on the other side, destroying companies. The truth is that most of the activity is beneficial."
That said, the outcry against the asset class has become more pitched. This past January, for instance, a speech Carlyle Group co-founder and managing director David Rubenstein was giving at a Wharton-sponsored PE conference was interrupted when demonstrators from the Service Employees International Union crashed the festivities to protest the firm's investment in Manor Care.
It should be noted that Carlyle hadn't even owned the company for a month.
Meanwhile, filmmaker Robert Greenwald has created a series of videos entitled "War on Greed", taking the private equity industry to task.
In his PR materials, he sums up his message like this: "In a year dominated by economic insecurity, scholars, journalists, elected officials and regular people are taking a second look at private equity and asking themselves if firms like KKR contribute to exacerbating the country's economic woes."
To that specific question, Gottschalg's research would answer definitively, "No." But Gottschalg concedes that a high-profile bankruptcy, or mass layoffs at a PE-backed company, would likely continue "to trigger a broad public outcry."
Here again, he stresses that the impact on the economy would be minimal.
The fundamental difference, he notes, between a failure in private equity and a failure in the banking sector is that PE transactions, and funds in general, are "unlinked."
"Even if a company like Chrysler, [owned by Cerberus Capital Management], went bankrupt, it wouldn't trigger a domino effect," he says.
"The standalone structure of [PE] funds and [PE-owned] companies differentiates private equity from other areas in the financial sector. It's not like a bank going out of business, which would trigger a failure of the entire system."
While this may comfort critics, to the industry's dismay, Gottschalg's research probably will have little impact in muzzling them.
A new study out of Europe, however, underscores that while private equity activity is garnering headlines, the asset class still holds little sway as it relates to the economies of the world.
Dr. Oliver Gottschalg, a professor in Insead's Department of Strategy and Management, conducted the study for the European Parliament, researching various topics, such as the time horizons of the asset class, conflicts of interest, transparency and the impact of private equity on financial stability.
What he found was that the asset class, while a force in M&A, barely appears on the radar when viewed in the context of the broader economy.
Using data from PricewaterhouseCoopers and Thomson Financial, the study noted, "The amount of equity invested by European buyout funds has increased substantially in recent years, but still represents less than 0.5% of the European GDP."
The aggregate value of PE-owned companies worldwide, meanwhile, corresponds roughly to the balance sheet of just one bulge-bracket investment bank, the study said.
"The red thread throughout the data reveals that the perceived wisdom around the asset class is not in line with the hard facts," Gottschalg says. He notes as another example that private equity returns, after fees, on average fare worse than the broad stock market average.
"People only see the exceptions. They see one deal generating a 50% IRR or they see the bankruptcies and the writeoffs," he says. "It makes private equity the perfect scapegoat, because people are either getting tremendously rich or, on the other side, destroying companies. The truth is that most of the activity is beneficial."
That said, the outcry against the asset class has become more pitched. This past January, for instance, a speech Carlyle Group co-founder and managing director David Rubenstein was giving at a Wharton-sponsored PE conference was interrupted when demonstrators from the Service Employees International Union crashed the festivities to protest the firm's investment in Manor Care.
It should be noted that Carlyle hadn't even owned the company for a month.
Meanwhile, filmmaker Robert Greenwald has created a series of videos entitled "War on Greed", taking the private equity industry to task.
In his PR materials, he sums up his message like this: "In a year dominated by economic insecurity, scholars, journalists, elected officials and regular people are taking a second look at private equity and asking themselves if firms like KKR contribute to exacerbating the country's economic woes."
To that specific question, Gottschalg's research would answer definitively, "No." But Gottschalg concedes that a high-profile bankruptcy, or mass layoffs at a PE-backed company, would likely continue "to trigger a broad public outcry."
Here again, he stresses that the impact on the economy would be minimal.
The fundamental difference, he notes, between a failure in private equity and a failure in the banking sector is that PE transactions, and funds in general, are "unlinked."
"Even if a company like Chrysler, [owned by Cerberus Capital Management], went bankrupt, it wouldn't trigger a domino effect," he says.
"The standalone structure of [PE] funds and [PE-owned] companies differentiates private equity from other areas in the financial sector. It's not like a bank going out of business, which would trigger a failure of the entire system."
While this may comfort critics, to the industry's dismay, Gottschalg's research probably will have little impact in muzzling them.
Lehman’s Moment in the M&A Sun
Leap year comes just once every four years. This time around, it has coincided with something a lot rarer: Lehman Brothers sitting at the top of the merger-advisory league tables.
Two months into 2008, Lehman Brothers leads the list of investment banks advising on mergers and acquisitions, as measured by the total value of deals in which it had a role, according to Dealogic. Among Lehman’s big-ticket assignments: Working with Yahoo, alongside Goldman Sachs, in its response to Microsoft’s $44.6 billion unsolicited bid; and providing counsel to Chinalco when that Chinese company, along with Alcoa of the United States, quietly bought 12 percent of Rio Tinto, the mining behemoth that is fending off a hostile bid.
Lehman has not held the No. 1 spot, either for the whole year or for the January-February period, since Dealogic began keeping track of such things in 1995.
Over the past few decades, Lehman has had its ups and downs in the investment banking business. It went from the top tier in the 1970s and 1980s to what The New York Times recently described as a “one-trick bond shop” in the 1990s. In recent years, under its current chief executive, Richard Fuld Jr., it has generally ranked high on the league tables — though never at the top.
But in the first two months of 2008, Lehman had a piece of 19 deals valued at more than $84 billion, Dealogic said. That was even more than Goldman, the perennial leader in the annual league tables, which had 28 deals valued at $76 billion.
And what about deal-making in general?
Unsurprisingly, Dealogic’s data show that 2008 is beginning at a much slower pace than the previous year, when the private equity boom was in full force.
The volume of global announced deals was $468.8 billion, down 27 percent from the comparable period in 2007.
Strategic mergers, or those in which one operating company buys another, accounted for $415 billion of that total, down 13 percent from a year ago. Acquisitions by private equity firms were just $34 billion, a 67 percent decline from a year earlier.
Consider this additional data point: At this time in 2007, the biggest buyout of the year was a $44 billion takeover of TXU, the Texas utility giant. This year, the biggest buyout so far is a $3.2 billion deal for Migros Turk, a Turkish supermarket chain.
Two months into 2008, Lehman Brothers leads the list of investment banks advising on mergers and acquisitions, as measured by the total value of deals in which it had a role, according to Dealogic. Among Lehman’s big-ticket assignments: Working with Yahoo, alongside Goldman Sachs, in its response to Microsoft’s $44.6 billion unsolicited bid; and providing counsel to Chinalco when that Chinese company, along with Alcoa of the United States, quietly bought 12 percent of Rio Tinto, the mining behemoth that is fending off a hostile bid.
Lehman has not held the No. 1 spot, either for the whole year or for the January-February period, since Dealogic began keeping track of such things in 1995.
Over the past few decades, Lehman has had its ups and downs in the investment banking business. It went from the top tier in the 1970s and 1980s to what The New York Times recently described as a “one-trick bond shop” in the 1990s. In recent years, under its current chief executive, Richard Fuld Jr., it has generally ranked high on the league tables — though never at the top.
But in the first two months of 2008, Lehman had a piece of 19 deals valued at more than $84 billion, Dealogic said. That was even more than Goldman, the perennial leader in the annual league tables, which had 28 deals valued at $76 billion.
And what about deal-making in general?
Unsurprisingly, Dealogic’s data show that 2008 is beginning at a much slower pace than the previous year, when the private equity boom was in full force.
The volume of global announced deals was $468.8 billion, down 27 percent from the comparable period in 2007.
Strategic mergers, or those in which one operating company buys another, accounted for $415 billion of that total, down 13 percent from a year ago. Acquisitions by private equity firms were just $34 billion, a 67 percent decline from a year earlier.
Consider this additional data point: At this time in 2007, the biggest buyout of the year was a $44 billion takeover of TXU, the Texas utility giant. This year, the biggest buyout so far is a $3.2 billion deal for Migros Turk, a Turkish supermarket chain.
Private equity eyes huge funds
Many leading private equity firms are raising tens of billions of dollars for new funds in spite of declining returns on old deals and growing difficulties in making additional acquisitions.
The amounts being raised are comparable to the fundraising efforts at the peak of the private equity boom in 2006 and early 2007 and suggest ample liquidity remains in the financial system in spite of the market turmoil.
While pension funds have scaled back their contributions to private equity firms in the face of market setbacks, investors say, sovereign wealth funds have become relatively more important investors in the sector.
“It feels harder and it takes longer but the allocations are still being made,” said Marco Masotti, a lawyer with Paul, Weiss, Rifkind, Wharton & Garrison in New York.
People familiar with the firms say Apollo is close to the end of its $15bn fundraising, TPG plans soon to conclude the first stage of its $15bn fundraising, and KKR is putting finishing touches on a €6bn ($9bn) European fund.
Bain Capital is also raising almost $20bn between North American and European funds. Blackstone, a later starter, is just beginning to raise its latest $20bn fund.
The fundraising round is proceeding even though the chaos in the debt markets has complicated the traditional private equity strategy of buying companies with a modest slice of equity and loads of debt. In contrast with the $40bn deals being plotted a year ago, acquisitions worth less than $2bn are the norm now.
Investors are feeling the pain because they are not receiving cheques back from private equity firms – either with profits from sales of holdings or generous dividend payments from portfolio companies.
Investors are also weeks away from receiving annual reports from private equity firms that are likely to contain gloomier news than is being made available.
Investor relations executives at some firms say they expect the annual reports, to be sent in April, will include writedowns on investments – an assessment shared by Monte Brem, head of StepStone Group, a consultancy in La Jolla, California.
A case in point involves Free-scale Semiconductor. In their offering documents, current to September 30, TPG and Blackstone value their investment in Freescale at the price they paid – even though the company’s debt today trades at about 82 cents on the dollar, suggesting the value of that equity is impaired.
Private equity firms say the discount reflects market conditions, not Freescale’s circumstances. However, when annual reports appear, Freescale is expected to be marked down dramatically, reflecting problems in its operations, a declining cash flow and a heavy debt load.
Mr Brem believed investors continued to embrace private equity because they had learnt “the best time to invest is when things look like they are going wrong”.
The amounts being raised are comparable to the fundraising efforts at the peak of the private equity boom in 2006 and early 2007 and suggest ample liquidity remains in the financial system in spite of the market turmoil.
While pension funds have scaled back their contributions to private equity firms in the face of market setbacks, investors say, sovereign wealth funds have become relatively more important investors in the sector.
“It feels harder and it takes longer but the allocations are still being made,” said Marco Masotti, a lawyer with Paul, Weiss, Rifkind, Wharton & Garrison in New York.
People familiar with the firms say Apollo is close to the end of its $15bn fundraising, TPG plans soon to conclude the first stage of its $15bn fundraising, and KKR is putting finishing touches on a €6bn ($9bn) European fund.
Bain Capital is also raising almost $20bn between North American and European funds. Blackstone, a later starter, is just beginning to raise its latest $20bn fund.
The fundraising round is proceeding even though the chaos in the debt markets has complicated the traditional private equity strategy of buying companies with a modest slice of equity and loads of debt. In contrast with the $40bn deals being plotted a year ago, acquisitions worth less than $2bn are the norm now.
Investors are feeling the pain because they are not receiving cheques back from private equity firms – either with profits from sales of holdings or generous dividend payments from portfolio companies.
Investors are also weeks away from receiving annual reports from private equity firms that are likely to contain gloomier news than is being made available.
Investor relations executives at some firms say they expect the annual reports, to be sent in April, will include writedowns on investments – an assessment shared by Monte Brem, head of StepStone Group, a consultancy in La Jolla, California.
A case in point involves Free-scale Semiconductor. In their offering documents, current to September 30, TPG and Blackstone value their investment in Freescale at the price they paid – even though the company’s debt today trades at about 82 cents on the dollar, suggesting the value of that equity is impaired.
Private equity firms say the discount reflects market conditions, not Freescale’s circumstances. However, when annual reports appear, Freescale is expected to be marked down dramatically, reflecting problems in its operations, a declining cash flow and a heavy debt load.
Mr Brem believed investors continued to embrace private equity because they had learnt “the best time to invest is when things look like they are going wrong”.
More Appointments At Goldman
Goldman Sachs tapped four professionals to lead its sales and trading unit, according to an internal memo cited by Bloomberg. Goldman spokesman Michael DuVally confirmed the memo's contents to the news agency.
The appointments of New York-based David Heller and Harvey Schwartz and London-based Edward Eisler and Pablo Salame follow yesterday's announcement that Michael Sherwood and J. Michael Evans were named vice chairmen.
Goldman stated Evans and Sherwood "will continue to have global oversight of the securities business" in its press release yesterday.
Evans and Sherwood have run the securities platform since 2003, in addition to their other responsibilities as chairman of Goldman Sachs Asia and co-chief executive of Goldman Sachs International, respectively.
The appointments of New York-based David Heller and Harvey Schwartz and London-based Edward Eisler and Pablo Salame follow yesterday's announcement that Michael Sherwood and J. Michael Evans were named vice chairmen.
Goldman stated Evans and Sherwood "will continue to have global oversight of the securities business" in its press release yesterday.
Evans and Sherwood have run the securities platform since 2003, in addition to their other responsibilities as chairman of Goldman Sachs Asia and co-chief executive of Goldman Sachs International, respectively.
Merrill Executive Departed This Month, Report Says
Merrill Lynch & Co.'s Craig Lipsay, one of two U.S. executives overseeing sales of investments linked to bonds, currencies and interest rates, has left the firm as part of an overhaul of its fixed-income division, three people familiar with the matter said.
Lipsay, 44, was co-head of the Strategic Solutions Group, a unit of about 70 people who sold so-called derivatives, said the people, who declined to be identified because Merrill hasn't announced his departure. He left Feb. 1, eight months after being hired from Morgan Stanley under a contract guaranteeing his pay for two years. Other members of his team are being reassigned, the people said.
Chief Executive Officer John Thain, 52, who joined Merrill in December following the ouster of Stan O'Neal, is retooling the fixed-income business after mortgage-related losses last year saddled the third-largest U.S. securities firm with a $7.8 billion loss. At least 20 traders and bankers in the division have lost their jobs or quit in the past two months.
``With all the things that happened in the credit crisis, they're going to really analyze who's leading the ship in every area,'' said Jeanne Branthover, a managing director at Boyden Global Executive Search in New York who represents current and former Merrill employees looking for jobs.
Lipsay, reached by telephone, confirmed that he left New York-based Merrill on Feb. 1 and declined to comment further. Company spokeswoman Jessica Oppenheim declined to comment.
He was hired in June 2007 from Morgan Stanley, the second- largest U.S. securities firm, where he had worked since 1996, according to regulatory records. He previously worked at Citigroup Inc. and Kidder, Peabody & Co., the records show.
Reversal of Fortune
Lipsay's short tenure at Merrill underscores how quickly fortunes have turned for traders, bankers and salesmen who specialized in securities and loans infected by surging defaults on subprime mortgages. The biggest banks and securities firms have reported at least $146 billion of writedowns and credit losses since the beginning of last year, according to data compiled by Bloomberg.
Merrill's Strategic Solutions Group oversaw sales of collateralized debt obligations, or CDOs, which are investments packaged from mortgage bonds, loans and other forms of debt and sold with a range of credit ratings. CDOs lost their allure last year as the U.S. housing market slumped and more borrowers fell behind on monthly payments, causing investors to shun securities linked to mortgages.
CDO Writedowns
Merrill was the biggest underwriter of CDOs in 2006, packaging about $55 billion of the securities, according to Thomson Financial. Writedowns on CDOs and subprime mortgages led to a $9.8 billion fourth-quarter loss, the widest in the firm's 94-year history. O'Neal stepped down in October after a $2.24 billion third-quarter loss that also included CDO writedowns.
David Sobotka, who had been head of commodities trading based in Houston, was named the worldwide head of fixed-income last year after the dismissal of the group's previous leader, Osman Semerci. Doug Mallach, head of fixed-income sales in the U.S., previously reported to Semerci and now reports to Sobotka.
Mallach, who hired Lipsay last year, referred a call to Oppenheim, who declined to comment on his behalf.
Merrill is a passive, minority investor in Bloomberg LP, the parent of Bloomberg News.
Lipsay, 44, was co-head of the Strategic Solutions Group, a unit of about 70 people who sold so-called derivatives, said the people, who declined to be identified because Merrill hasn't announced his departure. He left Feb. 1, eight months after being hired from Morgan Stanley under a contract guaranteeing his pay for two years. Other members of his team are being reassigned, the people said.
Chief Executive Officer John Thain, 52, who joined Merrill in December following the ouster of Stan O'Neal, is retooling the fixed-income business after mortgage-related losses last year saddled the third-largest U.S. securities firm with a $7.8 billion loss. At least 20 traders and bankers in the division have lost their jobs or quit in the past two months.
``With all the things that happened in the credit crisis, they're going to really analyze who's leading the ship in every area,'' said Jeanne Branthover, a managing director at Boyden Global Executive Search in New York who represents current and former Merrill employees looking for jobs.
Lipsay, reached by telephone, confirmed that he left New York-based Merrill on Feb. 1 and declined to comment further. Company spokeswoman Jessica Oppenheim declined to comment.
He was hired in June 2007 from Morgan Stanley, the second- largest U.S. securities firm, where he had worked since 1996, according to regulatory records. He previously worked at Citigroup Inc. and Kidder, Peabody & Co., the records show.
Reversal of Fortune
Lipsay's short tenure at Merrill underscores how quickly fortunes have turned for traders, bankers and salesmen who specialized in securities and loans infected by surging defaults on subprime mortgages. The biggest banks and securities firms have reported at least $146 billion of writedowns and credit losses since the beginning of last year, according to data compiled by Bloomberg.
Merrill's Strategic Solutions Group oversaw sales of collateralized debt obligations, or CDOs, which are investments packaged from mortgage bonds, loans and other forms of debt and sold with a range of credit ratings. CDOs lost their allure last year as the U.S. housing market slumped and more borrowers fell behind on monthly payments, causing investors to shun securities linked to mortgages.
CDO Writedowns
Merrill was the biggest underwriter of CDOs in 2006, packaging about $55 billion of the securities, according to Thomson Financial. Writedowns on CDOs and subprime mortgages led to a $9.8 billion fourth-quarter loss, the widest in the firm's 94-year history. O'Neal stepped down in October after a $2.24 billion third-quarter loss that also included CDO writedowns.
David Sobotka, who had been head of commodities trading based in Houston, was named the worldwide head of fixed-income last year after the dismissal of the group's previous leader, Osman Semerci. Doug Mallach, head of fixed-income sales in the U.S., previously reported to Semerci and now reports to Sobotka.
Mallach, who hired Lipsay last year, referred a call to Oppenheim, who declined to comment on his behalf.
Merrill is a passive, minority investor in Bloomberg LP, the parent of Bloomberg News.
Barclays' 2007 Pre-Tax Profit Slips
Barclays reported a pre-tax profit of 7.08 billion pounds sterling ($13.8 billion) in 2007, down from 7.14 billion pounds sterling a year ago, and the firm increased its dividend for the year to 34 pence from 31 pence in 2006.
Profits before tax within Barclays Capital, the investment banking business, were 2.34 billion sterling in 2007, up 5% from 2.22 billion sterling in 2006. The banking giant’s asset management business, Barclays Wealth, saw a 25% jump in profit last year to 307 million pounds sterling from 245 million in 2006. Income growth within the unit was 11%, driven by increased client funds and greater transaction volumes.
The British banking giant said credit market exposures resulted in net losses of 1.64 billion pounds sterling. “The net losses primarily related to ABS CDO super senior exposures, with additional losses from other credit market exposures partially offset by gains from the general widening of credit spreads on issued notes held at fair value,” the bank said.
Barclays said collateral for ABS CDO super senior exposures primarily comprised residential mortgage backed securities. Seventy-nine percent of the RMBS subprime collateral was 2005 or earlier vintages.
Within Barclays Capital, net income was driven by strong performance in interest rates, currency and equity products and commodity businesses.
Robert Diamond, head of Barclays Capital, told IDD Tuesday that “the interest rate businesses, notwithstanding the difficult market conditions, were up 76%, which is a stunning number. The currency businesses were up 60%. Our businesses in Asia doubled. Our business in Africa doubled. So we had a really strong underlying performance of the business.”
Diamond added that the banking firm’s interest rate and currency businesses were active in the wake of the credit market turmoil last summer.
“The volumes of business we were doing in July and August, September and October, during the worst of the crisis, were at record levels. A lot of those flows were coming from Asia,” said Diamond. “So much of the wealth created in the Asian central banks and the sovereign funds was moving aggressively into interest rates and against the dollar.”
Profits before tax within Barclays Capital, the investment banking business, were 2.34 billion sterling in 2007, up 5% from 2.22 billion sterling in 2006. The banking giant’s asset management business, Barclays Wealth, saw a 25% jump in profit last year to 307 million pounds sterling from 245 million in 2006. Income growth within the unit was 11%, driven by increased client funds and greater transaction volumes.
The British banking giant said credit market exposures resulted in net losses of 1.64 billion pounds sterling. “The net losses primarily related to ABS CDO super senior exposures, with additional losses from other credit market exposures partially offset by gains from the general widening of credit spreads on issued notes held at fair value,” the bank said.
Barclays said collateral for ABS CDO super senior exposures primarily comprised residential mortgage backed securities. Seventy-nine percent of the RMBS subprime collateral was 2005 or earlier vintages.
Within Barclays Capital, net income was driven by strong performance in interest rates, currency and equity products and commodity businesses.
Robert Diamond, head of Barclays Capital, told IDD Tuesday that “the interest rate businesses, notwithstanding the difficult market conditions, were up 76%, which is a stunning number. The currency businesses were up 60%. Our businesses in Asia doubled. Our business in Africa doubled. So we had a really strong underlying performance of the business.”
Diamond added that the banking firm’s interest rate and currency businesses were active in the wake of the credit market turmoil last summer.
“The volumes of business we were doing in July and August, September and October, during the worst of the crisis, were at record levels. A lot of those flows were coming from Asia,” said Diamond. “So much of the wealth created in the Asian central banks and the sovereign funds was moving aggressively into interest rates and against the dollar.”
JPMorgan to Funnel $750 Million into Asia Private Equity Fund
JPMorgan Chase announced a major push on Monday into private-equity investing in Asia, saying it had earmarked at least $750 million of its own capital to take minority stakes in businesses in a region where buyouts are notoriously difficult.
The expansion will be headed by Varun Bery and John Troy, co-founders of an Asia-focused private equity firm, TVG Capital Partners, who will join JPMorgan as managing directors. Their team will look for opportunities to invest in ventures with existing corporate clients in a broad range of sectors, including consumer, retail, industrial, health care and natural resources.
TVG, which has offices in Hong Kong, Bangalore and Sydney and manages more than $700 million in capital, is being wound down, according to Reuters.
JPMorgan said it would allow its corporate and financial sponsor clients to put their own capital together with that of the bank to “co-invest” in the opportunities it finds.
The new team will be the Asia arm of JPMorgan’s Private Equity Principal Investments business, which is led by Bob Case from New York. JPMorgan has also invested in Asian private equity through its units One Equity Partners and Principal Investment Management.
Private equity funds run by the likes of Morgan Stanley, the Blackstone Group and the Carlyle Group are ratcheting up their investments in the fast-growing Indian and Chinese markets as a global credit crunch hampers big buyouts in Europe and the United States.
But in a region where full-scale buyouts are often frowned upon and are difficult because families are still the main players in business, funds have had to settle mostly for taking minority stakes.
The expansion will be headed by Varun Bery and John Troy, co-founders of an Asia-focused private equity firm, TVG Capital Partners, who will join JPMorgan as managing directors. Their team will look for opportunities to invest in ventures with existing corporate clients in a broad range of sectors, including consumer, retail, industrial, health care and natural resources.
TVG, which has offices in Hong Kong, Bangalore and Sydney and manages more than $700 million in capital, is being wound down, according to Reuters.
JPMorgan said it would allow its corporate and financial sponsor clients to put their own capital together with that of the bank to “co-invest” in the opportunities it finds.
The new team will be the Asia arm of JPMorgan’s Private Equity Principal Investments business, which is led by Bob Case from New York. JPMorgan has also invested in Asian private equity through its units One Equity Partners and Principal Investment Management.
Private equity funds run by the likes of Morgan Stanley, the Blackstone Group and the Carlyle Group are ratcheting up their investments in the fast-growing Indian and Chinese markets as a global credit crunch hampers big buyouts in Europe and the United States.
But in a region where full-scale buyouts are often frowned upon and are difficult because families are still the main players in business, funds have had to settle mostly for taking minority stakes.
Tommy Lee, Goldman Sponsor MoneyGram Recap
Thomas H. Lee Partners and Goldman Sachs have sponsored a leveraged recapitalization of MoneyGram International.
Boston’s Thomas H. Lee and GS Capital, the New York private equity arm of Goldman Sachs, will invest $710 million for common and preferred stock in the Minneapolis wire-transfer, bill-payment and money-order arranger. The investors will receive convertible preferred stock paying 20% interest until it is converted, which will equal a 19.9% common stock stake upon conversion.
The investors also have an option to invest an additional $65 million of equity in MoneyGram, which has secured committed senior second lien debt financing of up to $500 million, payable at 13.25% over a 10-year term, from Goldman Sachs. In addition, MoneyGram may secure an additional $200 million of debt, priced up to 625 basis points over Libor as part of the closing condition, prior to the deal’s closing.
Philip Milne, president and chief executive of MoneyGram, said in a statement that the transaction will provide the company with the “necessary additional capital to significantly strengthen its balance sheet.”
Officials from Thomas H. Lee and GS Capital did not return calls.
JPMorgan Securities and Duff & Phelps served as financial advisors to MoneyGram, which announced the deal on Tuesday, and provided a fairness opinion to MoneyGram’s board, which approved the transaction on Monday. JPMorgan Securities also served as placement agent for MoneyGram.
The deal calls for MoneyGram, a $442.9 million market-capitalized company, to sell additional investment portfolio assets. In January, the company announced it had valued its portfolio after assessing $860 million in losses from its investment portfolio, primarily due to losses on asset-backed securities. MoneyGram sold $1.3 billion of securities in January, the same month it disclosed that the company was engaged in discussions with Thomas H. Lee and investors, and by Feb. 11 it had sold $1.8 billion of portfolio securities.
MoneyGram, which has a go-shop period in its agreement with the private equity investors to review other prospective financing proposals, is planning to obtain amendments on $350 million of available borrowings under its existing credit line. In January, it said that its lenders had agreed to waive certain defaults that were related to its portfolio losses.
The company has also secured an existing financial services agreement with Wal-Mart to continue providing bill payment, money transfer and money order services at more than 3,500 stores through January 2013.
MoneyGram’s shares were recently trading at $5.35, little changed from the previous day's close. The company’s stock has traded in a range of $3.68 to $30.85 a share over the past year.
A business with 143,000 locations in 170 countries and territories, MoneyGram disclosed that it paid a hefty $37.5 million in transaction fees to Thomas H. Lee and Goldman Sachs in connection with the recapitalization.
Boston’s Thomas H. Lee and GS Capital, the New York private equity arm of Goldman Sachs, will invest $710 million for common and preferred stock in the Minneapolis wire-transfer, bill-payment and money-order arranger. The investors will receive convertible preferred stock paying 20% interest until it is converted, which will equal a 19.9% common stock stake upon conversion.
The investors also have an option to invest an additional $65 million of equity in MoneyGram, which has secured committed senior second lien debt financing of up to $500 million, payable at 13.25% over a 10-year term, from Goldman Sachs. In addition, MoneyGram may secure an additional $200 million of debt, priced up to 625 basis points over Libor as part of the closing condition, prior to the deal’s closing.
Philip Milne, president and chief executive of MoneyGram, said in a statement that the transaction will provide the company with the “necessary additional capital to significantly strengthen its balance sheet.”
Officials from Thomas H. Lee and GS Capital did not return calls.
JPMorgan Securities and Duff & Phelps served as financial advisors to MoneyGram, which announced the deal on Tuesday, and provided a fairness opinion to MoneyGram’s board, which approved the transaction on Monday. JPMorgan Securities also served as placement agent for MoneyGram.
The deal calls for MoneyGram, a $442.9 million market-capitalized company, to sell additional investment portfolio assets. In January, the company announced it had valued its portfolio after assessing $860 million in losses from its investment portfolio, primarily due to losses on asset-backed securities. MoneyGram sold $1.3 billion of securities in January, the same month it disclosed that the company was engaged in discussions with Thomas H. Lee and investors, and by Feb. 11 it had sold $1.8 billion of portfolio securities.
MoneyGram, which has a go-shop period in its agreement with the private equity investors to review other prospective financing proposals, is planning to obtain amendments on $350 million of available borrowings under its existing credit line. In January, it said that its lenders had agreed to waive certain defaults that were related to its portfolio losses.
The company has also secured an existing financial services agreement with Wal-Mart to continue providing bill payment, money transfer and money order services at more than 3,500 stores through January 2013.
MoneyGram’s shares were recently trading at $5.35, little changed from the previous day's close. The company’s stock has traded in a range of $3.68 to $30.85 a share over the past year.
A business with 143,000 locations in 170 countries and territories, MoneyGram disclosed that it paid a hefty $37.5 million in transaction fees to Thomas H. Lee and Goldman Sachs in connection with the recapitalization.
Credit Suisse Appoints New Head of I-Banking
Credit Suisse announced the appointment of Jim Amine as co-head of its global investment banking department and head of its global markets solutions group (GMSG), effective today.
Amine is based in London and reports to Paul Calello, chief executive of Credit Suisse's investment bank. He previously served as the firm's co-head of global leveraged finance and European GMSG head.
Amine replaces Eric Varvel, who became CEO of Europe, the Middle East and Africa last month.
Marc Granetz continues as co-head of global investment banking and global head of M&A.
"Jim brings to the role more than 20 years of investment banking experience and a thorough understanding of the international capital markets," Calello said in a release. "With his broad experience across international markets and unparalleled client focus, Jim is ideally suited to lead our GMSG and investment banking platforms to the next level of success. Importantly, the fact that Jim will be based in London reflects our strong and diversified global business mix. We will continue to recognize and appoint leadership and management in all of our key global markets."
Amine joined Credit Suisse in 1997 after stints at Schroders and Merrion Group. Earlier in his career, he was a lawyer at Cravath, Swaine & Moore, where he focused on M&A and acquisition financing.
Credit Suisse disclosed its fourth-quarter and full-year earnings on Tuesday. The firm's investment banking division recorded 2007 income before taxes of $4.38 billion, a 19% decrease from 2006.
Credit Suisse was ranked sixth in Thomson Financial's league table of top global financial advisors for 2007, having placed seventh in 2006. The firm advised on 379 deals worth $871.1 billion last year, according to Thomson.
Amine is based in London and reports to Paul Calello, chief executive of Credit Suisse's investment bank. He previously served as the firm's co-head of global leveraged finance and European GMSG head.
Amine replaces Eric Varvel, who became CEO of Europe, the Middle East and Africa last month.
Marc Granetz continues as co-head of global investment banking and global head of M&A.
"Jim brings to the role more than 20 years of investment banking experience and a thorough understanding of the international capital markets," Calello said in a release. "With his broad experience across international markets and unparalleled client focus, Jim is ideally suited to lead our GMSG and investment banking platforms to the next level of success. Importantly, the fact that Jim will be based in London reflects our strong and diversified global business mix. We will continue to recognize and appoint leadership and management in all of our key global markets."
Amine joined Credit Suisse in 1997 after stints at Schroders and Merrion Group. Earlier in his career, he was a lawyer at Cravath, Swaine & Moore, where he focused on M&A and acquisition financing.
Credit Suisse disclosed its fourth-quarter and full-year earnings on Tuesday. The firm's investment banking division recorded 2007 income before taxes of $4.38 billion, a 19% decrease from 2006.
Credit Suisse was ranked sixth in Thomson Financial's league table of top global financial advisors for 2007, having placed seventh in 2006. The firm advised on 379 deals worth $871.1 billion last year, according to Thomson.
Carlyle Unveils Wave of Promotions
The Carlyle Group has promoted 30 executives to senior positions in the company, eight to managing director – the most senior role below those of senior adviser, founder and chairman – and 22 to director.
The promotions include 15 in North America - including seven in Washington, six in New York and two in Mexico. There were 11 in Europe, including one in Poland, and four in Asia.
Jonathan Bylin and Jim McGee, senior staff in investor relations, were among those promoted to the role of managing director in New York taking Carlyle’s stable of senior investor relations employees to 13 globally across its 57 active funds.
Last year Carlyle raised a €5.35bn ($7.8bn) European buyout fund as well as $1.15bn for infrastructure investments in the US and Canada, and it is also currently raising a real estate fund and Middle Eastern fund.
Investing across four investment disciplines - buyouts, venture and growth capital, real estate and leveraged finance, the group has a total of $75.6bn in funds under management.
Among the newly promoted managing directors was Vladimir Lasocki, who focuses on the group’s investments in Central and Eastern Europe from offices in Warsaw.
Lasocki is currently a member of the board of directors of Belgian portfolio company Transics International, which Carlyle bought in 2006 and Wall Street Institute Education, a provider of English language tuition.
The following is the full list of promotions for the firm:
• New managing directors
Janet Andre – administration; Washington, DC
Gary Bleiberg – accounting for US leveraged finance; New York
Jonathan Bylin – investor relations; New York
Patricia Gallagher – accounting for equity; Washington, DC
Hayden Jones – real estate; Washington, DC
Robert Konigsberg – accounting for global real estate; Washington, DC
Vladimir Lasocki – Central Eastern Europe buyouts; Warsaw
Jim McGee – investor relations; New York
• New principals/directors
Zeina Bain – Europe buyouts; London
Nicolas Debetencourt – global infrastructure buyouts; New York
Nilesh Desai – European leveraged finance; London
Pierre-Olivier Desplanches – Europe buyouts; Paris
Cam Dyer – US buyouts; Charlotte, NC
Rodrigo Fonseca – Mexico buyout; Mexico City
Mark Harris – Europe real estate; London
Chris Hodges – Europe technology; London
Brannan Johnston – US leveraged finance; New York
Rachel Lupiani – Europe real estate; Barcelona,Paris
Edward Man – Asia buyout; Hong Kong
Thomas Mayrhofer – Corporate development; Washington, DC
Nazo Moosa – Europe technology; London
Nancy Palleschi – Investor relations for global conference and events; Washington, DC
Adrian Siew – Asia buyout; Sydney
Charles Steel – Europe buyout; London
Miguel Valenzuela – Mexico buyout; Mexico City
Elliot Wagner – US buyout; Washington, DC
Carolyn Weimer – Investor relations and strategic resources; Washington, DC
Jonathan Zafrani – Europe buyouts; Paris
Elena Zhang – Asia growth capital; Hong Kong
Eric Zhang – Asia buyout; Hong Kong
The promotions include 15 in North America - including seven in Washington, six in New York and two in Mexico. There were 11 in Europe, including one in Poland, and four in Asia.
Jonathan Bylin and Jim McGee, senior staff in investor relations, were among those promoted to the role of managing director in New York taking Carlyle’s stable of senior investor relations employees to 13 globally across its 57 active funds.
Last year Carlyle raised a €5.35bn ($7.8bn) European buyout fund as well as $1.15bn for infrastructure investments in the US and Canada, and it is also currently raising a real estate fund and Middle Eastern fund.
Investing across four investment disciplines - buyouts, venture and growth capital, real estate and leveraged finance, the group has a total of $75.6bn in funds under management.
Among the newly promoted managing directors was Vladimir Lasocki, who focuses on the group’s investments in Central and Eastern Europe from offices in Warsaw.
Lasocki is currently a member of the board of directors of Belgian portfolio company Transics International, which Carlyle bought in 2006 and Wall Street Institute Education, a provider of English language tuition.
The following is the full list of promotions for the firm:
• New managing directors
Janet Andre – administration; Washington, DC
Gary Bleiberg – accounting for US leveraged finance; New York
Jonathan Bylin – investor relations; New York
Patricia Gallagher – accounting for equity; Washington, DC
Hayden Jones – real estate; Washington, DC
Robert Konigsberg – accounting for global real estate; Washington, DC
Vladimir Lasocki – Central Eastern Europe buyouts; Warsaw
Jim McGee – investor relations; New York
• New principals/directors
Zeina Bain – Europe buyouts; London
Nicolas Debetencourt – global infrastructure buyouts; New York
Nilesh Desai – European leveraged finance; London
Pierre-Olivier Desplanches – Europe buyouts; Paris
Cam Dyer – US buyouts; Charlotte, NC
Rodrigo Fonseca – Mexico buyout; Mexico City
Mark Harris – Europe real estate; London
Chris Hodges – Europe technology; London
Brannan Johnston – US leveraged finance; New York
Rachel Lupiani – Europe real estate; Barcelona,Paris
Edward Man – Asia buyout; Hong Kong
Thomas Mayrhofer – Corporate development; Washington, DC
Nazo Moosa – Europe technology; London
Nancy Palleschi – Investor relations for global conference and events; Washington, DC
Adrian Siew – Asia buyout; Sydney
Charles Steel – Europe buyout; London
Miguel Valenzuela – Mexico buyout; Mexico City
Elliot Wagner – US buyout; Washington, DC
Carolyn Weimer – Investor relations and strategic resources; Washington, DC
Jonathan Zafrani – Europe buyouts; Paris
Elena Zhang – Asia growth capital; Hong Kong
Eric Zhang – Asia buyout; Hong Kong
Citi Stops Withdrawals From CSO Partners Fund
The troubles continue for Citigroup’s alternative investment arm, with its CSO Partners barring investors from withdrawing money from the hedge fund.
“We have temporarily suspended redemptions of all shares of CSO to stabilize the fund and allow time to address its funding needs to meet anticipated obligations," says Jon Diat, spokesman for Citi, in an email statement to IDD. “All (Citigroup Alternative Investments) funds are subject to comprehensive internal fiduciary risk oversight, risk management practices and senior level management supervision.”
The single-manager fund, launched in 2004 and specializing in credit-oriented and event-driven strategies, suspended redemptions after investors tried to pull more than 30% of the fund’s roughly $500 million in assets, according to the Wall Street Journal. The fund had losses of 11% last year, and Citi infused $100 million last month.
Last December, manager John Pickett left over reported differences about his putting a large sum of money in one investment that went bad.
Citi’s $2.4 trillion alternative-investment division, which CEO Vikram Pandit once ran, has other hedge funds that are posting mediocre performance. Falcon Plus Strategies posted a 30% decline last year, and lost 52% in the fourth quarter alone after placing bad bets on mortgage-backed and preferred securities. Old Lane Partners, which was founded by Pandit and acquired by Citi last had a loss of 1.8% last month.
“We have temporarily suspended redemptions of all shares of CSO to stabilize the fund and allow time to address its funding needs to meet anticipated obligations," says Jon Diat, spokesman for Citi, in an email statement to IDD. “All (Citigroup Alternative Investments) funds are subject to comprehensive internal fiduciary risk oversight, risk management practices and senior level management supervision.”
The single-manager fund, launched in 2004 and specializing in credit-oriented and event-driven strategies, suspended redemptions after investors tried to pull more than 30% of the fund’s roughly $500 million in assets, according to the Wall Street Journal. The fund had losses of 11% last year, and Citi infused $100 million last month.
Last December, manager John Pickett left over reported differences about his putting a large sum of money in one investment that went bad.
Citi’s $2.4 trillion alternative-investment division, which CEO Vikram Pandit once ran, has other hedge funds that are posting mediocre performance. Falcon Plus Strategies posted a 30% decline last year, and lost 52% in the fourth quarter alone after placing bad bets on mortgage-backed and preferred securities. Old Lane Partners, which was founded by Pandit and acquired by Citi last had a loss of 1.8% last month.
Qatar Acquiring Credit Suisse Shares
The Qatar Investment Authority (QIA) is buying up shares in Credit Suisse, the Qatari prime minister said in an interview with Bloomberg on Monday.
"We have a relation with Credit Suisse and we bought some of the stock from the market, actually, but I cannot say what percentage because still we are in the process," Sheikh Hamad bin Jassem bin Jabr Al Thani, who is QIA chief executive as well as the Gulf state's prime minister and foreign minister, told Bloomberg.
The interview with Bloomberg's TV channel took place prior to the opening of the Brookings Institution's branch in Doha, the Qatari capital
The sheikh also sounded off on the controversy surrounding sovereign wealth funds: "The sovereign fund is from friendly countries, especially this region. They have no political ambitions. They are looking to invest their wealth for the people of these countries."
In addition, he revealed the QIA will create $1 billion funds to invest in Finland and Malaysia (similar to the one the Qatari government's investment arm announced it would establish for Indonesia in December) and that the QIA could invest up to $15 billion in US and European banks over the next year.
Large US and European banks have been building stronger ties with Qatar since 2005, when the Gulf state founded the Qatar Financial Center in Doha.
Credit Suisse, which released full-year and fourth-quarter 2007 financial results last Tuesday, was one of three European banks which offered to underwrite the proposed buyout of UK supermarket chain operator J Sainsbury by the QIA and London-based Three Delta LLP last year, according to Bloomberg. The QIA and Three Delta announced they withdrew their bid on Nov. 5.
"We have a relation with Credit Suisse and we bought some of the stock from the market, actually, but I cannot say what percentage because still we are in the process," Sheikh Hamad bin Jassem bin Jabr Al Thani, who is QIA chief executive as well as the Gulf state's prime minister and foreign minister, told Bloomberg.
The interview with Bloomberg's TV channel took place prior to the opening of the Brookings Institution's branch in Doha, the Qatari capital
The sheikh also sounded off on the controversy surrounding sovereign wealth funds: "The sovereign fund is from friendly countries, especially this region. They have no political ambitions. They are looking to invest their wealth for the people of these countries."
In addition, he revealed the QIA will create $1 billion funds to invest in Finland and Malaysia (similar to the one the Qatari government's investment arm announced it would establish for Indonesia in December) and that the QIA could invest up to $15 billion in US and European banks over the next year.
Large US and European banks have been building stronger ties with Qatar since 2005, when the Gulf state founded the Qatar Financial Center in Doha.
Credit Suisse, which released full-year and fourth-quarter 2007 financial results last Tuesday, was one of three European banks which offered to underwrite the proposed buyout of UK supermarket chain operator J Sainsbury by the QIA and London-based Three Delta LLP last year, according to Bloomberg. The QIA and Three Delta announced they withdrew their bid on Nov. 5.
Bear and Citic Said to Renegotiate Deal
U.S. investment bank Bear Stearns and CITIC Securities, China's largest securities firm, are to revise a share swap agreement, increasing the stake in each other, according to sources close to the deal.
Ongoing talks are now focused on lowering convertible prices of each share without changing the fixed-investment scale. Each side is set to cut the price by the same extent, the source said.
After the price cut, CITIC would hold 9.9 percent of the U.S. bank, up from the previous six percent. As for Bear Stearns, the one billion U.S. dollars debt would convert to a 2.5 percent stakein the Shanghai-listed firm that would amount to 7.5 percent over time.
No information about the actual convertible prices or the extent of the price cut was available yet.
The revised plan is still under discussion and subject to regulatory approval. "If everything goes well, the plan will be made public in April after adjustment," Business Finance Review, a Beijing-based magazine, cited the source as saying on Thursday.
The adjustment came amid a share price slump for both sides after the agreement was sealed in October.
Bear Stearns, hit particularly hard by the worsening U.S. subprime mortgage crisis, has seen its shares drop to less than 80U.S. dollars from 120 U.S. dollars in October. Meanwhile, CITIC's stock is down nearly 36.4 percent.
Bear Stearns and CITIC Securities agreed in October to a cross-investment plan. Under the agreement, CITIC will invest one billion U.S. dollars for about six percent of Bear Stearns, while the U.S. bank is buying one billion U.S. dollars of CITIC Securities debt, which will amount to two percent stake.
The two sides plan to share management expertise and technologies to provide new products and services to get a bigger share of China's booming financial market.
They are also considering setting up a joint venture in Hong Kong to offer a large range of financial services across Asia.
Ongoing talks are now focused on lowering convertible prices of each share without changing the fixed-investment scale. Each side is set to cut the price by the same extent, the source said.
After the price cut, CITIC would hold 9.9 percent of the U.S. bank, up from the previous six percent. As for Bear Stearns, the one billion U.S. dollars debt would convert to a 2.5 percent stakein the Shanghai-listed firm that would amount to 7.5 percent over time.
No information about the actual convertible prices or the extent of the price cut was available yet.
The revised plan is still under discussion and subject to regulatory approval. "If everything goes well, the plan will be made public in April after adjustment," Business Finance Review, a Beijing-based magazine, cited the source as saying on Thursday.
The adjustment came amid a share price slump for both sides after the agreement was sealed in October.
Bear Stearns, hit particularly hard by the worsening U.S. subprime mortgage crisis, has seen its shares drop to less than 80U.S. dollars from 120 U.S. dollars in October. Meanwhile, CITIC's stock is down nearly 36.4 percent.
Bear Stearns and CITIC Securities agreed in October to a cross-investment plan. Under the agreement, CITIC will invest one billion U.S. dollars for about six percent of Bear Stearns, while the U.S. bank is buying one billion U.S. dollars of CITIC Securities debt, which will amount to two percent stake.
The two sides plan to share management expertise and technologies to provide new products and services to get a bigger share of China's booming financial market.
They are also considering setting up a joint venture in Hong Kong to offer a large range of financial services across Asia.
Hana Mulling Stake In Merrill
South Korea's Hana Bank is considering the purchase of an equity stake in Merrill Lynch, a spokesman for Hana's holding company told Dow Jones Newswires on Monday.
The news service also quoted an unnamed source as saying Hana is in talks with Singapore's Temasek Holdings to acquire one million Merrill shares for $50 million. "Hana and Temasek have reached an agreement, and the announcement of the deal will likely come sometime next month, with the deal closing [in March]," the source told Dow Jones. The Hana spokesman declined to comment to Dow Jones on what the unnamed source said.
Temasek held a 9.62% stake in Hana's holding company, Hana Financial Holdings, as of September
"If the reported terms are something under discussion, it sounds reasonable as Temasek may want to spread its risk from owning too high a stake in Merrill Lynch and Hana would be one of their closest contacts," Nomura Securities analyst Kim Jin-Sang told Dow Jones.
Merrill announced it would accept a $4.4 billion capital infusion from Temasek in December.
The news service also quoted an unnamed source as saying Hana is in talks with Singapore's Temasek Holdings to acquire one million Merrill shares for $50 million. "Hana and Temasek have reached an agreement, and the announcement of the deal will likely come sometime next month, with the deal closing [in March]," the source told Dow Jones. The Hana spokesman declined to comment to Dow Jones on what the unnamed source said.
Temasek held a 9.62% stake in Hana's holding company, Hana Financial Holdings, as of September
"If the reported terms are something under discussion, it sounds reasonable as Temasek may want to spread its risk from owning too high a stake in Merrill Lynch and Hana would be one of their closest contacts," Nomura Securities analyst Kim Jin-Sang told Dow Jones.
Merrill announced it would accept a $4.4 billion capital infusion from Temasek in December.
Subscribe to:
Posts (Atom)