Don’t Look for Private Equity to Save Hostess: UPDATED

Who will save Hostess Brands? That’s the question that’s been circulating among investors and media outlets. The 82-year old Hostess, which makes Twinkies, Ding Dongs, Ho Hos and Wonder Bread, is looking for a lifeline after filing with a U.S. bankruptcy court last week to go out of business. Hostess is firing more than 18,000 employees after a week long strike by its baker’s union. Adding to the doom-and-gloom is a notice on the company’s website that says, “Hostess Brands is Closed.

Exit Breathes Life Into NY Shop

Executives at Fenway Partners are confident that a successful sale of 1-800 Contacts Inc. could put the beleaguered buyout shop in a position to raise another fund next year, Buyouts reported yesterday, citing two sources. The New York-based firm announced on June 4 it had agreed to sell the retailer of contact lenses and glasses […]

Japanese Game Co to Buy Resort Complex

Japanese game developer Sega Sammy Holdings has agreed to buy a resort complex in southern Japan from RHJ International for 5.8 billion yen ($72 million), reports reuters. RHJ International, the holding compay for US buyout fund Ripplewood Holdings, bought the bankrupt Seagaia resort in Miyazaki prefecture in 2001. Reuters – Japanese game developer Sega Sammy […]

Aircell Inks $35M for In-Flight Internet Connections

Aircell, a provider of in-flight WiFi services, has raised $35 million in few financing. Existing investors Ripplewood Holdings, Blumenstein/Thorne Information Partners and Oakleigh Thorne all participated in the financing. Aircell is based in Itasca, Illinois.

Sara Lee’s Bread Unit Sale Won’t Sizzle

Sara Lee’s proposed sale of its bread business will generate some interest from strategics and private equity firms, but don’t expect a hot bake-off.

Downers Grove, Ill.-based Sara Lee, which seems to be always selling something, has hired Bank of America to advise on options for its food and bakery unit for around $1 billion, according to Crain’s Chicago Business.

Pepperidge Farms, which is owned by Cambpell Soup Co., has showed interest in the unit, Crain’s says. Other potential bidders include Grupo Bimbo S.A. de C.V. and Flowers Foods Inc.

Canada’s George Weston, which owns Loblaw Co. Ltd. and Weston Foods, also could make a bid, one banker said. As for private equity names, there is Hostess Brands (fka Interstate Bakeries), which is 50% owned by Ripplewood Holdings.

Ripplewood To Sell Stake in Columbia Music

TOKYO (Reuters) – Ripplewood Holdings will sell its stake in Japan’s Columbia Music Entertainment (6791.T) for $27 million, as the U.S. private equity firm exits investments in non-financial companies. RHJ International (RHJI.BR), the Brussels-listed arm of the U.S. group, said it has agreed to sell its 25.5 percent stake in the music company to Japan’s […]

Ripplewood Sells 4.7% Stake in Egypt’s CIB

CAIRO (Reuters) – New York-based Ripplewood Holdings sold its remaining 4.7 percent stake in Egypt’s Commercial International Bank (CIB) (COMI.CA) “through the open market”, CIB said in a statement. Ripplewood sold its 13.9 million shares for 55 Egyptian pounds ($10) each for a total value of 764.5 million pounds, said a source familiar with the […]

Report: Ripplewood In Race for Daewoo Electronics

SEOUL (Reuters) – Creditors of South Korea’s Daewoo Electronics have chosen five candidates including Electrolux (ELUXb.ST) and Ripplewood to buy the appliance maker in a preliminary bidding, a local media report said on Thursday. It is the fourth attempt to sell creditors-owned Daewoo Electronics, once a flagship of the failed Daewoo Group. MoneyToday said that […]

Monthly PE-Backed Bankruptcy List: The Mega-buyouts Are Beginning To Crack

Just four additional sponsor-owned companies filed for Chapter 11 bankruptcy protection in August, bringing the total number to 59. That’s ten more filings than all of 2008. Notably, the four latest filings are among the year’s largest. We knew the bankruptcies would increase this year, but we weren’t sure if they’d creep into mega-buyout territory, […]

Weekly Downgrade Wrap-Up

As usual, we have a week’s worth of ratings actions on the debt of sponsor-backed companies, via ratings agencies Standard & Poor’s Ratings Services and Moody’s Investors Service.

A rare occurrence this week: S&P lowered its ratings on an actual private equity firm: American Capital, the BDC/buyout firm that’s facing some creditor troubles, was downgraded to ‘B-’. No word on the progress of those creditor negotiations since the firm’s earnings call earlier this month (which also provided no update). However, the firm did register to sell a $1.5 billion mixed-shelf offering on August 20.

Company: American Capital Ltd.
Sponsor: -
Downgrade: S&P lowered the long-term counterparty credit rating on American Capital to ‘B-’ from ‘BB-’.
Highlights: “The rating action reflects the accelerated deterioration in the firm’s realized earnings and reported leverage in second-quarter 2009, as well as the weakening performance of its portfolio companies. The firm’s coverage of interest by realized earnings that are not dependent on investment exits declined significantly to 1.0x in the second quarter from 1.8x in the previous quarter and 2.9x for 2008. Moreover, while we had expected further portfolio depreciation, the unrealized write-downs in the second quarter, coupled with the slowdown in investment exits, has driven leverage to 2.3x–well above the 1.0x that had been required by covenants and is required for compliance with business development company (BDC) regulations.”

Laundry Room Chronicles: Reader’s Digest Debacle

Discussing the Reader’s Digest bankruptcy, with Carrie Lee in New York and me just a few paces from the suburban home office:

Update: I made a misstatement in the video, in saying that Alpha Media and Vibe had filed for bankruptcy protection. Neither one has done so. Instead, both PE-backed companies were written off by their equity sponsors and were either recapped (Alpha) and/or sold (Vibe). Major apologies.

Quote of the Day: An “Inspired” Write-Off

“We also thank our sponsor Ripplewood Holdings, who has provided inspired vision and stewardship over the last two and a half years, including during this process.”

- Mary Berner, CEO of The Reader’s Digest Association.

This was part of today’s announcement that Reader’s Digest will file for Chapter 11 bankruptcy protection, to facilitate a debt restructuring that would wipe out Ripplewood’s equity stake. Remember, it was just over two years ago that Ripplewood bought Reader’s Digest just two years ago for $2.4 billion, and it originally wanted to pay about $150 million more (which likely would have resulted in even more debt).

So I’m not sure if Berner was being ironic or was just the victim of some well-meaning — but poor-thinking — PR flack. Maybe she was just saying “Thanks for the paycheck,” since Ripplewood installed her as CEO in the first place…

Reader’s Digest To Sell Gareth Stevens

Reader’s Digest Association Inc., a portfolio company of Ripplewood Holdings, has agreed to sell the assets of K-12 educational publisher Gareth Stevens Inc. to Roger Rosen (CEO of Rosen Publishing) and Gary Spears (co-founder of Gareth Stevens). No financial terms were disclosed.

Anthony Vernon Leaving Ripplewood Kraft Foods

SAN FRANCISCO (Reuters) – Kraft Foods Inc (KFT.N) said on Monday that W. Anthony Vernon will become president of Kraft Foods North America in mid-August, taking over for Rick Searer, who is retiring. Kraft said Vernon, 53, worked most recently as a healthcare industry partner at private equity firm Ripplewood Holdings. Previously, he worked at […]

Reader’s Digest Examines Restructuring Options

NEW YORK (Reuters) – Privately held Reader’s Digest Association Inc hired Kirkland & Ellis as legal advisors to evaluate restructuring options, including a potential bankruptcy, according an online story from Bloomberg. The Tuesday story, which cited an unnamed person familiar with the situation, said that Kirkland & Ellis was asked to examine options such as […]

6 Comments

PE Firm Mergers Are a Bad Idea. Here’s Why:

Could the acquirers become the acquirees? I’ve heard rumblings of private equity consolidation for a few weeks now, stemming from research done by law firm Simmons & Simmons. The study found that 79% of 700 surveyed PE pros expect increased consolidation in 2009.

I dismissed this as unlikely, but the topic continues to surface in conversations. There even are some trader rumors that Blackstone and KKR could acquire 3i. Would struggling buyout firms really merge with each other? At the very least, the image of PE pros nervously biting their nails in fear of a hostile takeover is ironic, since they’re usually the ones inflicting such fear on public company employees.

Either way, there are several issues with this idea, which I’ve laid out in a nice little list.

PEHUB Community

Join the 12503 members of peHUB to make connections, share your opinion, and follow your favorite authors.

Join the Community

Look Who’s Tweeting

Psst! Got any hot tips?

  • This field is for validation purposes and should be left unchanged.

PE HUB News Briefs

RSS Feed Widget

Marketplace

VCJ Headlines (subscribers only)

RSS Feed Widget

Buyouts Headlines (subscribers only)

RSS Feed Widget

Reuters VC and PE feed

RSS Feed Widget