AEA, Ontario Teachers-backed 24 Hour Fitness files for bankruptcy, Searchlight hires CVC executive as partner, How far underwater are PE returns?

Citing COVID-19, PE-backed gym chain 24 Hour Fitness files for bankruptcy and GreyLion Capital completed its spinout from Perella Weinberg Partners.

Morning!

BK: 24 Hour Fitness, backed by AEA Investors and Ontario Teachers’ Pension Plan, filed for bankruptcy and obtained an up to $250 million debtor-in-possession loan from creditors, the company said in a statement Monday.

The company blamed the impact of coronavirus for the Chapter 11 filing. The restructuring will allow the company to shutter out-of-date clubs and improve operations, the company said.
AEA and Ontario Teachers led an investment group to acquire 24 Hour Fitness in 2014 from Forstman Little & Co. Forstman Little acquired the business in 2005.

Such filings usually wipe out equity and restructure debt to pay back creditors as much as possible. This situation highlights the risk to an organization like Ontario Teachers, which like many Canadian pensions over the years, has built up its direct investing portfolio. Organizations like Ontario Teachers compete directly with GPs, or partner with them, on headline-grabbing deals. LP direct investing holds out the promise of fabulous returns, but also of magnified losses concentrated in one investment, as opposed to passive stakes in funds that provide for diversified exposure to numerous businesses.

Challenging: I mentioned emerging managers last week pushing through the challenging fundraising market in the downturn and trying to attract capital from LPs. Today we have news about another one:

GreyLion Capital completed its spinout from Perella Weinberg Partners, where the team operated the growth equity strategy. Formerly known as PWP Growth Equity, the team was formed in 2012. It will continue to be led by Chip Baird and David Ferguson, along with all investment staff and some non-investment staff.

I’m not clear if GreyLion will be seeking a first fund right away. As is, the group managed two private equity funds with a total of $1.35 billion. GreyLion focuses on consumer, industrial, software and services sectors.

Check out our news brief here on PE Hub.

GreyLion is a true spinout and as such, is different from some of the other first-timers we’ve been writing about. Many new firms are formed by executives from the same shop, but aren’t actually spinouts with agreements with the prior firm.

Another first-timer I wrote about recently is Nexus Capital Management, which is targeting more than $1 billion for its next special situations fund. Nexus is one of several emerging managers in the market right now despite the fundraising slowdown. Read it here on Buyouts.

What other emerging managers and first-timers have you seen out there? Hit me up at cwitkowsky@buyoutsinsider.com.

Top Scoops
Craig Ferguson, a managing director with the private markets arm of insurer Manulife, left the group to run private equity at Investment Management Corp of Ontario, writes Kirk Falconer on Buyouts. Ferguson joined the Ontario organization earlier this year as managing director of private equity, Kirk writes.

The role was previously held by Sean Macaulay, who is now an operating partner with EagleTree Capital, according to his LinkedIn profile. Read Kirk’s story here.

Tech outlook: As would be expected, Covid-19 accelerated e-commerce and digital data penetration as customers turned to shopping online as physical stores were forced to shut down in the health crisis. UBS, in a recent survey, recommends investors seek exposure to big platforms and technologies like mobile, cloud, big data and social, as well as emerging tech like blockchain and AI, writes Milana Vinn on PE Hub.

As well, data centers are expanding rapidly to cope with increasing demand for cloud applications, the report said. UBS expects data center investment to continue growth by double-digit rates going forward, she writes.

Read Milana’s story here.

That’s it! Have a great rest of your day. Hit me up as always with tips n’ gossip, feedback or just to chat at cwitkowsky@buyoutsinsider.com, on Twitter or find me on LinkedIn.