February 2010: “Fighting/Cajoling/Shaming”

In case you’ve been hibernating since Groundhog day, here’s a rundown of February’s 11 biggest private equity news stories:

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[slide title=”VCs Playing Dirty”]

Feb. 3: Venture Capitalist Accused of Blackmail

Giri Sekhar, a managing partner with FA Technology Ventures, has been indicted for trying to blackmail the chief counsel of NY State Comptroller Thomas DiNapoli, in order to secure a $25 million fund commitment from NY Common Retirement Fund. Specifically, Sekhar is alleged to have sent messages threatening to expose the chief counsel’s extramarital affair (which, for the record, DiNapoli’s office denies having occurred).

[slide title=”Cuomo Settlement Machine Powers On”]

Feb. 8: It’s Official: Markstone Settles with Cuomo – 02/08/2010

Israel-focused Markstone will pay back $18 million in fees related to a $250 million investment from the New York State Common Retirement Fund into Markstone’s debut fund. Also worth noting that Cuomo announced a $1 million settlement with Los Angeles-based Wetherly Capital, which had split fees for several fund placement jobs with Hank Morris.

[slide title=”FDIC Renegs”]

February 10: Dear FDIC, It’s Been Six Months… How About Those Bank Deals?

In August, the FDIC passed a stringent set of rules aimed at making it easier for buyout firms to take control of banks. The end result, however, was so restrictive that many private equity firms basically abandoned the idea altogether. Notably, FDIC chief Sheila Bair promised to review the policy six months down the road. Well, the six months are up, so I called the FDIC to find out if a review is slated to occur. I got this:

“The FDIC is considering whether any action is appropriate.  No decisions have been made to this point.”

[slide title=”Clear Channel Safe (For Now?)”]

Feb. 12: Clear Channel Bankruptcy No Longer Imminent

Today Moody’s upgraded its debt ratings on PE-backed Clear Channel with the expectation that “a full restructuring or bankruptcy filing is no longer imminent.” THL Partners and Bain Capital acquired the company in the midst of the buyout boom for $27 billion, saddling it with $18 billion in debt and contributing to its current 9.5x leverage ratio. If Clear Channel had filed for bankruptcy, it would dwarf last year’s largest PE-backed bust. With $5.25 billion in debt, Colony Capital’s failed $8.9 billion deal for Station Casinos looked like chump change compared to Clear Channel.

[slide title=”Clubbing Up for the Month’s Biggest Take-Private”]

Feb. 12: SkillSoft Going Private in $1.1 Billion Deal

Advent International, Bain Capital and Berkshire Partners today announced an agreement to acquire Skillsoft (Nasdaq: SKIL), a Dublin, Ireland-based provider of e-learning and performance support SaaS solutions. The $1.1 billion deal is the year’s largest take-private, and represents a 10.66% premium over yesterday’s closing price. On a conference call for the deal this morning, analysts and shareholders seemed unimpressed by both the price and the opportunity for a counterbid.

[slide title=”What Placement Agent Ban?”]

Feb. 18: NYC Does Right By Both Pensions and Placement Agents

NYC’s new comptroller John Liu announced he will lift an existing ban on private equity placement agents doing business with the NYC pension system. There are several new conditions: The agents must be registered with the SEC or FINRA, they must describe the services they provide, and they must have raised at least $500 million from entities other than NYC’s pension fund.

[slide title=”Oaktree Exit No Homerun”]

Feb. 17:  Walgreen To Buy Duane Reade for $1.1 Billion

Oak Hill Capital Partners today agreed to sell New York-based drug store chain Duane Reade to Walgreen Co. for nearly $1.1 billion. Oak Hill earned just over 1.5x its money on the deal, according to a source familiar with the situation. Return-wise, it’s not a home run. But considering the company’s struggle with debt and drug store industry consolidation (e.g., Rite Aid/Eckerd, CVS/Long’s), it can be viewed as a solid double.

[slide title=”Bloomberg Breaks Up With Quadrangle”]

Feb. 21: Bloomberg Moves Personal Fortune from Quadrangle

Private equity firm Quadrangle Group will no longer be managing the assets of New York City Mayor Michael Bloomberg, who is extracting his funds from the firm, two sources said on Friday. The news was earlier reported by the Wall Street Journal and New York Times, which said that Bloomberg is pulling roughly $5 billion of his personal assets from Quadrangle. The arrangement for Quadrangle to manage Bloomberg’s money was an unusual one for a private equity firm. They typically focus on investing funds in buying and selling companies.

[slide title=”Calpers Capitulates”]

Feb. 22: CalPERS Comes Clean on PE Firm Valuations

For the past three months, I’ve been fighting/begging/cajoling/shaming CalPERS to provide carrying values for its investments in Apollo Management, The Carlyle Group and Silver Lake Partners. Not in funds managed by those firms, but rather in the actual management companies. CalPERS has demurred, until now.

[slide title=”BX Earns”]

Feb. 25: Blackstone Earnings Rise, Beat Estimates

Private equity giant Blackstone Group on Thursday said earnings rose sharply from a year ago, beating analysts’ estimates, driven by increased performance fees and improved valuations of its portfolios. Blackstone’s fourth-quarter economic net income (ENI) was $329 million, compared with a loss of $764 million a year earlier. For the full year, ENI rose to $703 million, from a loss of $1.2 billion for 2008.

[slide title=”THL Enters Fast Food”]

Feb. 26: THL Buys CKE

THL Partners agreed to acquire publicly traded CKE Restaurants, which operates the Carl’s Jr. and Hardee’s chains, for $928 million. The deal includes the assumption of $309 million in debt. UBS Investment Bank is acting as financial advisor to CKE. BofA Merrill Lynch and Barclays Capital are acting as financial advisors to THL. Affiliates of BofA Merrill Lynch and Barclays Capital have provided a financing commitment to THL to support the transaction.

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See all past monthly wrap-ups here.

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