The sky is blue, Apollo Management has agreed to pay Huntsman Corp. $1 billion (it could have been worse) and in one week I’ll be on a plane to Costa Rica. In other words, it’s time for some Monday Mouth-Off.
*** First up is Mr. X, regarding my comment that a recent move by Permira could be the beginning of buyout fund size cuts: “If I’m reading that right, that’s not cutting the fund. That’s taking advantage of your LPs who are capital constrained. If my funds with portfolios acquired at 10x EBITDA tried that, I’d tell them to [bleep] off.” Albert adds: “Permira should be ashamed of itself for abusing a loyal LP in this manner.”
I agree with both comments, and should have done a better job reading the (not so) fine print.
*** SH on layoffs at The Carlyle Group: “This strikes me as horribly misaligned with LPs, unless there is a corresponding cut in mgt fees or a reduction/release of fund committed capital. Generally speaking, how can firms continue to charge the same management fee while reducing their investment staffs due to ‘market conditions?’ If market conditions warrant layoffs, don’t they also warrant smaller fund sizes?”
Tim strikes a similar theme: “If I were an LP with Carlyle – particularly in its Growth Fund – I’d be asking for a reduction in the management fee I’m paying.” And Fred: “Of course they’re cutting staff and keeping fund sizes the same. That’s the only way to maintain their standard of living, given the lack of exits/carried interest.”
*** Robert: “You wrote that secondary funds investing in 2006 and 2007 could have serious performance problems. I agree, but what about funds-of-funds? Won’t they be in even worse hot water, particularly since most of them are required to make a certain number of commitments to each vintage year?” Yup Robert, you’re probably right. Everyone gets to feel the pain.
*** Two different reactions to my swipe at US Air. Douglas writes: “Agreed on the US airways comment, sat on the runway last night in Manchester NH for 90 minutes heading to Philly, then sat on the runway in Philly for another hour, you would think there might be a glass of water in that, with or without ice?”
But A counters: “Airlines have to contract, in advance, their fuel. So they *might* still be paying a higher rate than what is comparable at the pump… Besides, the flight attendant doesn’t determine revenue policy, so being snippy with her is both an exercise in futility and, well, bad manners. If it were up to her, I’m sure you’d get a free soda – with a heavy splash of bourbon to mellow you out.”
*** Finally, Anon writes in to say that folks in 1910 called it “910,” which means perhaps we really will call it “oh-ten.”