Auction Time: If you wanna do a deal, you gotta be "creative." (FT) Advancing the Story: Private equity firms ravaged Simmons, could they do the same to banks? (Daily Finance) Speaking of the Story: 92K for a yacht captain? Yeesh. (NYT) And the Responses: "Shareholder Value for Beginners." (Baseline Scenario) "Blame the Banks." (Clusterstock) Now Hiring: Deloitte is looking at community colleges to increase its diversity. (BusinessWeek)
In the context of the New York Times private equity take-down, I think most peHUB readers would say that there is value created by private equity firms. It's also safe to say that buyout bosses are just as capable of destroying value. Taking it a step further, I'm of the opinion that while that dividend recap may take some risk off the table, they are generally not necessary. I also agree with Dan that management fees are an abomination. With that out of the way, here are examples of five more buyout-backed companies which underwent a dreaded dividend recap and ended up in bankruptcy. There isn't necessarily a straight line from recap to bankruptcy, nor is there a clear case that the company wouldn't have failed on its own apart from private equity involvement. But it sure doesn't look good. In some cases, the firms re-invested in the company, possibly to avoid a clawback if the fund from which the investment came from ends up underwater.
HHI Holdings LLC, a portfolio company of KPS Capital Partners, has completed its acquisition of the assets of FormTech Industries LLC, via a prepackaged bankruptcy process. FormTech makes forged metal automotive components, and employes around 400 people in Michigan and Ohio.
(Reuters) – Belgian supermarket group Delhaize (DELB.BR) (DEG.N) said on Monday that it agreed to buy a “substantial majority” of bankrupt U.S. supermarket chain BI-Lo LLC’s assets for $425 million in cash. Delhaize said it plans to integrate the assets included in the deal with its wholly owned U.S. subsidiary Food Lion LLC. BI-Lo, which […]
Today's NYT package story on THL Partners and its dividend recap of (soon to be) bankrupt Simmons Bedding Co. was destined to tap into a little populist anger. It's manifested in the site's comments section, with commenters calling buyout professionals thieves, colonizers, goons, mafia men and "rapists, pillagers and destroyers." Some of the harshest reactions, along with some of the more rational defenses, are after the jump...
NEW YORK (Reuters) – U.S. network equipment maker Brocade Communications Systems Inc (BRCD.O) has put itself up for sale and Hewlett-Packard Co (HPQ.N) is among the possible bidders, the Wall Street Journal reported on Monday, triggering a 17 percent jump in Brocade shares. The paper, citing people familiar with the matter, also named Oracle Corp […]
(Reuters) – Select Comfort Corp (SCSS.O) said it agreed with private equity firm Sterling Partners for an investment of $10 million through June 2010. Under the terms, Sterling Partners has the right to purchase 2.5 million shares at $4.00 apiece, and will receive warrants to buy 2 million shares at 1 cent each. Select Comfort […]
NEW YORK (Reuters) – Privately owned power company Energy Future Holdings Corp on Monday said it was offering to exchange up to $4 billion of new notes for outstanding notes to extend maturities and reduce debt. The company said it is also seeking consent from debt holders to amend restrictive terms of its outstanding notes. […]
The New York Times this morning has an article about Simmons Bedding Co., the mattress maker that has agreed to prepackaged bankruptcy that will transfer ownership from one private equity firm (THL Partners) to another (Ares Management). The main thrust is that THL made money on its original investment, in part via a dividend recap that ultimately helped drown Simmons’ balance sheet. Nothing we didn’t already know, but a good reminder that we really need to start discussing what the future of leveraged buyouts will look like in a (somewhat) recovered economy. Have PE pros been sufficiently chastened by past excess, and the intentional removal of “risk” from what used to be a “high-risk” asset class (as Steve Schwarzman once argued)? Will dividend recaps, IPO fees and the like be shunned as greed-driven cannibalism – or will they be emulated as proper tactics for protecting LP returns and ensuring PE firm survival? To begin, let me state that I do not believe there will be massive consolidation in the private equity market. Fund sizes may shrink from 2005-2007 levels – mostly corresponding to decreases in leverage availability – but I do not expect many notable buyout firms to fail. Lots of people point to the number of VC firms that disappeared following the dotcom bust, but few of those were VC firms of any significance (and today’s walking dead were felled by poor investing post-2001). As such
Quad-C Management is in talks to invest in Chicago-based Cloverhill Bakery, according to LBO Wire. The deal would include around $150 million in senior debt from Madison Capital Funding, GE Capital and BMO Capital Markets, plus junior debt from Audax Group’s mezzanine unit. www.cloverhill.com