TPG Writes Down Latest Fund by 29%

NEW YORK (Reuters) – Texas-based private equity firm TPG wrote down the value of investments in its latest buyout fund by 29 percent at the end of 2008, according to a document obtained by Reuters on Wednesday.

TPG Partners VI is a buyout fund of about $19 billion in size which the firm finished raising 6 months ago, so only a very small percentage of the fund has so far been invested.

One of TPG’s high profile investments, in savings and loan company Washington Mutual Inc, was wiped out by a move in September by the U.S. government to close and sell WaMu’s banking assets to JPMorgan Chase & Co (JPM.N).

The fund reported a realized loss of $473 million on that investment, according to the document.

The other investments — in Tygris Commercial Finance Group, Strauss Coffee and American Beacon — are marked in total at a fair value of $217 million versus a cost of $307 million, according to the document. That totals an unrealized loss at Dec 31 of nearly $90 million, calculated by Reuters as 29 percent below cost.

Adding that to the realized loss from WaMu totals $563 million — a significant portion of the $780 million invested, according to the document.

Buyout firms typically hold on to their investments for several years and aim that assets currently valued at below cost will eventually be sold at profit.

TPG declined comment on the document. Buyout companies typically send detailed updates on fund performance direct to their investors rather than making them publicly available.

Firms are in the midst of telling their investors the figures for the year end. For example, buyout giant Blackstone Group (BX.N) wrote down the value of its buyout Fund V by 35 percent for 2008, a source who saw a letter it sent to investors told Reuters earlier in March.

An important benchmark for funds is how the markets perform for the year. For 2008, the Dow Jones industrial average .DJI fell 33.8 percent and the Standard & Poor’s 500 Index .SPX dropped 38.5 percent.

Private equity firms are now obliged to value their assets as if they were to sell them today, rather than years in the future when they may be sold. The accounting rule known as FAS 157 came into effect for financial years beginning after Nov. 15, 2007.


The TPG document details that the fund’s investment in Tygris, which provides financing to mid-sized companies and was formed in May 2008 with investments from TPG among others, is marked as having a fair value of $91 million, versus a cost of $107 million.

Its investment in Strauss Coffee, the coffee operations of Israeli food and beverage company Strauss Group, is marked as having a fair value of $78 million, versus a cost of $104 million. TPG bought a 25 percent stake in the coffee firm in September.

The investment in American Beacon, an asset management business, is marked at a fair value of $48 million, versus a cost of $95 million. TPG made its investment in the firm in September.

TPG had a total investment in WaMu of $1.35 billion but that was spread across three of its funds.

Investors originally committed about $20 billion to the TPG VI fund, but TPG later allowed investors to reduce their commitments, a source told Reuters in December, which brought the size down to about $19 billion. It also reduced its annual management fees of 1 percent to 1.5 percent of assets by about one-tenth, the source said in December.

TPG, formerly Texas Pacific Group, is one of the largest private equity firms in the world. Its founding partner, David Bonderman, is considered one of the most influential figures in the U.S. private equity industry.

(Reporting by Megan Davies; editing by Carol Bishopric)