Click here the audio clip. As memory serves, the kissing sound was accompanied by a hugging motion.

"Private equity all has long term lock ups. So you may like our performance, you may not like our performance, but you’re my partner for the next 12 years (makes a smooching, kissy sound here). At a hedge fund, you’re my partner for the next 45 days until you can give me notice and get the
hell out. So you have a situation where a trillion dollars have come out of hedge funds, which is a third of all the capital they had, and virtually no money coming out of private equity.”

You would think that given the condition of the credit markets, and given the stifling of the private equity market, and given that private equity's leveraged loans are partly to blame for the credit crisis...you would think maybe that some of the private equity big shots that stole the headlines during the credit bubble would recede a bit from the limelight. Hey, we had our day, things are bad right now, maybe it's time to hunker down a bit.

Well, if you thought that was the case, you would be wrong. The keynote speaker at the Asian Venture Capital Journal's private equity conference in Hong Kong was none other than David Bonderman, the colorful co-founder of TPG Capital who prefers wearing mis-matching socks. TPG suffered a big blow when Washington Mutual was taken over by the government, losing $1.3 billion in cash from that investment alone. Their Asian portfolio of financial investments has also been getting roughed up lately. But the negative press clearly hasn't driven him away from the speaking circuit.

Bonderman was on stage at the JW Marriot conference room on Thursday, still able to pack a room, with rows of people stacked two deep around the edges and every table full and then some. Though he seemed a bit tired and at first short of breath, Bonderman was just as funny and insightful as he's been in previous conferences, but this time with a darker tone. Indeed, where once he was praising big buyout firms and their ability to generate outsize returns, he is now explaining to crowds what the heck happened, and how we got here.

David Rubenstein, Carlyle Group's co-founder, also spoke in Hong Kong on Thursday. And again, one would think that he may tire a bit of the public appearances, particularly now that the Golden Age is behind us. Carlyle hasn't suffered a loss of Washington Mutual proportions, but it's had some dust ups, including affiliate Carlyle Capital Corp. affiliate going bankrupt earlier this year. Yet Rubenstein hasn't lost a step, and he's still preaching the private equity gospel, with a different message this time. He too, however, spent time trying to explain what happened.

George Roberts, yes THE George Roberts as in Kohlberg Kravis & Roberts, spoke at the AVCJ event too.

Perhaps, when you are billionaires, economic climates like this one don't take such a toll on one's energy, or ego.

Here are some quotes from Bonderman, Rubenstein, and some other speakers at the AVCJ event. Here are some other quotes from the event.

Bonderman: "It's a beautiful day in Hong Kong. The sun is shining, the sky is clear, the temperature is perfect. So let's move right on to clinical depression in talking about the economy."

"One of the best investments we ever made was not to invest in auto makers or parts suppliers or anything to do with either."

"Private equity all has long term lock ups. So you may like our performance, you may not like our performance, but (makes a smooching, kissy sound here) you're my partner for the next 12 years. At a hedge fund, you're my partner for the next 45 days until you can give me notice and get the
hell out. So you have a situation where a trillion dollars have come out of hedge funds, which is a third of all the capital they had, and virtually no money coming out of private equity."

"It's all George W. Bush's fault." Joking, we think, about the financial turmoil.

David Rubenstein: ""Not even Abraham Lincoln would have helped." Referring to the economy's impact on John McCain's U.S. presidential campaign.

"Investment banks, not sure, does anyone remember what one is? These used to exist in the United States. Now they're gone. They, now the commercial banks, are not going to be shells of
what they once were, but will not be the engines of investment growth they were at the beginning of decade."
  
"I've been a registered Democrat for quite some time. I can't say I voted for my economic interests. But it's an inspiring story. All of us here, who got to where we are by working hard, how could you not be inspired by that?" On voting for President elect Barack Obama.

Jamie Paton, Candover: "I sometimes wonder if I should have stayed in Australia surfing." Joking, we can only assume, on launching a new private equity group in Hong Kong in the current climate.

Ralph Parks, Oaktree Capital: "I'm still trying to get the image out of my head of blood boiling at the bottom of a wok." On a panelists mention of the term "blood on the streets" and his repeated comparison of the economic climate following a "wok" trajectory.

Photos: Top, George Roberts. Bottom, David Rubenstein. Reuters

"I look at the shape of the real estate market and I imagine it bottoming out as a letter "L". If after the snows earlier this year, China had loosed up its monetary policy, we would have seen a "V"-shaped market. If they had loosened up before the Olympics, we would have seen a "U". But for them to release new policies now, like reducing the interest rate, it's already an "L". I don't know when the market will come back up."

More pressure will come to bear on Beijing's property market, especially the market for lower-end, residential units, as projects built on land released for development in 2007 are completed, Pan said, speaking at the Reuters China Summit in Beijing on Thursday.

"Most developers are building common, residential units. As these units come onto the market, they will deal it a huge hammer blow," Pan said, adding that China's policy since late-2006 of promoting the construction of residential units of less than 90 square meters would soon be felt.

"This year in the fourth quarter, the effect of this policy will hit the market and reshape it.... The price pressure will be biggest first on real estate outside the fifth ring road, second on units 90 square meters and below, and lastly on those priced at 8,000 a square meter or more."

By Lucy Hornby

So how do they expect to grow their businesses? Not through acquisitions, both executives said, at least for the time being. They seemed to be happy to grow by beefing up their existing operations and partnerships. Or, as they in executive speak, they’re content to keep growth “organic.”

“We’re very cautious on acquisitions,” Zhang told Reuters at the summit. “We’re still looking, but there are not very many candidates. So I’d be very careful,” before seeking to purchase a competitor or peer, he said.

Ditto for Wang, who spoke of the 300 independent game studios in China sitting out there, with “very little chance” that they’d all survive as independent entities.

That doesn’t mean Kingsoft is in a buying mode, according to the CFO, who said that his company is not interested in taking any of them over at the moment.

"I think there's nothing here we feel is toxid," he told Reuters on Wednesday at the Reuters China Summit in Beijing. He goes on:

"The Chinese capital market has responded quite differently than global capital markets and that is because the Chinese capital markets are still pretty well insulated by the way China controls the RMB and by the other financial controls that China has.

"It is true that both the Shanghai A-share market and the Heng Seng market have fallen quite steeply, but that is more in response to a correction from what many people believe was an over-inflated stock bubble, rather than a direct response from some financial crisis or concern. That's been then followed on by some concerns that people have about a weakening economic sentiment in the U.S. and Europe and Japan, which are China's key export markets, and what the knock-in impact will be in China. So there is also a fundamental concern."

"But there is not a sense of distress or of crisis, or that things that people thought were valuable suddenly vanishing into thin air, along the same lines of what we've seen with some of the things that were happening with Subprime and the complex structures that were set up around the subprime, back in the United States. So I think there's nothing really that we feel that is toxic, out here in China, so we are broadly comfortable with the businesses that we're in. "

By Lucy Hornby

The PEC and the academics who assembled the report obviously worked hard on it--and they point out the truism that in fact, in certain cases, PE firms create jobs. But the study took only a tiny slice of the market (42 companies bought by private equity firms). In addition, it didn't name the individual portfolio companies at the request of the private equity firms that control them. 

"They simply wanted to produce company data on an anonymous basis," PEC spokesman Robert Stewart said, citing "competitive issues."

Nevertheless, here are some of its findings:
    Among the 42 companies, 32 or 76.2 percent expanded their
workforces in subsequent years while the remaining 10 cut their workforces. 
    Across all 42 companies, 26,214 net new jobs were created, or an increase of 8.4 percent over their combined employment of 310,420 at the time of acquisition. 
     
Data was provided by Apollo, Bain, Blackstone, Carlyle, Kohlberg Kravis Roberts, Providence, Silver Lake, and Texas Pacific Group.
 
But without more information on how big a slice of the corporate universe controlled by private equity the surveyed companies represent, and why these particular companies were chosen for the survey and not others,  the report seems to raise as many questions about job creation as it answers.

(Image. PEC's Doug Lowenstein)

As to which firms employed this device more than others, Moody's has a report on the matter.

Moody's reviewed 220 transactions rated by its Corporate Finance Group since 2002, and found that large private equity firms took dividends in over 45 percent of the deals rated before September 2006, with nearly 30 percent taking dividends big enough to remove all or almost all the equity contributed to the initial deal. In 10 percent of the deals, Moody's says sponsors drew a big dividend within the first year of the initial rating. The study excluded deals where ratings were reversed within 2 years.

So who were the avid recappers during the buyout boom? According to Moody's, six firms were particularly aggressive, taking dividends in 50 percent or more of their deals: Welsh Carson, Cerberus, Providence Equity Partners, Carlyle, Madison Dearborn and TH Lee. KKR, Goldman Sachs and Bain Capital, took dividends in one-third of their deals.  

The basic function of a dividend recap, or leveraged recap as they're also known, is to borrow more money after a leveraged buyout to pay cash to the investors. As PEHub's Dan Primack puts it here, "critics (like me) assailed the practice as short-term greed, and claimed it was rampant. Industry insiders called us ignorant alarmists, adding that it was rare, safe and legal."

In more than one-third of their deals, TH Lee and Apollo took dividends within the first year, Moody's said. Goldman Sachs, TPG Capital, Cerberus, and Warburg Pincus did so once.

But fear not, recap critics. The credit crunch has made recaps tough, and quick ones nearly impossible.

With private equity and corporate buyers paying top dollar to shareholders over the last few years (prior to the credit crunch), poison pills fell out of favor somewhat.  What hasn't fallen out of favor is the percentage of companies resorting to them when they're in play. Bear with us.
    
There were 100 first time poison pill adoptions in 2003, according to research firm FactSet SharkRepellent. In 2007, that number fell to 42. 
    
Renewal rates for such plans have also plunged. In 2001, 84 percent of companies with poison pills renewed them. Last year, it was 30 percent, FactSet SharkRepellent says.
    
But there is one element of the poison pill strategy that's on the upswing:  Implementing it when the company is "in play."

Of the 100 pills swallowed in 2003, 11 percent of them were adopted when an unwanted suitor came knocking.

But of the 42 pills adopted last year, 24 percent of them came when a company was in play, according to FactSet SharkRepellent.

That's could be a reflection on the wave of activist hedge funds -formerly known as corporate raiders-that barrelled into the M&A scene in the last few years. Names like Icahn, Ackman, Peltz, Ubben, Loeb may make some companies realize that a pill could be the only defense mechanism against a forced sale.

If activists have proven anything, however, in their rise to prominence, it's that it is tough to kill off an auction. Activist investors, the successful ones anyway, are relentless, rarely letting go of a target until the fund has forced a change.

Will CNET's pill ward off Jana? It seems that shareholders don't think so. The stock rose 4 percent on Monday.

(Michael Flaherty and Megan Davies)

(Image. www.hauntedportraits.com)

That's a far cry from the policy of the USofA, which has so far allowed SWF's to swoop in and bail out troubled financial firms with mega chunks of money.

Apparently, that's not something France is prepared to invite.
    
"There is no question of France not acting ... France will make the political and strategic choice to protect its companies, to give them the means to defend themselves and to develop," Sarkozy told a news conference.
    
He said state bank Caisse des Depots would play a role in implementing this strategy. 
     
So it's probably safe to assume that while SWF's are interested in pulling in American/European talent, they're not scouring the market for French speakers.

(Image credit: Reuters)

For the first time since the private equity giant went public, its stock finished below $20 on Monday, even as the Dow and S&P ended higher. That's right. It's trading in the teens.
    
It's a milestone few expected in the spring, when Blackstone IPO hype was at its height, or even when shares priced at $31 in June and sprung higher when they opened. Then the stock fell, and has continued to do so. The sub-$20 dip came on a day when Blackstone took a bit of a bruising in the press. What a difference a few months makes.   
    
The New York Post came out swinging on Sunday with a Blackstone gut shot in an article on its CEO's response to the PHH deal falling apart. The article seemed a tad hysterical in its accusations, and made mention of Blackstone Chief Steve Schwarzman offering peace pipes to the CEOs of the two banks that were supposed to finance the deal but didn't: JPMorgan and Lehman. 
    
In fact, Deal Journal said that according to a person familiar with the matter, no such meetings took place, though the person did concede that duking it out with the banks wasn't worth it.
    
The fact that Blackstone didn't put up a fight shows that the firm probably wasn't all that bummed by the collapse. PHH's exposure to real estate market woes would be enough to make any buyer cringe -- not to mention their bankers -- when the mortgage mess and credit crunch came into full view during the summer.

And so it is that the private equity darlings and its CEO who shined during the height of the buyout boom endured another down day--symbolic in its representation of a leveraged buyout market brought to its knees by the credit crisis.

(NYSE trader. Reuters file)