Comments on: Private equity math, Nuveen edition A slice of lime in the soda Sun, 26 Oct 2014 19:05:02 +0000 hourly 1 By: realist50 Mon, 14 Apr 2014 21:40:36 +0000 Felix briefly mentions Nuveen’s intangible asset writedowns, but underplays them.

As Matt Levine notes – 14-04-14/how-bad-a-private-equity-invest ment-was-nuveen-investments – those impairments account for over 100% of the net losses posted by Nuveen during Madison Dearborn’s ownership. Those items are completely non-cash and are essentially a mark-to-market charge saying that Madison Dearborn overpaid for Nuveen in 2007. (That seems to be true, in the sense that Madison Dearborn would have taken a huge loss if it sold Nuveen in 2009 when, per Dan Primack, Nuveen’s annual EBITDA was $253 million, as compared to $404 million in 2013.) A key point to note is that GAAP dictates that these impairment charges are never reversed – there’s a requirement to test annually for impairment, but the amount that’s written down is never written back up.

Summarizing – the “$2.4 billion in losses” referenced by Felix are driven by required GAAP accounting for non-cash writedowns, and these losses are therefore completely meaningless for the type of analysis that he’s trying to carry out here.

By: nisiprius Mon, 14 Apr 2014 20:39:16 +0000 Personally, I never heard of Madison Dearborn and couldn’t care less whether they made a good move or not. As a TIAA-CREF participant, what I want to know is what on earth TIAA-CREF has in mind, and why they want a mutual fund company when they already have a perfectly good one of their own.

By: deleveraging Mon, 14 Apr 2014 19:15:13 +0000 Distressed Minority Stake = BofA selling out Merrill Lynch’s stake.

What about Nuveen’s purchase of U.S. Bancorp’s Asset Management business for cash & 10% stake

By: DefunkdReader Mon, 14 Apr 2014 15:53:10 +0000 You got tripped up with accounting.

Your cumulative $542m loss is mostly due to a $586m impairment in 2012 (you generously linked to the table yourself). Ditto for the other $2.4B loss with the $2B impairment in 2008.

Impairments = reckoning of previous bad decisions or if you’re a financial company in 2008, an extremely cruel mark to market rule (also related to reckoning).

Impairments are not cash! You don’t lose cash when you take accounting charges. This is why companies like reporting ‘adjusted EBITDA’, which they do.

By: Wcwhiner Mon, 14 Apr 2014 14:57:54 +0000 > Net loss: some $3.35 billion, give or take.

Unless MD injected more equity, those losses are TIAA-Cref’s problem now and don’t affect MD’s bottom line.

Sale price is $6.3b, cost was $5.8b. Debt is up to $4.6b from the original $3.1b. How MD pulled the extra $0.5b out isn’t clear, but is eminently believable.

This, however, seems right:
> the enormous disconnect between the economics of private equity companies — the wealthy rentiers of society — versus the economics of the real-world companies they buy and sell.

By: EpicureanDeal Mon, 14 Apr 2014 14:52:49 +0000 I suspect Madison Dearborn wrote down its investment in Nuveen over time as the company struggled. The Journal might simply have relayed the comment that MD was “breaking even” on the already written-down value of the investment in its portfolio.

Or: shenanigans. Your guess is as good as mine.