KKR next buyout fund likely 2010

KKR’s next buyout fund will be a 2010 event, sources told us and peHUB – unless the market collapses again… While KKR hasn’t committed to a timeline or even started raising the fund (no documents are out), there had been an expectation it would start raising in 2009. (Private equity research group Preqin published this table in June (flip to page 13) of the funds they’re following as “on the road”. )   

However, KKR still has a sizeable chunk of its existing funds to spend (known as dry powder) – it finished raising a $17.6 billion to spend on buyouts in 2008.

Fundraising is a tough place to be right now. Blackstone is continuing to chip away raising for BCP VI, its sixth buyout fund, which according to Preqin has a $15 billion target.

Other research Preqin has done shows the average time taken to close a fund is 18.3 months. That’s not surprising, as LPs (the investors in private equity funds) are far more concerned that private equity funds don’t make capital calls on existing funds.

But some are managing to raise even first funds  – Huntsman Gay finished raising its first fund, totaling $1.1 billion this week.

Wrestling for control

wrestleDespite objections, and a rival bid from PAI Partners, a group of three distressed debt investors proved successful in their aggressive bid to wrestle control of French roofing company Monier through a debt for equity swap.

The restructuring deal sees Monier’s 1.9 billion euro debt load halved in exchange for senior lenders taking full ownership of the firm.

Previous owner PAI had its fingers prised from a prized asset through a combination of its rivals’ tight focus and a collapse in Monier’s earnings, which helped propel lenders into the driving seat.

Private equity underwater

yellowsubmarineThe private equity industry has indeed sunk if it is being compared with the Beatles’ Yellow Submarine. 

Asked at Dow Jones’ Limited Partners conference to come up with a theme song for the industry, Nick Ashmore, head of private equity at the National Pensions Reserve Fund in Dublin, reeled off an imaginative few suggestions including: 

Yellow Submarine ; nominated for all the funds underwater; and “Hotel California”, dedicated to all the real estate funds where investors could check out but never leave.

Is KKR missing the boat?

Unnerved by sagging markets, storied private equity firm Kohlberg Kravis Roberts appears to be thinking of putting off its New York listing. The original plan was to buy its Amsterdam-listed fund and parlay it into a New York-listed entity.

Now, having watched Blackstone‘s stock tumble a gut-wrenching 68 percent since it went public two years ago, we hear KKR is leaning toward buying out the Dutch fund, known as KPE, but putting off the NYSE listing.

Separating the two plans would give KKR, co-founded by “buyout king” Henry Kravis (pictured left), the option of buying its Amsterdam-listed fund without the pressure of having to list at a difficult time to go public. The company could later decide to list under a different method if it desired, Megan Davies reports.

Debating ‘green shoots’

USAIs it a green shoot or just a less-brown twig? That’s the question posed by the Blackstone Group’s Chief Operating Office Tony James at the Keefe, Bruyette & Woods Diversified Financial Services Conference.
“These supposedly green shoots the government wants us to believe in — we see them as slowing rates of decline, not signs of growth,” James said.
Blackstone views the current economic crisis as worse than a typical recession, but not as severe as the Great Depression. The firm expects a faster rebound than seen after the Great Depression, but it will be more like “grudging regrowth” than a vibrant resurgence, James said.
Overall, James said the private equity firm was excited by investment opportunities but the firm would proceed with caution.

(Photo, of James at 2006 Reuters Summit, by Keith Bedford)

Another one bites the dust

The Essent electricity plant is seen in MoerdijkAnother auction — appropriately enough, this time of a waste management firm — is consigned to the dustbin of history. As Catherine Hornby and I wrote earlier:

“Dutch utility Essent scrapped the sale of its waste-management unit, blaming low prices and other problems with bids for the failure of an auction that had once aimed to raise a billion euros or more.

“The sale of Essent Milieu, which bankers began working on in late 2008, had originally promised to be one of Europe’s first big leveraged buyouts (LBOs) since the credit crunch, with a staple financing helping attract private equity firms such as BC Partners and PAI.

KKR releases a snapshot of its performance

Private-equity firm KKR, which usually holds its cards close to its chest, gave investors a look at its portfolio on Sunday night. The New York firm disclosed the information, including its $1.2 billion loss in 2008, to update investors on its financial condition as it evaluates buying out its Amsterdam-listed fund, KKR Private Equity Investors LP.

Also in the presentation was the value of the firm’s 10 largest portfolio companies as of March 31. The fair values of these companies may not be particularly representative of where they’d be valued today — the S&P 500 is up nearly 20 percent since March 31 — but it is an interesting snapshot of how KKR has been performing.

The Good: French industrial conglomerate Legrand, which has a fair value that is more than double its December 2002 cost; Singapore-based technology company Avago,  up 70 percent from December 2005; Nordic telecom company TDC, up more than 30 percent from February 2006; retailer Dollar General, up 30 percent from July 2007; and health care company HCA; which has held a stable value since November 2006.

Carlyle Group calls 2008 a “humbling experience”

Private equity firm The Carlyle Group gave a blunt assessment of 2008, when a financial crisis pulled three of its portfolio companies — German auto parts maker Edscha, energy company SemGroup
and Hawaiian Telcom — into bankruptcy protection or administration.
In its annual report, Carlyle told investors “the year 2008 was a humbling experience for us and most of the financial services industry. After several years of unprecedented growth, product innovation, geographic expansion, capital deployment and investment gains, our world changed dramatically.”
Going forward, Carlyle takes a cautious view.
“In 2008, the financial landscape change — and it will remain changed for the foreseeable future. Operating conditions for our portfolio companies will remain challenging. Transactions will be fewer and smaller. More equity will be required and debt terms will be less favorable. And hold periods will increase while returns will decrease.”

Click here to see the full Carlyle Group annual report.

Gone Shopping

As Steve Slater and I wrote earlier:

“British bank Barclays has sidelined private equity houses bidding for iShares, its exchange-traded fund unit, and is looking to sell its entire asset management arm instead if offers approach $12 billion.

“U.S. money manager BlackRock and Bank of New York Mellon are among the interested bidders for Barclays Global Investors (BGI), the world’s biggest asset manager, people familiar with the matter said.”

Looking to boost its capital position and to justify its decision not to take state aid, Barclays is aiming to maximize the proceeds from any asset sales.

“Tourists” arrive in private equity

Opportunistic buyers, lovingly dubbed “tourists” by those in the industry, have moved into the secondary private equity market. They’re looThe cruise ship from Mediterranean Shipping Company Musica dwarfs Via Garibald as it arrives in Veniceking for positions in brand-name private equity funds at knock-down prices. As I wrote in a DealTalk today:”Pension funds and wealthy middle-east sovereign wealth funds are buying up investments in private equity funds, pushing up prices and sidelining secondary firms that specialise in acquiring the assets.”The market for second-hand private equity assets — where private equity investors offload assets to specialist buyers — has mushroomed as the credit crisis has intensified. And increasing numbers of cash-strapped investors are concerned about meeting their future commitments to buyout funds.”New investors have been attracted to deals by steep discounts to net asset value, forcing up prices for specialist buyers, such as Goldman Sachs (GS.N) and HarbourVest Partners (HVPE.AS) that last month closed secondary funds after reaching their $5.5 billion and $2.9 billion targets respectively.”Read the full piece here.