Leverage available for right assets

By Sarah Young, from Acquisitions Monthly

It’s widely acknowledged that the tables have turned on private equity and with debt scarce it is their bids for assets which are looking uncompetitive compared to offers from the strategic buyers they out-priced time and again in the days of readily-available leverage.

But there are exceptions to this new reality.

Insiders say that bank appetite to lend to private equity firms bidding for German credit card payments processor Easycash is such that the four or five buyout houses participating in the UBS-run auction are in with a reasonable chance of winning the asset.

Banks are willing to lend between 3x and 4x last year’s ebitda to fund the deal, meaning it could weigh in at around the €250 million plus mark.

Their competition on the trade side is going to come from French information technology conglomerate Atos Origin and US player Global Payments, both of which are understood to be in the running.

The performance of the company over the last twelve months and the stability of its earnings going forward plus its strong development under its current private equity owner, Warburg Pincus, has apparently convinced banks that lending to buyout firms to fund the acquisition of Easycash is a wise use of their limited liquidity.

Poking holes in the Swiss

A federal judge has agreed to delay the UBS tax-evasion trial as the U.S. and the Swiss seek a resolution. UBS shares gained strongly on the presumption that a delay was near.

A source familiar with the situation told Reuters the talks, now led by the U.S. and Swiss governments, were aimed at finding a way to allow the bank to transfer client data without breaching Swiss law. No doubt the discussions, and perhaps even the nature of a settlement, will be murky.

That a settlement is being sought may be a short-sighted reason to buy UBS stock. Without its precious secrecy to define it, Swiss banking would lose the standing that has made it the wealth-management center of the world. The fact that the two sides are talking may indicate Washington is willing to accept less than unconditional surrender. But make no mistake: Settlement means less secrecy, not more. While a settlement would help the bank with this particular mess, it could have an added sting in the form of a payment from UBS to the U.S. government.

Deals du Jour

TMT is heating up. Vodafone, the British mobile phone operator, is pondering a bid for T-Mobile UK, while Microsoft has hired Morgan Stanley to sell its digital agency Razorfish. Both stories are in the Financial Times. Private equity group Candover says it has ended talks with potential acquirers, confident it can meet debt covenants. For all Reuters Deals news, click here.

And here’s what other media are writing today.

* Anglo American (AAL.L) is building its defences against a 41 billion pound ($67.74 billion) merger approach from Xstrata (XTA.L) by plotting talks about a major Chinese investment, the Sunday Telegraph reported.

* Switzerland’s UBS (UBSN.VX) is to pay 3 to 5 billion Swiss francs ($2.77-$4.62 billion) in the next two weeks to settle a U.S. tax probe into the bank, Swiss newspaper Sonntag reported on Sunday.

UBS tries to block healthcare banker exodus to Jefferies

UBS received a temporary restraining order earlier this week against Jefferies and two of its former health care bankers, Benjamin Lorello and Sage Kelly, preventing them from starting work at Jefferies for 30 days. The order also prevents Jefferies from poaching other UBS bankers until July 20.

This is not the first time UBS has gone to court to make sure its employment contracts are honored. The Swiss bank sought an injunction against rival Vestra Wealth last year in London, after 75 of its wealth managers left for the start-up.

The order against Jefferies and the bankers is posted below.

UBS/Jefferies order

Price hampering bank disposals

(From Sarah Young at Acquisitions Monthly)

This week has seen policy-makers on both sides of the Atlantic contemplate the future of the banking industry.

Yesterday, Switzerland’s central bank joined the discussion. It is one country that truly knows the meaning of too big to fail – the combined assets of Credit Suisse and UBS were last year equivalent to six times Swiss GDP.

The restructuring and M&A activity that would come about should regulators introduce restrictions on the size of banks, or push for the division of investment and retail banking, must have deal advisers’ eyes watering with the thought of the fees that would be up for grabs.

Barclays’ moves to escape bailout

BRITAIN-BANKS/Investors have welcomed the prospective £3bn (US$4.4 billion) sale of iShares by Barclays, which gives strong hope that the bank can avoid accepting a UK Government bailout and its implicit restrictions.

Since the deal announcement, Barclays’ shares have risen by 26 percent to 198.8p, their highest point since October, when a rescue £7.3bn financing was arranged with royal potentates from Qatar and Abu Dhabi. These Gulf investors agreed to subscribe for an effective 31percent stake through separate issues at 153.3p and 197.8p. Now, both slugs are “in the money”. However, that cash has not come cheaply.

The £4.3 billion of mandatorily convertible notes, which must be converted into shares at 153.3p by the end of June, receive a 9.75 percent coupon. And the £3 billion of reserve capital instruments pay 14 percent annually, or £420 million, for 10 years. They have warrants convertible at 197.8p.

Investors long for UBS happy end

Die-hard UBS investors who have stayed with the bank through thick and thin are hoping new boss Oswald Gruebel (sitting) will return the Swiss icon to its former splendour thanks to a bitter medicine of thousands of new layoffs and heavy cost cuts announced on Wednesday.

But their patience is running out.

ubs“The only reason why we are still with UBS is because hope dies last. But if this carries on, we will not tolerate it anymore,” said Blandina Heyne, a UBS investor for seven years, as she and her husband came to attend the bank’s annual general meeting in Zurich.

Both clients and shareholders have turned their back to Switzerland’s largest bank after the crisis forced UBS to post the biggest loss in Swiss corporate history and shares plummeted to historic lows.

Après le Changyou IPO, le déluge?

umbrella2Well maybe not yet, but it was a good week for IPOs, with hopeful signs the market is beginning to awaken from its long slumber.

Thursday’s IPO by Chinese video games maker had a first day “pop” of 25 percent, the strongest debut in a year, making it the third IPO in a row, after Mead Johnson in February and Grand Canyon in November, to do well.

Two more companies, language instruction provider Rosetta Stone and Bridgepoint Education, apparently buoyed by all the advance buzz around Changyou, scheduled their IPOs for pricing in two weeks.

IPO drought persists in Q1, no rain in sight

desertWith just a few days left, the first quarter of 2009 has been as miserable for the U.S. IPO market as the last few quarters were.

The first three months of the year saw one solitary IPO- a grand slam to be sure, an $828 million (including over-allotments) deal by kids food maker Mead Johnson Nutrition. In contrast, the first quarter of 2008, when IPO flow was already starting to fall off a cliff, had 10 deals yield a total of $20.6 billion.

It was the second quarter in a row to see only one deal, the first time such a six-month drought has happened this decade.

Banking on Politics

SWITZERLAND/They say that if you want to find an outlaw, you hire an outlaw. This may be the thinking behind UBS’s move to put some political muscle into the chairman’s office. The bank, facing a U.S. inquisition over providing sanctuary for wealthy U.S. tax dodgers, says former Swiss Finance Minister Kaspar Villiger will succeed Peter Kurer as chairman. Later this morning, a U.S. Senate panel holds a hearing on offshore tax havens and IRS attempts to get names of U.S. clients from UBS. Mark Branson, chief financial officer of UBS Global Wealth Management, is scheduled to testify.

On Monday, legislators took aim at offshore tax havens in Switzerland, the Cayman Islands and other nations, targeting them for shutdown with bills introduced by Democrats in both chambers of Congress. The whole sordid business has become very public, and very un-Swiss-bankish.

Villiger will have to deal with the scandalous allegation that USB kept its clients’ financial information secret. Given that secrecy is perhaps the biggest marketing plank of Swiss banking, he may find it hard to distance UBS from the political fallout. Perhaps the best he can do is keep secret the details of any deal the bank makes with U.S. authorities.