Unstructured Finance

Timing is everything, private equity finds

With the market talking of green shoots, it seems only a matter of time before the predators of the private equity world begin stalking the market again. Simon Meads and I took a look at the issue earlier today.

We found that though many private equity houses are still licking the wounds inflicted by ill-judged boom year deals, others remain keen and ready to go. Many of these firms timed it just right, either raising funds late in the credit cycle or selling companies at the top of the market.

Private equity companies in a good position include Advent International, Bridgepoint, CVC, Charterhouse, Cinven, PAI and Warburg Pincus.

For those that got it wrong, keeping their heads down and hoping for a change in fortunes seems the preferred option. But for those in the worst position, help is required: badly wounded Candover is now looking for a buyer and debt-laden 3i has asked for fresh funds from shareholders.

For those lucky enough to have money to invest, buyouts have changed with the times. Distressed funds, secondary funds — which deal in second-hand private equity assets — growth capital and niche buyouts are all tools of choice for today’s private equity hunters.

(Be)league(red) tables

Preliminary first-quarter data from Thomson Reuters on mergers and acquisitions (M&A) and capital markets are out. And unsurprisingly, spring has not sprung in investment banking, with the big exception of a record deluge of corporate bonds.

Fees across investment banking (M&A, loans, and debt and equity capital markets) halved, while fees for completed M&A topped that with a 68 percent fall. Overall announced M&A fell by a third, compared to the same period last year, to $444 billion.

And even that figure is flattered by two huge pharma deals, which bankers doubt will be followed by more of the same, and a flurry of bank bailouts.

Moody’s Bottom (Restaurant and Retail) Rung

bcbgMoody’s on Tuesday published its “U.S. Bottom Rung,” a list of companies that the corporate credit ratings agency thinks are at the most risk of defaulting on their debt. There are 283 companies on the list, which is current as of March 1, including the names of some beloved restaurants, retailers and food companies.

Why do this? The Wall Street Journal offers some possibilities:

“Sounds like Moody’s may be trying to get out in front on defaults, given they were perhaps a little behind on subprime mortgages and commercial mortgage-backed securities,” said David Resnick, managing director at investment banking firm Rothschild Inc. which works on many corporate bankruptcies and restructurings.

Moody’s and credit-rating rival Standard & Poor’s were criticized by the Senate in hearings late last year about the effectiveness of the ratings agencies.

Distressed investors say TGIF

Roman Catholics have fish Fridays. Boxing fans have Friday Night Fights. For distressed investors, like Jon Winick, president of Clark Street Capital, there’s Friday night Failure. 
 
“You can count on Friday failures for the next six to twelve months,” Winick said at a distressed investing conference in New York this week. He forecasts bank failures to rise to 200 through next year.
 
There have been 14 bank failures so far this year, according to the Federal Deposit Insurance Corp, with filings every Friday since Jan. 16 after the year end and New Year’s Day holidays.
    
The FDIC seized 25 banks last year. In just the first seven weeks of 2009, the 14 bank failures mean the FDIC is on pace to close more than 100 banks in 2009.
     
Distressed investors say they are expecting a record wave of bankruptcies this year, marking unprecedented opportunity for investors and a feeding frenzy on Fridays. The filings on Fridays are procedural, as the FDIC posts the failures at the end of the week. That allows the declaring bank to give regulators the weekend to sort things out, and it prevents a big run on the bank because branches are closed.
 
Brad Hunter, national director of consulting at Metrostudy, a housing industry research firm, thinks things are just getting started. He said bank takeovers ultimately could exceed 1,000. 
 
“Option ARM loans are coming due, and that will trigger another wave of foreclosure,” he said.

Saving Hendry? Thanks but no thanks, says Hugh

rtr1z9ud1It was always unlikely that a letter of advice was going to change the mind of maverick hedge fund manager Hugh Hendry.

 

And in his latest letter to investors, Hendry has smartly rebuffed any attempt to ‘save’ him from his bond investments.

 

The letter in question – Gregor.us’s monthly note, entitled “Saving Hugh Hendry” – praises the Eclectica co-founder and CIO as a “brilliant and colourful” hedge fund manager who saw the coming storm and took cover well in advance.

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