Proper investment policy, disclosure, governance and accountability should be mandated under the law for EPF’s near half a trillion ringgit funds
THE recent brouhaha over the Employees Provident Fund (EPF) financing a government-sponsored RM1.5bil housing scheme highlights several issues facing the nation’s premier retirement fund.
Considering that it is a major heavyweight, which manages almost RM470bil belonging to some 12 million members, it is important to ensure that the EPF does its job, and does it as well as it should.
Questions swirl around three main issues: The kind of projects that the EPF should finance and the risk they bear; the amount of government influence over what the EPF should do; and the level of transparency and accountability that the fund shows to its members.
Sadly, on all three counts, it shows serious deficiencies. Although it has improved in recent years, in terms of the quality of investments, it has in the past made some dubious investments which have never been fully explained.
In part this is due to substantial government influence over its operations, specifically, the Finance Minister, who not only appoints board members but also has substantial influence over them, the law requiring directors in most cases to be subservient to the Finance Minister.
Meantime, the way the EPF reports its results, and its investments and losses and gains, leaves much to be desired. It is impossible for a fund member or anyone else to independently verify the soundness of its investment decisions. There is no or little statutory requirement for appropriate standards of disclosure, governance and accountability.
Because of its huge size, approaching half a trillion ringgit (it should exceed that mark easily this year), a multitude of sins can be easily hidden in its massive books. That’s all the more reason for an eagle eye to be kept on it at all times.
The way to ensure that the EPF keeps on the straight and narrow is to mandate that unambiguously through an amendment to the EPF Act. That should start with clear definitions of directors’ qualifications, requiring them to be those who have impeccable integrity and have an unblemished and distinguished record of service in the finance, accounting and investment fields.
The current Act gives the power to the Government, through the Finance Minister, to nominate the board members, but this should be preferably done through a committee rather than a single individual.
The Act should then specify clearly the role of the directors, which would be to oversee the implementation of measures which will follow a highly specified investment policy and return objectives.
The investment policy should specify a low risk approach that would preserve members’ contributions, while at the same time providing a moderate rate of return.
It should also specify very broad allocation strategy between various classes of assets, for example Malaysian Government Securities, other investment-grade bonds, equities, property and real estate and other investments.
Changes to the EPF Act should clearly specify that directors and the fund should at all times act solely in the interest of members who own the funds in the first place. While the Government can borrow money from the EPF, it has no business inducing it to invest in businesses that have high risk.
That will stop the board from making a decision to invest in a project just because the Finance Minister or someone else told it so. Those with long memories will remember that the EPF has made strange investments before, like Time dotCom.
The changes to the Act should also specify in fairly specific terms the kind of disclosure that it makes. It should itemise all the investments it makes, and state when they were made and at what price, and how much it is losing or making on each one.
Averages have a way of disguising major outliers. On average, gains may be respectable but that does not mean major losses may not have been made on some investments. The only way to ensure that does not get buried under the mountain of funds is to disclose it.
These are not unrealistic changes. Many retirement funds act this way. Take CalPERS or California Public Employees’ Retirement System, the United States’ largest public pension fund with assets totalling some US$220bil (about RM660bil).
It publicly discloses its investment policy and asset allocation decisions. Those interested can view its investment track record. Journalists can ask for and receive its investment details for specific companies, areas and regions.
Here’s what it says in its own words: “Our goal is to efficiently and effectively manage investments to achieve the highest possible return at an acceptable level of risk. In doing so, CalPERS has generated strong long-term returns.”
We want EPF, whose size is not very far away from CalPERS, to do the same for all its members. The EPF does not belong to the Government and therefore the Government must not have full powers over the way it acts.
Until these changes to the Act are made and the EPF board acts professionally and above board in every decision it makes, taking all the required professional advice, we can’t ever be sure that EPF is always acting purely in the interests of its constituents – the Malaysian working public.
Independent consultant P Gunasegaram (t.p.guna@gmail.com) is happy that the EPF declared 6% dividends. He hopes it can continue to do so.
http://tourism9.com/ http://vkins.com/
2012年2月25日星期六
2012年2月19日星期日
Blackstone to make major investments in Israel
The Blackstone Group LP (NYSE: BX) will reportedly invest hundreds of millions of dollars in Israel, through a joint venture that it will set up with Markstone Capital Partners Group LLC. Markstone, headed by managing directors Ron Lubash and Amir Kess, will apparently become Blackstone’s exclusive representative in Israel. Markstone will seek Israeli companies in which the two private equity funds will invest.
The deal will be closed in a few weeks. Markstone has declined to respond to the report.
Blackstone, with $166.2 billion in assets under management, is the world’s largest private equity fund, larger than Apax Partners, which has invested billions of shekels in Israel, including the acquisition of the controlling interests in Tnuva Food Industries Ltd. and Psagot Investment House Ltd.
New York-based Blackstone was founded by CEO Stephen Schwarzman in 1985. It has a market cap of $7.66 billion, and posted a net profit of $1.4 billion in 2011.
Markstone has had a mixed track record with its investments in Israel. It founded Prisma Investment House, which went bankrupt. Its investments in Elran (DD) Real Estate Ltd. (TASE:ELRE) and Tomcar Ltd., which developed a commercial off-road utility vehicle, both failed. Successful exits on investments include Golden Pages Ltd., improved seed varieties developer Zeraim Gedera Ltd., and Netafim Ltd.
Markstone raised $800 million in 2003-04 from institutional investors, including California Public Employees’ Retirement System (CalPERS) and New York State Pension Fund in the US, and Clal Insurance Enterprises Holdings Ltd. (TASE: CLIS) and Menorah Mivtachim Holdings Ltd. (TASE: MORA) in Israel. Markstone chairman Elliot Broidy resigned after a plea bargain for bribery in the US. In September 2010, Markstone reached a settlement with then-New York State Attorney General Andrew Cuomo, in which the Israeli private equity fund paid $18 million.
Published by Globes [online], Israel business news – www.globes-online.com – on February 19, 2012
© Copyright of Globes Publisher Itonut (1983) Ltd. 2012http://tourism9.cm/ http://vkins.com/
The deal will be closed in a few weeks. Markstone has declined to respond to the report.
Blackstone, with $166.2 billion in assets under management, is the world’s largest private equity fund, larger than Apax Partners, which has invested billions of shekels in Israel, including the acquisition of the controlling interests in Tnuva Food Industries Ltd. and Psagot Investment House Ltd.
New York-based Blackstone was founded by CEO Stephen Schwarzman in 1985. It has a market cap of $7.66 billion, and posted a net profit of $1.4 billion in 2011.
Markstone has had a mixed track record with its investments in Israel. It founded Prisma Investment House, which went bankrupt. Its investments in Elran (DD) Real Estate Ltd. (TASE:ELRE) and Tomcar Ltd., which developed a commercial off-road utility vehicle, both failed. Successful exits on investments include Golden Pages Ltd., improved seed varieties developer Zeraim Gedera Ltd., and Netafim Ltd.
Markstone raised $800 million in 2003-04 from institutional investors, including California Public Employees’ Retirement System (CalPERS) and New York State Pension Fund in the US, and Clal Insurance Enterprises Holdings Ltd. (TASE: CLIS) and Menorah Mivtachim Holdings Ltd. (TASE: MORA) in Israel. Markstone chairman Elliot Broidy resigned after a plea bargain for bribery in the US. In September 2010, Markstone reached a settlement with then-New York State Attorney General Andrew Cuomo, in which the Israeli private equity fund paid $18 million.
Published by Globes [online], Israel business news – www.globes-online.com – on February 19, 2012
© Copyright of Globes Publisher Itonut (1983) Ltd. 2012http://tourism9.cm/ http://vkins.com/
2012年2月1日星期三
Cohen Said to Plan Donating Gains From SAC Spinout as Investors Flag Risk
Steven A. Cohen plans to donate to charity any profits he makes from the former private-equity arm of the SAC Capital Advisors LP hedge fund, according to three investors.
Some limited partners and prospective investors in Siris Capital Group LLC have expressed concern that the New York-based spinout’s ties with Cohen left it vulnerable to “headline risk,” or negative news, the people said. Two former employees of SAC Capital have pleaded guilty to insider trading in the U.S. government’s five-year probe of hedge funds, and last month a technology analyst at one of the $14 billion firm’s units was accused of the crime.
Prior to the close of the first fundraising stage in September, Cohen decided against investing in the Siris fund, whose general partners are seeking $400 million, the people said. Cohen also decided to hand over his cut of future profits to charity, according to the investors. Siris had agreed at the time of the spinout to give Cohen 20 percent of its slice of profits, or carried interest, from the first fund, the investors said.
Frank Baker, co-founder of Siris, declined to comment, as did Jonathan Gasthalter, a spokesman for SAC Capital at Sard Verbinnen & Co. No allegations of wrongdoing have been levied against Cohen or SAC.
Public pension plans have been sensitive to any bad press around investments they make.
“The nightmare scenario for any public pension manager is getting a call from a board member one morning because a negative story involving a fund in their portfolio is on page one,” said Jake Elmhirst, a managing director at UBS Investment Bank in New York.
Cohen’s decision not to invest in the fund has alleviated concerns about potential headline risk, one of the people said. Another possible limited partner said his investment firm wouldn’t be troubled if Cohen’s had participated in the fund because that would represent a “validation” of the Siris team.
At SAC, Cohen acted as the sole backer of deals by the private-capital group and helped Siris get started.
Siris gathered $125 million in the first phase of fundraising, according to one investor. Teachers’ Retirement System of Illinois committed $45 million in August.
Siris was founded by Baker, Peter Berger and Jeffrey Hendren, who have worked together for more than a decade. They were colleagues at private-equity firm Ripplewood Holdings LLC before joining SAC Capital in 2007.
SAC’s private-capital group invested in Cosmos Bank Taiwan (2837), network infrastructure company Airvana and MedQuist Holdings. The deals have produced an average of about two times invested capital, according to another person familiar with Siris.
To contact the reporter on this story: Sabrina Willmer in New York at swillmer2@bloomberg.net
To contact the editor responsible for this story: Christian Baumgaertel at cbaumgaertel@bloomberg.net
'
'
http://tourism9.com/ http://vkins.com/
Some limited partners and prospective investors in Siris Capital Group LLC have expressed concern that the New York-based spinout’s ties with Cohen left it vulnerable to “headline risk,” or negative news, the people said. Two former employees of SAC Capital have pleaded guilty to insider trading in the U.S. government’s five-year probe of hedge funds, and last month a technology analyst at one of the $14 billion firm’s units was accused of the crime.
Prior to the close of the first fundraising stage in September, Cohen decided against investing in the Siris fund, whose general partners are seeking $400 million, the people said. Cohen also decided to hand over his cut of future profits to charity, according to the investors. Siris had agreed at the time of the spinout to give Cohen 20 percent of its slice of profits, or carried interest, from the first fund, the investors said.
Frank Baker, co-founder of Siris, declined to comment, as did Jonathan Gasthalter, a spokesman for SAC Capital at Sard Verbinnen & Co. No allegations of wrongdoing have been levied against Cohen or SAC.
Siris Fundraising
Siris, the private-capital group that spun off from SAC Capital early last year, has raised $175 million for its first buyout fund, said two of the investors, who asked not to be identified because the information isn’t public. The fund, Siris Partners II LP, will invest in technology, telecommunications and health-care companies.Public pension plans have been sensitive to any bad press around investments they make.
“The nightmare scenario for any public pension manager is getting a call from a board member one morning because a negative story involving a fund in their portfolio is on page one,” said Jake Elmhirst, a managing director at UBS Investment Bank in New York.
Cohen’s decision not to invest in the fund has alleviated concerns about potential headline risk, one of the people said. Another possible limited partner said his investment firm wouldn’t be troubled if Cohen’s had participated in the fund because that would represent a “validation” of the Siris team.
At SAC, Cohen acted as the sole backer of deals by the private-capital group and helped Siris get started.
Siris gathered $125 million in the first phase of fundraising, according to one investor. Teachers’ Retirement System of Illinois committed $45 million in August.
Tekelec, Applied Discovery
In January, Siris led a group that bought Internet services company Tekelec (TKLC) in a deal valued at about $780 million. The firm purchased LexisNexis’s Applied Discovery unit, a provider of electronic legal services, in December.Siris was founded by Baker, Peter Berger and Jeffrey Hendren, who have worked together for more than a decade. They were colleagues at private-equity firm Ripplewood Holdings LLC before joining SAC Capital in 2007.
SAC’s private-capital group invested in Cosmos Bank Taiwan (2837), network infrastructure company Airvana and MedQuist Holdings. The deals have produced an average of about two times invested capital, according to another person familiar with Siris.
To contact the reporter on this story: Sabrina Willmer in New York at swillmer2@bloomberg.net
To contact the editor responsible for this story: Christian Baumgaertel at cbaumgaertel@bloomberg.net
'
'
http://tourism9.com/ http://vkins.com/
2012年1月23日星期一
Maximize financial aid by filling out FAFSA
As of Jan. 1, the Free Application for Federal Student Aid, or FAFSA, became available for the 2012-13 school year. The FAFSA qualifies students for federal grants, loans and work-study jobs, and serves as the basis for determining aid eligibility for many private awards. In light of other 2012 financial aid changes that will make it tougher for some students to pay for college, maximizing your federal aid eligibility is more crucial than ever. Here’s how to get an A in FAFSA 101.
“Everyone should fill out the FAFSA,” says Beth V. Walker, founder of College Funding Coaches, a college finance planning firm headquartered in Las Vegas. “There are a lot of parents who think they make too much money and that they’re not going to qualify for anything, but I think it’s a surprise to many people to know that the merit-based aid is handed out many times through the need-based door.”
All undergrads, regardless of their family’s income, can qualify for a total of $27,000 in unsubsidized Stafford loans over four years, reports the Department of Education, while families with adjusted gross incomes of $60,000 or less can also usually expect some federal grant aid, says Walker. Unlike student loans, grants need not be repaid, though certain conditions may apply. Before filing, families can get an estimate of their EFC by using the FAFSA4Caster tool at Fafsa.ed.gov.
“Generally, need-based financial aid is going to be harder to get next year than it was last year,” says Jay Murray, president of Solutions for Tuition, a college planning firm in Lone Tree, Colo.
Families can take action. While most families can’t change their income, they can maximize their federal aid eligibility by filing the FAFSA as close to Jan. 1 as possible and by shifting or spending assets held in the student’s name.
“Student assets are assessed at 20 percent,” says Murray, meaning for every dollar in an account in a student’s name, the government will subtract 20 cents from the student’s aid package. This starts with need-based grants. “Parental assets are assessed at (up to) 5.6 percent.” The exception, Murray says, is 529 plans. These are assessed at the parental rate regardless of whether they’re held in a parent’s or student’s name.
Gary Carpenter, executive director of the National College Advocacy Group, a nonprofit organization in Syracuse, N.Y., says families can also increase their aid eligibility by knowing which investment vehicles the government doesn’t take into consideration.
“The FAFSA form does not assess the family home. It does not assess retirement accounts. It does not assess life insurance policies or annuities,” says Carpenter. “Also, they do not assess personal assets like automobiles, clothing, furniture — none of that is assessed.”
Families looking to shift assets from assessable accounts to sheltered ones can do so by maxing out their retirement accounts, paying down the mortgage on their primary home and purchasing personal items the student will need before filing the FAFSA. These personal items can include a computer or dorm supplies. Families who need those assets to be available for college costs can simply move funds from an account in the student’s name to a 529 plan or one held in the parent’s name.
Sandy Baum, a senior fellow at the George Washington University Graduate School of Education, adds that students should also alert their school’s financial aid office about expenses that aren’t considered on the FAFSA.
“For example, if you fill out (the FAFSA) and your parents made a reasonable income last year and then they lose their jobs, you want to be sure you go to the financial aid office,” she says. “Tell them this because they can adjust your aid award to account for those unfortunate new circumstances. That’s terrifically important.”
By letting your aid office know about factors that aren’t included on the FAFSA, such as medical expenses, death in the family, divorce or parental job loss, and by providing documentation, families can keep aid officers abreast of their current financial situation and increase their chances of landing college aid.
More From Bankrate.com
http://tourism9.cm/ http://vkins.com/
Understand the basics
The sole purpose of the FAFSA is to determine your expected family contribution, or EFC — the amount the government believes your family can chip in for college that year. Based primarily on your family’s income and assets, the EFC qualifies students for federal grants, loans and work-study programs. It’s also one of the main factors used by colleges to determine how much your family can pay relative to the cost of that school and how much the college will contribute to your total aid package.“Everyone should fill out the FAFSA,” says Beth V. Walker, founder of College Funding Coaches, a college finance planning firm headquartered in Las Vegas. “There are a lot of parents who think they make too much money and that they’re not going to qualify for anything, but I think it’s a surprise to many people to know that the merit-based aid is handed out many times through the need-based door.”
All undergrads, regardless of their family’s income, can qualify for a total of $27,000 in unsubsidized Stafford loans over four years, reports the Department of Education, while families with adjusted gross incomes of $60,000 or less can also usually expect some federal grant aid, says Walker. Unlike student loans, grants need not be repaid, though certain conditions may apply. Before filing, families can get an estimate of their EFC by using the FAFSA4Caster tool at Fafsa.ed.gov.
The loopholes
Understanding the federal aid methodology is especially important in light of 2012 financial aid changes. This year, the interest rate on subsidized Stafford loans for undergrads will increase, subsidized Stafford loans for grad students will be eliminated and students will have fewer semesters to qualify for a Pell Grant. It will also become harder to qualify for the full Pell Grant award. As of last year, families with adjusted gross incomes of $30,000 or less automatically qualified for a full Pell. This year, that threshold will decrease to $23,000, reports the Department of Education.“Generally, need-based financial aid is going to be harder to get next year than it was last year,” says Jay Murray, president of Solutions for Tuition, a college planning firm in Lone Tree, Colo.
Families can take action. While most families can’t change their income, they can maximize their federal aid eligibility by filing the FAFSA as close to Jan. 1 as possible and by shifting or spending assets held in the student’s name.
“Student assets are assessed at 20 percent,” says Murray, meaning for every dollar in an account in a student’s name, the government will subtract 20 cents from the student’s aid package. This starts with need-based grants. “Parental assets are assessed at (up to) 5.6 percent.” The exception, Murray says, is 529 plans. These are assessed at the parental rate regardless of whether they’re held in a parent’s or student’s name.
Gary Carpenter, executive director of the National College Advocacy Group, a nonprofit organization in Syracuse, N.Y., says families can also increase their aid eligibility by knowing which investment vehicles the government doesn’t take into consideration.
“The FAFSA form does not assess the family home. It does not assess retirement accounts. It does not assess life insurance policies or annuities,” says Carpenter. “Also, they do not assess personal assets like automobiles, clothing, furniture — none of that is assessed.”
Families looking to shift assets from assessable accounts to sheltered ones can do so by maxing out their retirement accounts, paying down the mortgage on their primary home and purchasing personal items the student will need before filing the FAFSA. These personal items can include a computer or dorm supplies. Families who need those assets to be available for college costs can simply move funds from an account in the student’s name to a 529 plan or one held in the parent’s name.
Sandy Baum, a senior fellow at the George Washington University Graduate School of Education, adds that students should also alert their school’s financial aid office about expenses that aren’t considered on the FAFSA.
“For example, if you fill out (the FAFSA) and your parents made a reasonable income last year and then they lose their jobs, you want to be sure you go to the financial aid office,” she says. “Tell them this because they can adjust your aid award to account for those unfortunate new circumstances. That’s terrifically important.”
By letting your aid office know about factors that aren’t included on the FAFSA, such as medical expenses, death in the family, divorce or parental job loss, and by providing documentation, families can keep aid officers abreast of their current financial situation and increase their chances of landing college aid.
More From Bankrate.com
http://tourism9.cm/ http://vkins.com/
NYT: Romney fan and private equity poster boy
updated 1 minute ago 2012-01-22T23:36:00
It was, the gossip pages would later report, the talk of the Hamptons — a midsummer night’s bacchanal in the playground of the 1 percent.
Beyond the windswept dunes in Bridgehampton, at a $400,000-a-month oceanfront mansion, bright young things bubbled up and the Champagne flowed fast. Into the small hours, professional dancers in exotic clothing gyrated atop platforms. One couple twirled flaming torches. The sounds of techno boomed over the beach.
The New York Post summed up the evening’s Dionysian mysteries with the following headline: “Nude Frolic in Tycoon’s Pool.”
The Post’s tycoon, and the party’s host, was a financier named Marc J. Leder, and those weekend revels last July had the East End of Long Island buzzing. Like many deal makers, though, Mr. Leder, 50, is virtually unknown outside financial circles. But from his headquarters in Boca Raton, Fla., he presides over a multibillion-dollar private empire. He is a practitioner of a Wall Street art that helped define an age of hyperwealth, and which has now been dragged into the white-hot spotlight of presidential politics: private equity.
It was through private equity that one Republican candidate, Mitt Romney, amassed his wealth — and, it turns out, it was through private equity that Mr. Romney first met Mr. Leder. A couple of months after the blowout in Bridgehampton, Mr. Leder was host for a fund-raiser at his Boca Raton home for Mr. Romney’s campaign. But the connection goes back even further. Years ago, a visit to Mr. Romney’s investment firm inspired Mr. Leder to get into private equity in the first place. Mr. Romney was an early investor in some of the deals done by Mr. Leder’s investment company, Sun Capital, which today oversees about $8 billion in equity.
Mr. Romney’s own time in the private equity business, at Bain Capital, has provoked fierce attacks from Republican rivals and others. It has also prompted a lot of questions, including the big one: What good is this business, anyway? Detractors say private equity has enriched a handful of financiers at the expense of ordinary Americans. The deal makers, this line goes, buy companies and then bleed the life out of them. Jobs are often among the casualties.
Whether there’s truth to such claims depends on whom you ask. Private equity executives, as well as Mr. Romney, who left Bain in 1999, say the industry fixes troubled companies and ultimately creates jobs. Whatever the case, three decades after this sort of deal-making burst onto the scene in the merger mania of the 1980s, there are surprisingly few solid answers from either side.
What is certain is that buyout specialists upended the old order and made vast fortunes for themselves. Fueled by easy money from banks, and from endowments and pension funds, these private investors were able to buy companies with borrowed money and put down relatively little of their own cash.
Today, many of these private kingdoms rival the nation’s mightiest public companies. In all, the private equity industry oversees $3 trillion in global assets, according to Preqin, the research firm. Buyout kings control more than 14,000 American companies, including brands like Hilton Hotels and Burger King.
But financiers weren’t the only ones to embrace private equity. On the campaign trail, Rick Perry called private equity artists “vulture capitalists.” But as governor of Texas, he blessed the largest corporate buyout in history — the $44.4 billion takeover of the utility TXU by several investment firms in 2007. Indeed, as in many other places nationwide, public pension funds in Texas used public money to bet on private equity, in hopes of generating the investment returns they needed to pay retirees.
Against this backdrop, the story of Marc Leder might seem a footnote in the nation’s economic ledger. But it is a story worth knowing. That’s because, in many ways, Mr. Leder personifies the debates now swirling around this lucrative corner of finance.
To his critics, he represents everything that’s wrong with this setup. In recent years, a large number of the companies that Sun Capital has acquired have run into serious trouble, eliminated jobs or both. Since 2008, some 25 of its companies — roughly one of every five it owns — have filed for bankruptcy.
Among the losers was Friendly’s, the restaurant chain known for its Jim Dandy sundaes and Fribble shakes. (Sun Capital was accused by a federal agency of pushing Friendly’s into bankruptcy last year to avoid paying pensions to the chain’s employees; Sun disputes that contention.) Another company that sank into bankruptcy was Real Mex, owner of the Chevy’s restaurant chain. In that case, Mr. Leder lost money for his investors not once, but twice.
Yet Mr. Leder doesn’t seem to be suffering too much himself. In fact, he is living so large that he can’t avoid the limelight. Last July, he used part of his personal fortune to join a group of investors in buying the Philadelphia 76ers. In December, he was spotted on St. Bart’s with Russell Simmons, of Def Jam and Phat Farm fame, and Rachel Zoe, the celebrity stylist. That again landed him in The New York Post, which dubbed him a “private equity party boy.”
Mr. Leder says that characterization couldn’t be further from the truth. He focuses on what are known as “scratch and dent” deals, which typically involve companies that are struggling to begin with. One-third of the companies Sun Capital has bought are losing money. It’s a tricky game in good times, and downright dangerous in bad ones. Mr. Leder and his defenders say Sun Capital has saved many companies and, with them, many, many jobs.
“I think the portrayal of me as having wild and crazy parties is absolutely incorrect,” Mr. Leder said during a wide-ranging interview in Sun Capital’s offices in Midtown Manhattan. “I spend a small percentage throwing some parties, attending some parties. I like music. I like to dance. But rather than reporting on how I spend 340 days and nights of my year, the media likes to report on the other 25.”
Paul Jones, chief executive of the Midwest retailer ShopKo, which Sun Capital acquired in 2005, said Mr. Leder has kept a close eye on his company. “I get e-mails from him, usually on Sunday mornings, in which he’s says we had an impressive week or sometimes it’s just to give our team an ‘attaboy,’ ” Mr. Jones said.
For more than 28 years, Helen Smolak worked at the Friendly’s in Denham, Mass. Day in and day out, she served Big Beef Burgers and Fribbles, collected tips and made a decent living.
All that changed one evening last October. That was when Ms. Smolak’s supervisor called to tell her the restaurant was shutting down — immediately.
“It was my family. That was my home,” said Ms. Smolak, 56. “Friendly’s always came first. I was supposed to retire with these people and with this company.”
What went wrong? Sun Capital acquired Friendly’s in 2007 for $395 million — an 8 percent premium based on Friendly’s stock price at the time. But now Sun was saying the weak economy and the rising prices of milk and other ingredients had pushed Friendly’s, a 76-year-old chain, to the brink.
The Pension Benefit Guaranty Corporation, the federal agency that helps safeguard corporate pensions, wasn’t so sure. It accused Sun Capital in bankruptcy court filings of using the bankruptcy to shift Friendly’s pension burden onto the agency.
“That’s absolutely not true,” Mr. Leder said. Friendly’s pension fund, he said, was underfunded well before Sun Capital bought the company. The outcome, he added, is simply the way the bankruptcy process works.
“We don’t make the rules,” he said with a shrug. He said the matter was settled with the agency for a “nominal” sum.
Bankruptcy is never pretty. But, in this case, Sun Capital was particularly adept at getting what it wanted. Only months after Friendly’s went bankrupt, Mr. Leder has already regained control of the company. It was a calculated move, and one that is potentially lucrative for Sun Capital and its investors. In filing for bankruptcy, Friendly’s also cut hundreds of jobs, closed dozens of restaurants and bought some time to regroup. Now, if Sun Capital can turn around Friendly’s, it might eventually be able to sell the chain at a profit.
Beyond the windswept dunes in Bridgehampton, at a $400,000-a-month oceanfront mansion, bright young things bubbled up and the Champagne flowed fast. Into the small hours, professional dancers in exotic clothing gyrated atop platforms. One couple twirled flaming torches. The sounds of techno boomed over the beach.
The New York Post summed up the evening’s Dionysian mysteries with the following headline: “Nude Frolic in Tycoon’s Pool.”
The Post’s tycoon, and the party’s host, was a financier named Marc J. Leder, and those weekend revels last July had the East End of Long Island buzzing. Like many deal makers, though, Mr. Leder, 50, is virtually unknown outside financial circles. But from his headquarters in Boca Raton, Fla., he presides over a multibillion-dollar private empire. He is a practitioner of a Wall Street art that helped define an age of hyperwealth, and which has now been dragged into the white-hot spotlight of presidential politics: private equity.
It was through private equity that one Republican candidate, Mitt Romney, amassed his wealth — and, it turns out, it was through private equity that Mr. Romney first met Mr. Leder. A couple of months after the blowout in Bridgehampton, Mr. Leder was host for a fund-raiser at his Boca Raton home for Mr. Romney’s campaign. But the connection goes back even further. Years ago, a visit to Mr. Romney’s investment firm inspired Mr. Leder to get into private equity in the first place. Mr. Romney was an early investor in some of the deals done by Mr. Leder’s investment company, Sun Capital, which today oversees about $8 billion in equity.
Mr. Romney’s own time in the private equity business, at Bain Capital, has provoked fierce attacks from Republican rivals and others. It has also prompted a lot of questions, including the big one: What good is this business, anyway? Detractors say private equity has enriched a handful of financiers at the expense of ordinary Americans. The deal makers, this line goes, buy companies and then bleed the life out of them. Jobs are often among the casualties.
Whether there’s truth to such claims depends on whom you ask. Private equity executives, as well as Mr. Romney, who left Bain in 1999, say the industry fixes troubled companies and ultimately creates jobs. Whatever the case, three decades after this sort of deal-making burst onto the scene in the merger mania of the 1980s, there are surprisingly few solid answers from either side.
What is certain is that buyout specialists upended the old order and made vast fortunes for themselves. Fueled by easy money from banks, and from endowments and pension funds, these private investors were able to buy companies with borrowed money and put down relatively little of their own cash.
Today, many of these private kingdoms rival the nation’s mightiest public companies. In all, the private equity industry oversees $3 trillion in global assets, according to Preqin, the research firm. Buyout kings control more than 14,000 American companies, including brands like Hilton Hotels and Burger King.
But financiers weren’t the only ones to embrace private equity. On the campaign trail, Rick Perry called private equity artists “vulture capitalists.” But as governor of Texas, he blessed the largest corporate buyout in history — the $44.4 billion takeover of the utility TXU by several investment firms in 2007. Indeed, as in many other places nationwide, public pension funds in Texas used public money to bet on private equity, in hopes of generating the investment returns they needed to pay retirees.
Against this backdrop, the story of Marc Leder might seem a footnote in the nation’s economic ledger. But it is a story worth knowing. That’s because, in many ways, Mr. Leder personifies the debates now swirling around this lucrative corner of finance.
To his critics, he represents everything that’s wrong with this setup. In recent years, a large number of the companies that Sun Capital has acquired have run into serious trouble, eliminated jobs or both. Since 2008, some 25 of its companies — roughly one of every five it owns — have filed for bankruptcy.
Among the losers was Friendly’s, the restaurant chain known for its Jim Dandy sundaes and Fribble shakes. (Sun Capital was accused by a federal agency of pushing Friendly’s into bankruptcy last year to avoid paying pensions to the chain’s employees; Sun disputes that contention.) Another company that sank into bankruptcy was Real Mex, owner of the Chevy’s restaurant chain. In that case, Mr. Leder lost money for his investors not once, but twice.
Yet Mr. Leder doesn’t seem to be suffering too much himself. In fact, he is living so large that he can’t avoid the limelight. Last July, he used part of his personal fortune to join a group of investors in buying the Philadelphia 76ers. In December, he was spotted on St. Bart’s with Russell Simmons, of Def Jam and Phat Farm fame, and Rachel Zoe, the celebrity stylist. That again landed him in The New York Post, which dubbed him a “private equity party boy.”
Mr. Leder says that characterization couldn’t be further from the truth. He focuses on what are known as “scratch and dent” deals, which typically involve companies that are struggling to begin with. One-third of the companies Sun Capital has bought are losing money. It’s a tricky game in good times, and downright dangerous in bad ones. Mr. Leder and his defenders say Sun Capital has saved many companies and, with them, many, many jobs.
“I think the portrayal of me as having wild and crazy parties is absolutely incorrect,” Mr. Leder said during a wide-ranging interview in Sun Capital’s offices in Midtown Manhattan. “I spend a small percentage throwing some parties, attending some parties. I like music. I like to dance. But rather than reporting on how I spend 340 days and nights of my year, the media likes to report on the other 25.”
Paul Jones, chief executive of the Midwest retailer ShopKo, which Sun Capital acquired in 2005, said Mr. Leder has kept a close eye on his company. “I get e-mails from him, usually on Sunday mornings, in which he’s says we had an impressive week or sometimes it’s just to give our team an ‘attaboy,’ ” Mr. Jones said.
For more than 28 years, Helen Smolak worked at the Friendly’s in Denham, Mass. Day in and day out, she served Big Beef Burgers and Fribbles, collected tips and made a decent living.
All that changed one evening last October. That was when Ms. Smolak’s supervisor called to tell her the restaurant was shutting down — immediately.
“It was my family. That was my home,” said Ms. Smolak, 56. “Friendly’s always came first. I was supposed to retire with these people and with this company.”
What went wrong? Sun Capital acquired Friendly’s in 2007 for $395 million — an 8 percent premium based on Friendly’s stock price at the time. But now Sun was saying the weak economy and the rising prices of milk and other ingredients had pushed Friendly’s, a 76-year-old chain, to the brink.
The Pension Benefit Guaranty Corporation, the federal agency that helps safeguard corporate pensions, wasn’t so sure. It accused Sun Capital in bankruptcy court filings of using the bankruptcy to shift Friendly’s pension burden onto the agency.
“That’s absolutely not true,” Mr. Leder said. Friendly’s pension fund, he said, was underfunded well before Sun Capital bought the company. The outcome, he added, is simply the way the bankruptcy process works.
“We don’t make the rules,” he said with a shrug. He said the matter was settled with the agency for a “nominal” sum.
Bankruptcy is never pretty. But, in this case, Sun Capital was particularly adept at getting what it wanted. Only months after Friendly’s went bankrupt, Mr. Leder has already regained control of the company. It was a calculated move, and one that is potentially lucrative for Sun Capital and its investors. In filing for bankruptcy, Friendly’s also cut hundreds of jobs, closed dozens of restaurants and bought some time to regroup. Now, if Sun Capital can turn around Friendly’s, it might eventually be able to sell the chain at a profit.
And profit, after all, is what private equity is really about. Among the Sun Capital investors that stand to benefit from all of this are the New York State Teachers’ Retirement System, the Indiana State Teachers’ Retirement Fund and the Ford Foundation.
Jeffrey States is the investment officer for the Nebraska Investment Council, another Sun Capital investor. He said some private equity firms do provide information about how their dealings might affect things like jobs. But not all investors ask for such details.
“The primary objective is returns,” Mr. States said.
Mr. Leder, for his part, has never been shy about turning a profit. He and another banker, Rodger R. Krouse, were working at Lehman Brothers when they saw the huge money-making potential of private equity. They hatched their plan to get into the business one April afternoon in 1995, after a meeting at Mr. Romney’s Bain Capital in Boston.
The executives at Bain had been grousing about a deal in which Bain had doubled its money. But the Bain executives were lamenting that if they had sold sooner, they could have made much more.
On the plane back to New York, Mr. Leder and Mr. Krouse sat stunned.
“We’re looking at each other saying, ‘This is an industry where double your money is not that good of a deal?’ ” Mr. Leder recalls.
At 10 the next morning, Mr. Leder and Mr. Krouse marched into their bosses’ offices and quit. They then decided to base their new private equity firm in Boca Raton, and became its co-chief executives, believing the location would give them an edge in spotting potential acquisitions in the Southeast before their rivals in New York and Boston. But competitors kept outbidding them for companies.
It took 20 months, but they finally got their foot in the door. Friends and family members invested in their first dozen deals. Mr. Romney also invested personally in some early transactions, including an acquisition of a company that made speakers for computers and another that made carbon paper.
(Mr. Romney’s 2011 financial disclosures included stakes worth less than $15,000 apiece in two Sun-controlled companies — a pittance, given his estimated wealth of as much as $250 million. A spokeswoman for Mr. Romney’s campaign did not respond to an e-mail or a call seeking comment.)
Sun Capital soon carved a niche in doing turnarounds. In 1997, it acquired a majority stake in a maker of injection-molded polypropylene panels. By 2002, that company had more than doubled its sales.
One success led to another. Mr. Leder and Mr. Krouse invested $1.5 million in a company that supplied parts for Corvettes and walked away with $20 million. Two Sun investors were so tickled that they bought each man a red Corvette.
Such successes aside, Mr. Leder and Mr. Krouse make something of an odd couple. Mr. Krouse has the quiet demeanor of an accountant and tends to shift in his seat when conversations turn to his private life. (Former associates say he is a family man who likes to spend his spare time reading.)
Mr. Leder, by contrast, is bigger than life. He storms into a room and seems to suck out all of the air. Several former colleagues say he appears to have a photographic memory. He speaks rapidly and rarely holds back.
In a conversation about his business dealings, he segued into how his father wanted him to be a doctor but that he opted for other pursuits because he hated dissecting frogs in biology class. And he mentioned how he used crushed graham crackers as the secret ingredient in the pancakes he used to make for his youngest daughter.
He also said he started reading The Wall Street Journal when he was 12, and that in high school he delivered chickens and started a D. J. business. And he said that he typically sleeps for two to three hours at a time at night before waking up to answer e-mails.
AS word got out about Sun Capital’s early investment successes, pension funds and endowments were soon clamoring to get into its funds. Sun Capital raised fund after fund, each bigger than the last. In 2007, it raised $6 billion for a single fund. Sun Capital had hit the big time.
Then the Great Recession struck. The private equity boom turned bust fast.
By early 2009, numerous companies that Sun Capital had acquired were struggling to survive. Sun was racked by internal dissent. And Mr. Leder’s personal life had hit a rough patch.
By that spring, several Sun companies, including Drug Fair, Big 10 Tires and Mark IV Industries, had spiraled into bankruptcy. The firm had already taken losses on a large deal, a hostile takeover of the fashion company Kellwood, which Sun Capital had acquired without the usual due diligence.
Then came other, more personal blows. Mr. Leder and Mr. Krouse both lost money that they had personally invested with Bernard L. Madoff. Mr. Leder and his wife of 22 years, Lisa, began to go through a messy divorce. She demanded half of his total wealth, which she contended was more than $400 million at the time. The two eventually settled for an undisclosed amount.
Its business in retreat, Sun Capital laid off a number of its own employees. Those who stayed were told they would receive no cash bonuses. Instead, everyone was given a bigger slice of the portfolio of companies that, at that time, was losing value every day.
Angry employees fired off a list of dozens of pointed questions to Mr. Leder and Mr. Krouse, asking how much money the two co-founders had been paid and how much they had taken out of Sun Capital. The employees wanted to know how a firm that had just raised a $6 billion fund, and which was collecting about $120 million a year in management fees alone, could possibly be running low on cash.
Mr. Leder and Mr. Krouse had, in fact, already paid themselves handsomely for their giant fund. As 50-50 partners, they kept the first year’s fees, in cash, for themselves, according to former employees. A spokesman for Sun Capital declined to comment.
Mr. Leder said that even during its worst year, Sun Capital booked a small profit. He denied that his decisions were driven by his own financial interests. And Sun Capital paid its employees cash bonuses early for 2009 , he said, because “we realized we had pulled in the reins a little too hard.”
To critics who say that Sun Capital grew too big, too fast, Mr. Leder pointed to ShopKo, which it bought for $1.2 billion. Sun brought in new management, freshened up stores and plans to merge it with another Midwest retailer, Pamida. Sun Capital has already paid itself a dividend on that deal, and Mr. Leder says he expects it will generate big returns.
In a smaller deal, Sun Capital bought the Midwest retailer Gordmans for $56 million in 2008. It doubled its returns through two dividend payments and proceeds from the Gordmans initial public offering in 2010.
When asked if private equity could withstand the heat of election-year politics, Mr. Leder seems unfazed. He is among the top contributors to the political action committee Restore Our Future, a so-called super-PAC created to help Mr. Romney. He insists his business isn’t politics — it’s private equity.
“I don’t worry about what I can’t affect,” he said.
This story, “In a Romney Believer, Private Equity’s Risks and Rewards,” oringinally appeared in The New York Times.
Copyright © 2012 The New York Times
http://tourism9.cm/ http://vkins.com/
Jeffrey States is the investment officer for the Nebraska Investment Council, another Sun Capital investor. He said some private equity firms do provide information about how their dealings might affect things like jobs. But not all investors ask for such details.
“The primary objective is returns,” Mr. States said.
Mr. Leder, for his part, has never been shy about turning a profit. He and another banker, Rodger R. Krouse, were working at Lehman Brothers when they saw the huge money-making potential of private equity. They hatched their plan to get into the business one April afternoon in 1995, after a meeting at Mr. Romney’s Bain Capital in Boston.
The executives at Bain had been grousing about a deal in which Bain had doubled its money. But the Bain executives were lamenting that if they had sold sooner, they could have made much more.
On the plane back to New York, Mr. Leder and Mr. Krouse sat stunned.
“We’re looking at each other saying, ‘This is an industry where double your money is not that good of a deal?’ ” Mr. Leder recalls.
At 10 the next morning, Mr. Leder and Mr. Krouse marched into their bosses’ offices and quit. They then decided to base their new private equity firm in Boca Raton, and became its co-chief executives, believing the location would give them an edge in spotting potential acquisitions in the Southeast before their rivals in New York and Boston. But competitors kept outbidding them for companies.
It took 20 months, but they finally got their foot in the door. Friends and family members invested in their first dozen deals. Mr. Romney also invested personally in some early transactions, including an acquisition of a company that made speakers for computers and another that made carbon paper.
(Mr. Romney’s 2011 financial disclosures included stakes worth less than $15,000 apiece in two Sun-controlled companies — a pittance, given his estimated wealth of as much as $250 million. A spokeswoman for Mr. Romney’s campaign did not respond to an e-mail or a call seeking comment.)
Sun Capital soon carved a niche in doing turnarounds. In 1997, it acquired a majority stake in a maker of injection-molded polypropylene panels. By 2002, that company had more than doubled its sales.
One success led to another. Mr. Leder and Mr. Krouse invested $1.5 million in a company that supplied parts for Corvettes and walked away with $20 million. Two Sun investors were so tickled that they bought each man a red Corvette.
Such successes aside, Mr. Leder and Mr. Krouse make something of an odd couple. Mr. Krouse has the quiet demeanor of an accountant and tends to shift in his seat when conversations turn to his private life. (Former associates say he is a family man who likes to spend his spare time reading.)
Mr. Leder, by contrast, is bigger than life. He storms into a room and seems to suck out all of the air. Several former colleagues say he appears to have a photographic memory. He speaks rapidly and rarely holds back.
In a conversation about his business dealings, he segued into how his father wanted him to be a doctor but that he opted for other pursuits because he hated dissecting frogs in biology class. And he mentioned how he used crushed graham crackers as the secret ingredient in the pancakes he used to make for his youngest daughter.
He also said he started reading The Wall Street Journal when he was 12, and that in high school he delivered chickens and started a D. J. business. And he said that he typically sleeps for two to three hours at a time at night before waking up to answer e-mails.
AS word got out about Sun Capital’s early investment successes, pension funds and endowments were soon clamoring to get into its funds. Sun Capital raised fund after fund, each bigger than the last. In 2007, it raised $6 billion for a single fund. Sun Capital had hit the big time.
Then the Great Recession struck. The private equity boom turned bust fast.
By early 2009, numerous companies that Sun Capital had acquired were struggling to survive. Sun was racked by internal dissent. And Mr. Leder’s personal life had hit a rough patch.
By that spring, several Sun companies, including Drug Fair, Big 10 Tires and Mark IV Industries, had spiraled into bankruptcy. The firm had already taken losses on a large deal, a hostile takeover of the fashion company Kellwood, which Sun Capital had acquired without the usual due diligence.
Then came other, more personal blows. Mr. Leder and Mr. Krouse both lost money that they had personally invested with Bernard L. Madoff. Mr. Leder and his wife of 22 years, Lisa, began to go through a messy divorce. She demanded half of his total wealth, which she contended was more than $400 million at the time. The two eventually settled for an undisclosed amount.
Its business in retreat, Sun Capital laid off a number of its own employees. Those who stayed were told they would receive no cash bonuses. Instead, everyone was given a bigger slice of the portfolio of companies that, at that time, was losing value every day.
Angry employees fired off a list of dozens of pointed questions to Mr. Leder and Mr. Krouse, asking how much money the two co-founders had been paid and how much they had taken out of Sun Capital. The employees wanted to know how a firm that had just raised a $6 billion fund, and which was collecting about $120 million a year in management fees alone, could possibly be running low on cash.
Mr. Leder and Mr. Krouse had, in fact, already paid themselves handsomely for their giant fund. As 50-50 partners, they kept the first year’s fees, in cash, for themselves, according to former employees. A spokesman for Sun Capital declined to comment.
Mr. Leder said that even during its worst year, Sun Capital booked a small profit. He denied that his decisions were driven by his own financial interests. And Sun Capital paid its employees cash bonuses early for 2009 , he said, because “we realized we had pulled in the reins a little too hard.”
To critics who say that Sun Capital grew too big, too fast, Mr. Leder pointed to ShopKo, which it bought for $1.2 billion. Sun brought in new management, freshened up stores and plans to merge it with another Midwest retailer, Pamida. Sun Capital has already paid itself a dividend on that deal, and Mr. Leder says he expects it will generate big returns.
In a smaller deal, Sun Capital bought the Midwest retailer Gordmans for $56 million in 2008. It doubled its returns through two dividend payments and proceeds from the Gordmans initial public offering in 2010.
When asked if private equity could withstand the heat of election-year politics, Mr. Leder seems unfazed. He is among the top contributors to the political action committee Restore Our Future, a so-called super-PAC created to help Mr. Romney. He insists his business isn’t politics — it’s private equity.
“I don’t worry about what I can’t affect,” he said.
This story, “In a Romney Believer, Private Equity’s Risks and Rewards,” oringinally appeared in The New York Times.
Copyright © 2012 The New York Times
http://tourism9.cm/ http://vkins.com/
In a Romney Believer, Private Equity’s Risks and Rewards
IT was, the gossip pages would later report, the talk of the Hamptons — a midsummer night’s bacchanal in the playground of the 1 percent.
Beyond the windswept dunes in Bridgehampton, at a $400,000-a-month oceanfront mansion, bright young things bubbled up and the Champagne flowed fast. Into the small hours, professional dancers in exotic clothing gyrated atop platforms. One couple twirled flaming torches. The sounds of techno boomed over the beach.
The New York Post summed up the evening’s Dionysian mysteries with the following headline: “Nude Frolic in Tycoon’s Pool.”
The Post’s tycoon, and the party’s host, was a financier named Marc J. Leder, and those weekend revels last July had the East End of Long Island buzzing. Like many deal makers, though, Mr. Leder, 50, is virtually unknown outside financial circles. But from his headquarters in Boca Raton, Fla., he presides over a multibillion-dollar private empire. He is a practitioner of a Wall Street art that helped define an age of hyperwealth, and which has now been dragged into the white-hot spotlight of presidential politics: private equity.
It was through private equity that one Republican candidate, Mitt Romney, amassed his wealth — and, it turns out, it was through private equity that Mr. Romney first met Mr. Leder. A couple of months after the blowout in Bridgehampton, Mr. Leder was host for a fund-raiser at his Boca Raton home for Mr. Romney’s campaign. But the connection goes back even further. Years ago, a visit to Mr. Romney’s investment firm inspired Mr. Leder to get into private equity in the first place. Mr. Romney was an early investor in some of the deals done by Mr. Leder’s investment company, Sun Capital, which today oversees about $8 billion in equity.
Mr. Romney’s own time in the private equity business, at Bain Capital, has provoked fierce attacks from Republican rivals and others. It has also prompted a lot of questions, including the big one: What good is this business, anyway? Detractors say private equity has enriched a handful of financiers at the expense of ordinary Americans. The deal makers, this line goes, buy companies and then bleed the life out of them. Jobs are often among the casualties.
Whether there’s truth to such claims depends on whom you ask. Private equity executives, as well as Mr. Romney, who left Bain in 1999, say the industry fixes troubled companies and ultimately creates jobs. Whatever the case, three decades after this sort of deal-making burst onto the scene in the merger mania of the 1980s, there are surprisingly few solid answers from either side.
What is certain is that buyout specialists upended the old order and made vast fortunes for themselves. Fueled by easy money from banks, and from endowments and pension funds, these private investors were able to buy companies with borrowed money and put down relatively little of their own cash.
Today, many of these private kingdoms rival the nation’s mightiest public companies. In all, the private equity industry oversees $3 trillion in global assets, according to Preqin, the research firm. Buyout kings control more than 14,000 American companies, including brands like Hilton Hotels and Burger King.
BUT financiers weren’t the only ones to embrace private equity. On the campaign trail, Rick Perry called private equity artists “vulture capitalists.” But as governor of Texas, he blessed the largest corporate buyout in history — the $44.4 billion takeover of the utility TXU by several investment firms in 2007. Indeed, as in many other places nationwide, public pension funds in Texas used public money to bet on private equity, in hopes of generating the investment returns they needed to pay retirees.
Against this backdrop, the story of Marc Leder might seem a footnote in the nation’s economic ledger. But it is a story worth knowing. That’s because, in many ways, Mr. Leder personifies the debates now swirling around this lucrative corner of finance.
To his critics, he represents everything that’s wrong with this setup. In recent years, a large number of the companies that Sun Capital has acquired have run into serious trouble, eliminated jobs or both. Since 2008, some 25 of its companies — roughly one of every five it owns — have filed for bankruptcy.
Among the losers was Friendly’s, the restaurant chain known for its Jim Dandy sundaes and Fribble shakes. (Sun Capital was accused by a federal agency of pushing Friendly’s into bankruptcy last year to avoid paying pensions to the chain’s employees; Sun disputes that contention.) Another company that sank into bankruptcy was Real Mex, owner of the Chevy’s restaurant chain. In that case, Mr. Leder lost money for his investors not once, but twice.
Yet Mr. Leder doesn’t seem to be suffering too much himself. In fact, he is living so large that he can’t avoid the limelight. Last July, he used part of his personal fortune to join a group of investors in buying the Philadelphia 76ers. In December, he was spotted on St. Bart’s with Russell Simmons, of Def Jam and Phat Farm fame, and Rachel Zoe, the celebrity stylist. That again landed him in The New York Post, which dubbed him a “private equity party boy.”
Mr. Leder says that characterization couldn’t be further from the truth. He focuses on what are known as “scratch and dent” deals, which typically involve companies that are struggling to begin with. One-third of the companies Sun Capital has bought are losing money. It’s a tricky game in good times, and downright dangerous in bad ones. Mr. Leder and his defenders say Sun Capital has saved many companies and, with them, many, many jobs.
“I think the portrayal of me as having wild and crazy parties is absolutely incorrect,” Mr. Leder said during a wide-ranging interview in Sun Capital’s offices in Midtown Manhattan. “I spend a small percentage throwing some parties, attending some parties. I like music. I like to dance. But rather than reporting on how I spend 340 days and nights of my year, the media likes to report on the other 25.”
Paul Jones, chief executive of the Midwest retailer ShopKo, which Sun Capital acquired in 2005, said Mr. Leder has kept a close eye on his company. “I get e-mails from him, usually on Sunday mornings, in which he’s says we had an impressive week or sometimes it’s just to give our team an ‘attaboy,’ ” Mr. Jones said.
FOR more than 28 years, Helen Smolak worked at the Friendly’s in Denham, Mass. Day in and day out, she served Big Beef Burgers and Fribbles, collected tips and made a decent living.
All that changed one evening last October. That was when Ms. Smolak’s supervisor called to tell her the restaurant was shutting down — immediately.
“It was my family. That was my home,” said Ms. Smolak, 56. “Friendly’s always came first. I was supposed to retire with these people and with this company.”
What went wrong? Sun Capital acquired Friendly’s in 2007 for $395 million — an 8 percent premium based on Friendly’s stock price at the time. But now Sun was saying the weak economy and the rising prices of milk and other ingredients had pushed Friendly’s, a 76-year-old chain, to the brink.
The Pension Benefit Guaranty Corporation, the federal agency that helps safeguard corporate pensions, wasn’t so sure. It accused Sun Capital in bankruptcy court filings of using the bankruptcy to shift Friendly’s pension burden onto the agency.
“That’s absolutely not true,” Mr. Leder said. Friendly’s pension fund, he said, was underfunded well before Sun Capital bought the company. The outcome, he added, is simply the way the bankruptcy process works.
“We don’t make the rules,” he said with a shrug. He said the matter was settled with the agency for a “nominal” sum.
Bankruptcy is never pretty. But, in this case, Sun Capital was particularly adept at getting what it wanted. Only months after Friendly’s went bankrupt, Mr. Leder has already regained control of the company. It was a calculated move, and one that is potentially lucrative for Sun Capital and its investors. In filing for bankruptcy, Friendly’s also cut hundreds of jobs, closed dozens of restaurants and bought some time to regroup. Now, if Sun Capital can turn around Friendly’s, it might eventually be able to sell the chain at a profit.
And profit, after all, is what private equity is really about. Among the Sun Capital investors that stand to benefit from all of this are the New York State Teachers’ Retirement System, the Indiana State Teachers’ Retirement Fund and the Ford Foundation.
Jeffrey States is the investment officer for the Nebraska Investment Council, another Sun Capital investor. He said some private equity firms do provide information about how their dealings might affect things like jobs. But not all investors ask for such details.
“The primary objective is returns,” Mr. States said.
Mr. Leder, for his part, has never been shy about turning a profit. He and another banker, Rodger R. Krouse, were working at Lehman Brothers when they saw the huge money-making potential of private equity. They hatched their plan to get into the business one April afternoon in 1995, after a meeting at Mr. Romney’s Bain Capital in Boston.
The executives at Bain had been grousing about a deal in which Bain had doubled its money. But the Bain executives were lamenting that if they had sold sooner, they could have made much more.
On the plane back to New York, Mr. Leder and Mr. Krouse sat stunned.
“We’re looking at each other saying, ‘This is an industry where double your money is not that good of a deal?’ ” Mr. Leder recalls.
At 10 the next morning, Mr. Leder and Mr. Krouse marched into their bosses’ offices and quit. They then decided to base their new private equity firm in Boca Raton, and became its co-chief executives, believing the location would give them an edge in spotting potential acquisitions in the Southeast before their rivals in New York and Boston. But competitors kept outbidding them for companies.
It took 20 months, but they finally got their foot in the door. Friends and family members invested in their first dozen deals. Mr. Romney also invested personally in some early transactions, including an acquisition of a company that made speakers for computers and another that made carbon paper.
(Mr. Romney’s 2011 financial disclosures included stakes worth less than $15,000 apiece in two Sun-controlled companies — a pittance, given his estimated wealth of as much as $250 million. A spokeswoman for Mr. Romney’s campaign did not respond to an e-mail or a call seeking comment.)
Sun Capital soon carved a niche in doing turnarounds. In 1997, it acquired a majority stake in a maker of injection-molded polypropylene panels. By 2002, that company had more than doubled its sales.
One success led to another. Mr. Leder and Mr. Krouse invested $1.5 million in a company that supplied parts for Corvettes and walked away with $20 million. Two Sun investors were so tickled that they bought each man a red Corvette.
Such successes aside, Mr. Leder and Mr. Krouse make something of an odd couple. Mr. Krouse has the quiet demeanor of an accountant and tends to shift in his seat when conversations turn to his private life. (Former associates say he is a family man who likes to spend his spare time reading.)
Mr. Leder, by contrast, is bigger than life. He storms into a room and seems to suck out all of the air. Several former colleagues say he appears to have a photographic memory. He speaks rapidly and rarely holds back.
In a conversation about his business dealings, he segued into how his father wanted him to be a doctor but that he opted for other pursuits because he hated dissecting frogs in biology class. And he mentioned how he used crushed graham crackers as the secret ingredient in the pancakes he used to make for his youngest daughter.
He also said he started reading The Wall Street Journal when he was 12, and that in high school he delivered chickens and started a D. J. business. And he said that he typically sleeps for two to three hours at a time at night before waking up to answer e-mails.
AS word got out about Sun Capital’s early investment successes, pension funds and endowments were soon clamoring to get into its funds. Sun Capital raised fund after fund, each bigger than the last. In 2007, it raised $6 billion for a single fund. Sun Capital had hit the big time.
Then the Great Recession struck. The private equity boom turned bust fast.
By early 2009, numerous companies that Sun Capital had acquired were struggling to survive. Sun was racked by internal dissent. And Mr. Leder’s personal life had hit a rough patch.
By that spring, several Sun companies, including Drug Fair, Big 10 Tires and Mark IV Industries, had spiraled into bankruptcy. The firm had already taken losses on a large deal, a hostile takeover of the fashion company Kellwood, which Sun Capital had acquired without the usual due diligence.
Then came other, more personal blows. Mr. Leder and Mr. Krouse both lost money that they had personally invested with Bernard L. Madoff. Mr. Leder and his wife of 22 years, Lisa, began to go through a messy divorce. She demanded half of his total wealth, which she contended was more than $400 million at the time. The two eventually settled for an undisclosed amount.
Its business in retreat, Sun Capital laid off a number of its own employees. Those who stayed were told they would receive no cash bonuses. Instead, everyone was given a bigger slice of the portfolio of companies that, at that time, was losing value every day.
Angry employees fired off a list of dozens of pointed questions to Mr. Leder and Mr. Krouse, asking how much money the two co-founders had been paid and how much they had taken out of Sun Capital. The employees wanted to know how a firm that had just raised a $6 billion fund, and which was collecting about $120 million a year in management fees alone, could possibly be running low on cash.
Mr. Leder and Mr. Krouse had, in fact, already paid themselves handsomely for their giant fund. As 50-50 partners, they kept the first year’s fees, in cash, for themselves, according to former employees. A spokesman for Sun Capital declined to comment.
Mr. Leder said that even during its worst year, Sun Capital booked a small profit. He denied that his decisions were driven by his own financial interests. And Sun Capital paid its employees cash bonuses early for 2009 , he said, because “we realized we had pulled in the reins a little too hard.”
To critics who say that Sun Capital grew too big, too fast, Mr. Leder pointed to ShopKo, which it bought for $1.2 billion. Sun brought in new management, freshened up stores and plans to merge it with another Midwest retailer, Pamida. Sun Capital has already paid itself a dividend on that deal, and Mr. Leder says he expects it will generate big returns.
In a smaller deal, Sun Capital bought the Midwest retailer Gordmans for $56 million in 2008. It doubled its returns through two dividend payments and proceeds from the Gordmans initial public offering in 2010.
When asked if private equity could withstand the heat of election-year politics, Mr. Leder seems unfazed. He is among the top contributors to the political action committee Restore Our Future, a so-called super-PAC created to help Mr. Romney. He insists his business isn’t politics — it’s private equity.
“I don’t worry about what I can’t affect,” he said.
http://tourism9.cm/ http://vkins.com/
The New York Post summed up the evening’s Dionysian mysteries with the following headline: “Nude Frolic in Tycoon’s Pool.”
The Post’s tycoon, and the party’s host, was a financier named Marc J. Leder, and those weekend revels last July had the East End of Long Island buzzing. Like many deal makers, though, Mr. Leder, 50, is virtually unknown outside financial circles. But from his headquarters in Boca Raton, Fla., he presides over a multibillion-dollar private empire. He is a practitioner of a Wall Street art that helped define an age of hyperwealth, and which has now been dragged into the white-hot spotlight of presidential politics: private equity.
It was through private equity that one Republican candidate, Mitt Romney, amassed his wealth — and, it turns out, it was through private equity that Mr. Romney first met Mr. Leder. A couple of months after the blowout in Bridgehampton, Mr. Leder was host for a fund-raiser at his Boca Raton home for Mr. Romney’s campaign. But the connection goes back even further. Years ago, a visit to Mr. Romney’s investment firm inspired Mr. Leder to get into private equity in the first place. Mr. Romney was an early investor in some of the deals done by Mr. Leder’s investment company, Sun Capital, which today oversees about $8 billion in equity.
Mr. Romney’s own time in the private equity business, at Bain Capital, has provoked fierce attacks from Republican rivals and others. It has also prompted a lot of questions, including the big one: What good is this business, anyway? Detractors say private equity has enriched a handful of financiers at the expense of ordinary Americans. The deal makers, this line goes, buy companies and then bleed the life out of them. Jobs are often among the casualties.
Whether there’s truth to such claims depends on whom you ask. Private equity executives, as well as Mr. Romney, who left Bain in 1999, say the industry fixes troubled companies and ultimately creates jobs. Whatever the case, three decades after this sort of deal-making burst onto the scene in the merger mania of the 1980s, there are surprisingly few solid answers from either side.
What is certain is that buyout specialists upended the old order and made vast fortunes for themselves. Fueled by easy money from banks, and from endowments and pension funds, these private investors were able to buy companies with borrowed money and put down relatively little of their own cash.
Today, many of these private kingdoms rival the nation’s mightiest public companies. In all, the private equity industry oversees $3 trillion in global assets, according to Preqin, the research firm. Buyout kings control more than 14,000 American companies, including brands like Hilton Hotels and Burger King.
BUT financiers weren’t the only ones to embrace private equity. On the campaign trail, Rick Perry called private equity artists “vulture capitalists.” But as governor of Texas, he blessed the largest corporate buyout in history — the $44.4 billion takeover of the utility TXU by several investment firms in 2007. Indeed, as in many other places nationwide, public pension funds in Texas used public money to bet on private equity, in hopes of generating the investment returns they needed to pay retirees.
Against this backdrop, the story of Marc Leder might seem a footnote in the nation’s economic ledger. But it is a story worth knowing. That’s because, in many ways, Mr. Leder personifies the debates now swirling around this lucrative corner of finance.
To his critics, he represents everything that’s wrong with this setup. In recent years, a large number of the companies that Sun Capital has acquired have run into serious trouble, eliminated jobs or both. Since 2008, some 25 of its companies — roughly one of every five it owns — have filed for bankruptcy.
Among the losers was Friendly’s, the restaurant chain known for its Jim Dandy sundaes and Fribble shakes. (Sun Capital was accused by a federal agency of pushing Friendly’s into bankruptcy last year to avoid paying pensions to the chain’s employees; Sun disputes that contention.) Another company that sank into bankruptcy was Real Mex, owner of the Chevy’s restaurant chain. In that case, Mr. Leder lost money for his investors not once, but twice.
Yet Mr. Leder doesn’t seem to be suffering too much himself. In fact, he is living so large that he can’t avoid the limelight. Last July, he used part of his personal fortune to join a group of investors in buying the Philadelphia 76ers. In December, he was spotted on St. Bart’s with Russell Simmons, of Def Jam and Phat Farm fame, and Rachel Zoe, the celebrity stylist. That again landed him in The New York Post, which dubbed him a “private equity party boy.”
Mr. Leder says that characterization couldn’t be further from the truth. He focuses on what are known as “scratch and dent” deals, which typically involve companies that are struggling to begin with. One-third of the companies Sun Capital has bought are losing money. It’s a tricky game in good times, and downright dangerous in bad ones. Mr. Leder and his defenders say Sun Capital has saved many companies and, with them, many, many jobs.
“I think the portrayal of me as having wild and crazy parties is absolutely incorrect,” Mr. Leder said during a wide-ranging interview in Sun Capital’s offices in Midtown Manhattan. “I spend a small percentage throwing some parties, attending some parties. I like music. I like to dance. But rather than reporting on how I spend 340 days and nights of my year, the media likes to report on the other 25.”
Paul Jones, chief executive of the Midwest retailer ShopKo, which Sun Capital acquired in 2005, said Mr. Leder has kept a close eye on his company. “I get e-mails from him, usually on Sunday mornings, in which he’s says we had an impressive week or sometimes it’s just to give our team an ‘attaboy,’ ” Mr. Jones said.
FOR more than 28 years, Helen Smolak worked at the Friendly’s in Denham, Mass. Day in and day out, she served Big Beef Burgers and Fribbles, collected tips and made a decent living.
All that changed one evening last October. That was when Ms. Smolak’s supervisor called to tell her the restaurant was shutting down — immediately.
“It was my family. That was my home,” said Ms. Smolak, 56. “Friendly’s always came first. I was supposed to retire with these people and with this company.”
What went wrong? Sun Capital acquired Friendly’s in 2007 for $395 million — an 8 percent premium based on Friendly’s stock price at the time. But now Sun was saying the weak economy and the rising prices of milk and other ingredients had pushed Friendly’s, a 76-year-old chain, to the brink.
The Pension Benefit Guaranty Corporation, the federal agency that helps safeguard corporate pensions, wasn’t so sure. It accused Sun Capital in bankruptcy court filings of using the bankruptcy to shift Friendly’s pension burden onto the agency.
“That’s absolutely not true,” Mr. Leder said. Friendly’s pension fund, he said, was underfunded well before Sun Capital bought the company. The outcome, he added, is simply the way the bankruptcy process works.
“We don’t make the rules,” he said with a shrug. He said the matter was settled with the agency for a “nominal” sum.
Bankruptcy is never pretty. But, in this case, Sun Capital was particularly adept at getting what it wanted. Only months after Friendly’s went bankrupt, Mr. Leder has already regained control of the company. It was a calculated move, and one that is potentially lucrative for Sun Capital and its investors. In filing for bankruptcy, Friendly’s also cut hundreds of jobs, closed dozens of restaurants and bought some time to regroup. Now, if Sun Capital can turn around Friendly’s, it might eventually be able to sell the chain at a profit.
And profit, after all, is what private equity is really about. Among the Sun Capital investors that stand to benefit from all of this are the New York State Teachers’ Retirement System, the Indiana State Teachers’ Retirement Fund and the Ford Foundation.
Jeffrey States is the investment officer for the Nebraska Investment Council, another Sun Capital investor. He said some private equity firms do provide information about how their dealings might affect things like jobs. But not all investors ask for such details.
“The primary objective is returns,” Mr. States said.
Mr. Leder, for his part, has never been shy about turning a profit. He and another banker, Rodger R. Krouse, were working at Lehman Brothers when they saw the huge money-making potential of private equity. They hatched their plan to get into the business one April afternoon in 1995, after a meeting at Mr. Romney’s Bain Capital in Boston.
The executives at Bain had been grousing about a deal in which Bain had doubled its money. But the Bain executives were lamenting that if they had sold sooner, they could have made much more.
On the plane back to New York, Mr. Leder and Mr. Krouse sat stunned.
“We’re looking at each other saying, ‘This is an industry where double your money is not that good of a deal?’ ” Mr. Leder recalls.
At 10 the next morning, Mr. Leder and Mr. Krouse marched into their bosses’ offices and quit. They then decided to base their new private equity firm in Boca Raton, and became its co-chief executives, believing the location would give them an edge in spotting potential acquisitions in the Southeast before their rivals in New York and Boston. But competitors kept outbidding them for companies.
It took 20 months, but they finally got their foot in the door. Friends and family members invested in their first dozen deals. Mr. Romney also invested personally in some early transactions, including an acquisition of a company that made speakers for computers and another that made carbon paper.
(Mr. Romney’s 2011 financial disclosures included stakes worth less than $15,000 apiece in two Sun-controlled companies — a pittance, given his estimated wealth of as much as $250 million. A spokeswoman for Mr. Romney’s campaign did not respond to an e-mail or a call seeking comment.)
Sun Capital soon carved a niche in doing turnarounds. In 1997, it acquired a majority stake in a maker of injection-molded polypropylene panels. By 2002, that company had more than doubled its sales.
One success led to another. Mr. Leder and Mr. Krouse invested $1.5 million in a company that supplied parts for Corvettes and walked away with $20 million. Two Sun investors were so tickled that they bought each man a red Corvette.
Such successes aside, Mr. Leder and Mr. Krouse make something of an odd couple. Mr. Krouse has the quiet demeanor of an accountant and tends to shift in his seat when conversations turn to his private life. (Former associates say he is a family man who likes to spend his spare time reading.)
Mr. Leder, by contrast, is bigger than life. He storms into a room and seems to suck out all of the air. Several former colleagues say he appears to have a photographic memory. He speaks rapidly and rarely holds back.
In a conversation about his business dealings, he segued into how his father wanted him to be a doctor but that he opted for other pursuits because he hated dissecting frogs in biology class. And he mentioned how he used crushed graham crackers as the secret ingredient in the pancakes he used to make for his youngest daughter.
He also said he started reading The Wall Street Journal when he was 12, and that in high school he delivered chickens and started a D. J. business. And he said that he typically sleeps for two to three hours at a time at night before waking up to answer e-mails.
AS word got out about Sun Capital’s early investment successes, pension funds and endowments were soon clamoring to get into its funds. Sun Capital raised fund after fund, each bigger than the last. In 2007, it raised $6 billion for a single fund. Sun Capital had hit the big time.
Then the Great Recession struck. The private equity boom turned bust fast.
By early 2009, numerous companies that Sun Capital had acquired were struggling to survive. Sun was racked by internal dissent. And Mr. Leder’s personal life had hit a rough patch.
By that spring, several Sun companies, including Drug Fair, Big 10 Tires and Mark IV Industries, had spiraled into bankruptcy. The firm had already taken losses on a large deal, a hostile takeover of the fashion company Kellwood, which Sun Capital had acquired without the usual due diligence.
Then came other, more personal blows. Mr. Leder and Mr. Krouse both lost money that they had personally invested with Bernard L. Madoff. Mr. Leder and his wife of 22 years, Lisa, began to go through a messy divorce. She demanded half of his total wealth, which she contended was more than $400 million at the time. The two eventually settled for an undisclosed amount.
Its business in retreat, Sun Capital laid off a number of its own employees. Those who stayed were told they would receive no cash bonuses. Instead, everyone was given a bigger slice of the portfolio of companies that, at that time, was losing value every day.
Angry employees fired off a list of dozens of pointed questions to Mr. Leder and Mr. Krouse, asking how much money the two co-founders had been paid and how much they had taken out of Sun Capital. The employees wanted to know how a firm that had just raised a $6 billion fund, and which was collecting about $120 million a year in management fees alone, could possibly be running low on cash.
Mr. Leder and Mr. Krouse had, in fact, already paid themselves handsomely for their giant fund. As 50-50 partners, they kept the first year’s fees, in cash, for themselves, according to former employees. A spokesman for Sun Capital declined to comment.
Mr. Leder said that even during its worst year, Sun Capital booked a small profit. He denied that his decisions were driven by his own financial interests. And Sun Capital paid its employees cash bonuses early for 2009 , he said, because “we realized we had pulled in the reins a little too hard.”
To critics who say that Sun Capital grew too big, too fast, Mr. Leder pointed to ShopKo, which it bought for $1.2 billion. Sun brought in new management, freshened up stores and plans to merge it with another Midwest retailer, Pamida. Sun Capital has already paid itself a dividend on that deal, and Mr. Leder says he expects it will generate big returns.
In a smaller deal, Sun Capital bought the Midwest retailer Gordmans for $56 million in 2008. It doubled its returns through two dividend payments and proceeds from the Gordmans initial public offering in 2010.
When asked if private equity could withstand the heat of election-year politics, Mr. Leder seems unfazed. He is among the top contributors to the political action committee Restore Our Future, a so-called super-PAC created to help Mr. Romney. He insists his business isn’t politics — it’s private equity.
“I don’t worry about what I can’t affect,” he said.
http://tourism9.cm/ http://vkins.com/
2012年1月4日星期三
Private equity fund raises US$16b
Blackstone Group will conclude fundraising for its latest buyout fund in January, raising just over US$16 billion ($20 billion), three people familiar with the matter said on Wednesday, in a four-year process challenged by the global financial crisis.
The fund is the largest in the market to complete its fundraising process and the sixth-biggest private equity fund ever raised, according to data firm Preqin.
Private equity firms raised US$263b in 2011, slightly less than in 2010, according to Preqin, and a far cry from the height of the buyouts boom leading up to 2007, when they pulled in around US$600b a year.
The size of the fund that Blackstone was able to raise in this environment shows that pension funds and other investors are getting more picky about which private equity firms they trust their money with. Some investors are also getting better deals on fees by negotiating large commitments.
“I don’t think we will see a large private equity fund like this closing for a few years,” said Sandler O’Neill & Partners analyst Michael Kim.
Fundraising for the latest buyout fund, Blackstone Capital Partners VI LP (BCP VI), began at the start of 2008 and the firm kicked off the fund’s investment period on January 7, 2011, giving it a 12-month deadline to reach final fundraising close, the people said.
Blackstone had already pushed back the final close as late investors asked for time to get approval from their investment committees and conduct their due diligence. A June 2010 memo by private equity advisor PCG Asset Management to the Oregon Public Employees’ Retirement Fund listed June 30, 2010 as the expected final closing date.
In November, Blackstone said it had raised over US$14b for the fund and Chief Operating Officer Tony James said the number will end up with close to US$15b.
But in July 2011, Blackstone Chief Executive Steve Schwarzman said the fund had topped US$16b and predicted that it would likely will be the largest to be raised for the next two or three years. The amount has remained about the same since then, the sources said.
Blackstone declined to comment.
NEGOTIATING A BETTER DEAL
BCP VI has attracted some of the world’s largest private equity investors, including the California Public Employees’ Retirement System and Canada Pension Plan Investment Board, according to disclosures by these pension funds.
Some investors took advantage of the protracted fundraising period either to tap a previously unavailable private equity allocation or negotiate a better deal.
Last month, the New Jersey Division of Investment said it planned to invest US$50 million in BCP VI as part of an investment programme across Blackstone’s alternative asset platforms that will total up to US$2.5b.
The New Jersey pension fund manager will pay a blended 1.3 per cent management fee on committed capital during the fund’s investment period and 0.75 per cent on invested capital after the period ends, as well as options for management fee offsets that Blackstone offered, according its investment committee report.
Private equity firms typically charge around 1.5 per cent of committed capital as a management fee, but investors may pay different fees based on the size of their commitments.
“Fundraising takes longer these days; this is not unique to Blackstone. But big investors are looking to give money to fewer private equity managers and the likes of Blackstone are a beneficiary of that,” Kim said.
BCP VI’s predecessor, BCP V, remains the largest private equity fund ever to be raised at US$21.7b, according to Preqin.
BCP VI’s first acquisition deals include the US$3b takeover of healthcare IT firm Emdeon and an investment of up to US$277m in Exeter Finance, which provides financing to auto dealers.
BCP VI had invested $620 million of its capital as of September 30, according to a November 10, 2011 presentation by Schwarzman to investors. Blackstone had about US$15.1b of available capital between BCP V and BCP VI, the presentation showed. The Emdeon deal was completed in November.
While Blackstone seeks so-called “dislocation” in markets for attractive asset values, financial market turmoil also affects its ability to source debt cheaply for deals, and hence its returns and transaction size.
The firm’s shares are up almost 40 per cent from a 2011 low of US$10.51 as prospects for the US economy brightened and concerns over the euro zone’s sovereign debt crisis eased slightly.
Global private-equity backed mergers and acquisition activity picked up in 2011, with total volumes up 32.2 percent year-on-year to US$306.3b, according to Thomson Reuters data.
- Reuters
http://tourism9.com/
The fund is the largest in the market to complete its fundraising process and the sixth-biggest private equity fund ever raised, according to data firm Preqin.
Private equity firms raised US$263b in 2011, slightly less than in 2010, according to Preqin, and a far cry from the height of the buyouts boom leading up to 2007, when they pulled in around US$600b a year.
The size of the fund that Blackstone was able to raise in this environment shows that pension funds and other investors are getting more picky about which private equity firms they trust their money with. Some investors are also getting better deals on fees by negotiating large commitments.
“I don’t think we will see a large private equity fund like this closing for a few years,” said Sandler O’Neill & Partners analyst Michael Kim.
Fundraising for the latest buyout fund, Blackstone Capital Partners VI LP (BCP VI), began at the start of 2008 and the firm kicked off the fund’s investment period on January 7, 2011, giving it a 12-month deadline to reach final fundraising close, the people said.
Blackstone had already pushed back the final close as late investors asked for time to get approval from their investment committees and conduct their due diligence. A June 2010 memo by private equity advisor PCG Asset Management to the Oregon Public Employees’ Retirement Fund listed June 30, 2010 as the expected final closing date.
In November, Blackstone said it had raised over US$14b for the fund and Chief Operating Officer Tony James said the number will end up with close to US$15b.
But in July 2011, Blackstone Chief Executive Steve Schwarzman said the fund had topped US$16b and predicted that it would likely will be the largest to be raised for the next two or three years. The amount has remained about the same since then, the sources said.
Blackstone declined to comment.
NEGOTIATING A BETTER DEAL
BCP VI has attracted some of the world’s largest private equity investors, including the California Public Employees’ Retirement System and Canada Pension Plan Investment Board, according to disclosures by these pension funds.
Some investors took advantage of the protracted fundraising period either to tap a previously unavailable private equity allocation or negotiate a better deal.
Last month, the New Jersey Division of Investment said it planned to invest US$50 million in BCP VI as part of an investment programme across Blackstone’s alternative asset platforms that will total up to US$2.5b.
The New Jersey pension fund manager will pay a blended 1.3 per cent management fee on committed capital during the fund’s investment period and 0.75 per cent on invested capital after the period ends, as well as options for management fee offsets that Blackstone offered, according its investment committee report.
Private equity firms typically charge around 1.5 per cent of committed capital as a management fee, but investors may pay different fees based on the size of their commitments.
“Fundraising takes longer these days; this is not unique to Blackstone. But big investors are looking to give money to fewer private equity managers and the likes of Blackstone are a beneficiary of that,” Kim said.
BCP VI’s predecessor, BCP V, remains the largest private equity fund ever to be raised at US$21.7b, according to Preqin.
BCP VI’s first acquisition deals include the US$3b takeover of healthcare IT firm Emdeon and an investment of up to US$277m in Exeter Finance, which provides financing to auto dealers.
BCP VI had invested $620 million of its capital as of September 30, according to a November 10, 2011 presentation by Schwarzman to investors. Blackstone had about US$15.1b of available capital between BCP V and BCP VI, the presentation showed. The Emdeon deal was completed in November.
While Blackstone seeks so-called “dislocation” in markets for attractive asset values, financial market turmoil also affects its ability to source debt cheaply for deals, and hence its returns and transaction size.
The firm’s shares are up almost 40 per cent from a 2011 low of US$10.51 as prospects for the US economy brightened and concerns over the euro zone’s sovereign debt crisis eased slightly.
Global private-equity backed mergers and acquisition activity picked up in 2011, with total volumes up 32.2 percent year-on-year to US$306.3b, according to Thomson Reuters data.
- Reuters
http://tourism9.com/
2012年1月2日星期一
Carlyle launches new financial firms buyout fund
(Reuters) – The Carlyle Group has started fundraising for a new global financial services buyout fund that is seeking to top its previous $1.1 billion fund, which is now almost fully invested, a person familiar with the matter said on Tuesday.
With about 90 percent of its first financials buyout fund spent, the private equity group is looking for more firepower as Europe’s financial crisis and higher capital requirements for banks offer new investment opportunities, the source said.
The new fund, Carlyle Global Financial Services Partners II, has a minimum commitment threshold for investors of $10 million and intends to fundraise for more than a year, according to a filing with the U.S. Securities and Exchange Commission.
Carlyle, which is preparing for an initial public offering in 2012, is one of the private equity industry’s most prolific fund managers, with more than $148 billion of assets under management in 89 active funds and 52 fund of fund vehicles.
Carlyle’s financial services group is headed by former UBS investment banker Olivier Sarkozy, half-brother of France’s President Nicolas Sarkozy and a flamboyant New York socialite with a masters in medieval history from St. Andrews University in Scotland.
The California Public Employees’ Retirement System, a major investor in Carlyle, had made 1.2 times its $94.1 million contribution to Carlyle Global Financial Services Partners I as of June 30, according to a performance report by the pension fund. The first fund launched in 2008.
The financial crisis which began in the summer of 2007 has weighed on private equity returns in the sector. The $7 billion financial firms fund raised in 2006 by the private equity firm founded by former Goldman Sachs banker J. Christopher Flowers is down about 60 percent, a source told Reuters in November.
However, J.C. Flowers’ latest fund, which raised $2.3 billion in 2009 and has invested about half the money, is doing much better and is currently up about 30 percent, according to the source.
Investments of Carlyle Global Financial Services Partners I include Bermuda-based Bank of N.T. Butterfield & Son, Florida bank BankUnitedand Boston-based asset manager Boston Private Financial. BankUnited shares rose as much as 9.3 percent on the day of their debut when the bank floated in January.
Earlier this year, Carlyle participated in the $1.5 billion auction of Regions Financial Corp’sMorgan Keegan brokerage and investment banking unit, sources familiar with the matter told Reuters in October.
(Reporting by Greg Roumeliotis and Paritosh Bansal in New York; Editing by Tim Dobbyn)
http://tourism9.com/
With about 90 percent of its first financials buyout fund spent, the private equity group is looking for more firepower as Europe’s financial crisis and higher capital requirements for banks offer new investment opportunities, the source said.
The new fund, Carlyle Global Financial Services Partners II, has a minimum commitment threshold for investors of $10 million and intends to fundraise for more than a year, according to a filing with the U.S. Securities and Exchange Commission.
Carlyle, which is preparing for an initial public offering in 2012, is one of the private equity industry’s most prolific fund managers, with more than $148 billion of assets under management in 89 active funds and 52 fund of fund vehicles.
Carlyle’s financial services group is headed by former UBS investment banker Olivier Sarkozy, half-brother of France’s President Nicolas Sarkozy and a flamboyant New York socialite with a masters in medieval history from St. Andrews University in Scotland.
The California Public Employees’ Retirement System, a major investor in Carlyle, had made 1.2 times its $94.1 million contribution to Carlyle Global Financial Services Partners I as of June 30, according to a performance report by the pension fund. The first fund launched in 2008.
The financial crisis which began in the summer of 2007 has weighed on private equity returns in the sector. The $7 billion financial firms fund raised in 2006 by the private equity firm founded by former Goldman Sachs banker J. Christopher Flowers is down about 60 percent, a source told Reuters in November.
However, J.C. Flowers’ latest fund, which raised $2.3 billion in 2009 and has invested about half the money, is doing much better and is currently up about 30 percent, according to the source.
Investments of Carlyle Global Financial Services Partners I include Bermuda-based Bank of N.T. Butterfield & Son, Florida bank BankUnited
Earlier this year, Carlyle participated in the $1.5 billion auction of Regions Financial Corp’s
(Reporting by Greg Roumeliotis and Paritosh Bansal in New York; Editing by Tim Dobbyn)
http://tourism9.com/
Ziegler Closes $59 Million Covenant Retirement Communities Financing
CHICAGO, IL–(Marketwire -12/29/11)- Ziegler, a specialty investment bank, is pleased to announce the successful closing of a tax-exempt bank direct purchase for Covenant Retirement Communities (CRC). The direct purchase was completed by JP Morgan Chase and was structured as two series of bonds, $15,830,000 of Series A Bonds and $43,335,000 Series B Bonds, for a total aggregate par amount of $59,165,000 (Series 2011 Bonds).
The Series 2011 Bonds were the first multi-state issuance for the Illinois Finance Authority. The Illinois Finance Authority passed legislation allowing it to serve as a multi-state conduit issuer in July, 2010. The CRC financing is the first financing that has been approved and closed under the multi-state legislation. Ziegler, the IFA, and CRC are very excited to be the first transaction of what hopes to become a great resource to other multi-state providers. “The Illinois Finance Authority is proud to play a role in our State’s first multi-state conduit transaction. Governor Pat Quinn and the Illinois General Assembly recognized that multi-state conduit issuance authority is an important tool to both retain and create jobs in Illinois. The IFA is pleased to work with Ziegler’s professional team and, importantly, Covenant Retirement Communities, on this groundbreaking project,” said Chris Meister, IFA Executive Director.
Proceeds from the Series 2011 Bonds were used to refund the outstanding Series 1999 (MI) Bonds, Series 1999 (CO) Bonds, Series 2004 Bonds, and Series 2006 Bonds, as well as provide CRC with more than $6 million of new money to pay for capital improvements for several CRC campuses in Colorado, Illinois, and Michigan. In addition to the issuance of the Series 2011 Bonds, Ziegler also worked closely with Covenant Retirement Communities on the replacement of two letters of credit for the Series 1992 and 1995 Bonds. Both the Series 1992 and 1995 Bonds will be secured by letters of credit from JP Morgan Chase.
Covenant Retirement Communities, Inc. (CRC) is an Illinois 501(c)(3) eligible corporation that owns and operates a system of continuing care communities offering the full continuum of care, in association with the Evangelical Covenant Church. The corporate office of CRC is located in Skokie, IL with facilities located in California, Washington, Connecticut, Florida, Illinois, Minnesota, Colorado, and Michigan. CRC currently has 14 communities with more than 4700 independent living, assisted living, and skilled nursing units and is #5 on the LeadingAge Ziegler 100, a list of the largest not-for-profit senior living providers in the nation.
As one of the nation’s leading underwriters of financing for non-profit senior living providers Ziegler offers investment banking, financial risk management, merger and acquisition services, investment management, seed capital, FHA/HUD, capital and strategic planning as well as senior living research, education, and communication. Don Carlson, Managing Director and Vice Chairman at Ziegler, commented, “The IFA multistate legislation provided a very cost effective and efficient process which allowed CRC to issue bonds to refund prior issues in Colorado, Michigan and Illinois and to fund new projects in each of these states as well. This transaction will further strengthen CRC’s conservative capital structure, which will allow them to continue to provide the highest level of service to their residents. This transaction was truly a success on many fronts.”
For further information on the structure and use of these issues, please see the Official Statements for the Series 1992 and Series 1995 Bonds located on the Electronic Municipal Market Access system’s Document Archive.
For more information about Ziegler, please visit us at www.Ziegler.com.
About Ziegler:
The Ziegler Companies, Inc. (Pinksheets: ZGCO.PK – News) together with its affiliates (Ziegler) is a specialty investment bank with unique expertise in complex credit structures and advisory services. Nationally, Ziegler is ranked as one of the leading investment banking firms in its specialty sectors of healthcare, senior living, religion and education finance, as well as corporate finance and FHA/HUD. Headquartered in Chicago, IL with regional and branch offices throughout the U.S., Ziegler creates tailored financial solutions including bond financing, advisory, private placement, seed capital, M&A, risk and asset management. Ziegler serves institutional and individual investors through its wealth management and capital markets distribution channels.
Certain comments in this news release represent forward-looking statements made pursuant to the provisions of the Private Securities Litigation Reform Act of 1995. This client’s experience may not be representative of the experience of other clients, nor is it indicative of future performance or success. The forward-looking statements are subject to a number of risks and uncertainties, in particular, the overall financial health of the securities industry, the strength of the healthcare sector of the U.S. economy and the municipal securities marketplace, the ability of the Company to underwrite and distribute securities, the market value of mutual fund portfolios and separate account portfolios advised by the Company, the volume of sales by its retail brokers, the outcome of pending litigation, and the ability to attract and retain qualified employees.
This communication does not constitute an offer to buy these securities. The offering is made only by the Official Statement and through an appropriately registered representative. The Series 2011 Bonds may not be appropriate for all investors. Market value and/or accrued interest will fluctuate during the period held, and, if sold prior to maturity, the yield received may be more or less than the yield calculated at the time of purchase. Discounted yields herein are gross yields to maturity. Discounted bonds may be subject to capital gains tax, rates of which will vary, so investors should consult their own tax advisor with regard to their personal tax situation. Interest on municipal bonds may be exempt from federal income tax but may be subject to tax for residents of certain states. For bonds designated AMT, taxes may exist for certain investors. Ziegler will sell these bonds on a principal basis.
The corporation or its officers, directors, stockholders, or members of their families may at times have a position in the securities mentioned herein and may make purchases or sales of these securities. Not all call or put information is identified in the description above. Please be sure to discuss any special features with your Financial Advisor before deciding whether to invest in these securities.
http://tourism9.com/
The Series 2011 Bonds were the first multi-state issuance for the Illinois Finance Authority. The Illinois Finance Authority passed legislation allowing it to serve as a multi-state conduit issuer in July, 2010. The CRC financing is the first financing that has been approved and closed under the multi-state legislation. Ziegler, the IFA, and CRC are very excited to be the first transaction of what hopes to become a great resource to other multi-state providers. “The Illinois Finance Authority is proud to play a role in our State’s first multi-state conduit transaction. Governor Pat Quinn and the Illinois General Assembly recognized that multi-state conduit issuance authority is an important tool to both retain and create jobs in Illinois. The IFA is pleased to work with Ziegler’s professional team and, importantly, Covenant Retirement Communities, on this groundbreaking project,” said Chris Meister, IFA Executive Director.
Proceeds from the Series 2011 Bonds were used to refund the outstanding Series 1999 (MI) Bonds, Series 1999 (CO) Bonds, Series 2004 Bonds, and Series 2006 Bonds, as well as provide CRC with more than $6 million of new money to pay for capital improvements for several CRC campuses in Colorado, Illinois, and Michigan. In addition to the issuance of the Series 2011 Bonds, Ziegler also worked closely with Covenant Retirement Communities on the replacement of two letters of credit for the Series 1992 and 1995 Bonds. Both the Series 1992 and 1995 Bonds will be secured by letters of credit from JP Morgan Chase.
Covenant Retirement Communities, Inc. (CRC) is an Illinois 501(c)(3) eligible corporation that owns and operates a system of continuing care communities offering the full continuum of care, in association with the Evangelical Covenant Church. The corporate office of CRC is located in Skokie, IL with facilities located in California, Washington, Connecticut, Florida, Illinois, Minnesota, Colorado, and Michigan. CRC currently has 14 communities with more than 4700 independent living, assisted living, and skilled nursing units and is #5 on the LeadingAge Ziegler 100, a list of the largest not-for-profit senior living providers in the nation.
As one of the nation’s leading underwriters of financing for non-profit senior living providers Ziegler offers investment banking, financial risk management, merger and acquisition services, investment management, seed capital, FHA/HUD, capital and strategic planning as well as senior living research, education, and communication. Don Carlson, Managing Director and Vice Chairman at Ziegler, commented, “The IFA multistate legislation provided a very cost effective and efficient process which allowed CRC to issue bonds to refund prior issues in Colorado, Michigan and Illinois and to fund new projects in each of these states as well. This transaction will further strengthen CRC’s conservative capital structure, which will allow them to continue to provide the highest level of service to their residents. This transaction was truly a success on many fronts.”
For further information on the structure and use of these issues, please see the Official Statements for the Series 1992 and Series 1995 Bonds located on the Electronic Municipal Market Access system’s Document Archive.
For more information about Ziegler, please visit us at www.Ziegler.com.
About Ziegler:
The Ziegler Companies, Inc. (Pinksheets: ZGCO.PK – News) together with its affiliates (Ziegler) is a specialty investment bank with unique expertise in complex credit structures and advisory services. Nationally, Ziegler is ranked as one of the leading investment banking firms in its specialty sectors of healthcare, senior living, religion and education finance, as well as corporate finance and FHA/HUD. Headquartered in Chicago, IL with regional and branch offices throughout the U.S., Ziegler creates tailored financial solutions including bond financing, advisory, private placement, seed capital, M&A, risk and asset management. Ziegler serves institutional and individual investors through its wealth management and capital markets distribution channels.
Certain comments in this news release represent forward-looking statements made pursuant to the provisions of the Private Securities Litigation Reform Act of 1995. This client’s experience may not be representative of the experience of other clients, nor is it indicative of future performance or success. The forward-looking statements are subject to a number of risks and uncertainties, in particular, the overall financial health of the securities industry, the strength of the healthcare sector of the U.S. economy and the municipal securities marketplace, the ability of the Company to underwrite and distribute securities, the market value of mutual fund portfolios and separate account portfolios advised by the Company, the volume of sales by its retail brokers, the outcome of pending litigation, and the ability to attract and retain qualified employees.
This communication does not constitute an offer to buy these securities. The offering is made only by the Official Statement and through an appropriately registered representative. The Series 2011 Bonds may not be appropriate for all investors. Market value and/or accrued interest will fluctuate during the period held, and, if sold prior to maturity, the yield received may be more or less than the yield calculated at the time of purchase. Discounted yields herein are gross yields to maturity. Discounted bonds may be subject to capital gains tax, rates of which will vary, so investors should consult their own tax advisor with regard to their personal tax situation. Interest on municipal bonds may be exempt from federal income tax but may be subject to tax for residents of certain states. For bonds designated AMT, taxes may exist for certain investors. Ziegler will sell these bonds on a principal basis.
The corporation or its officers, directors, stockholders, or members of their families may at times have a position in the securities mentioned herein and may make purchases or sales of these securities. Not all call or put information is identified in the description above. Please be sure to discuss any special features with your Financial Advisor before deciding whether to invest in these securities.
http://tourism9.com/
订阅：
博文 (Atom)