Manhattan Lures REITs Capitalizing on Rising Rents as Sales Lag: Mortgages

Tom Toomey, chief executive officer of real estate investment firm UDR Inc. (UDR), is betting the best rental deal in Manhattan is owning the whole building.
The nation’s third-largest apartment real estate investment trust bought a five-tower apartment complex on Columbus Avenue between West 97th and 100th streets for about $630 million last month, with rents from $2,500 for a studio or one-bedroom apartment to more than $10,000 a month for a penthouse suite. It’s Toomey’s fifth purchase in Manhattan in the past year as rents soar and financing difficulties make it harder for individuals to buy.
“Financing and underwriting are much tighter,” Toomey said in a telephone interview. With purchases requiring larger down payments, “people are going to stay renters for a long time,” said Toomey, who’s based in Highlands Ranch, Colorado.
Strict lending standards for so-called jumbo mortgages have contributed to declining home buying across the U.S. by even the most creditworthy borrowers as issuance of the loans has dropped 68 percent since 2007. Nowhere is that more evident than in Manhattan, where the median price of a two-bedroom apartment is about $1.2 million, almost twice the limit backed by government- supported mortgage companies Fannie Mae and Freddie Mac.
Manhattan rents rose 9.5 percent last quarter to an average $3,121, Miller Samuel Inc. and Prudential Douglas Elliman Real Estate said in a report last month. That’s about three times the rate for the 44 largest apartment markets in the U.S., according to Marcus & Millichap, a real estate brokerage firm. Manhattan rental apartment vacancy rates fell to a four-year low of 0.96 percent last year, down from 1.2 percent a year earlier and 1.9 percent in 2009, according to brokerage Citi Habitats. Vacancy bottomed in 2006 at 0.76 percent.

Wall Street Pay

“The key to the strength of the rental market is tightness of credit,” Jonathan Miller, president of appraiser Miller Samuel, said in a telephone interview. “It takes quadruple-A bizarre credit requirements to get approved.”
Jumbo loans exceed limits set for government-controlled mortgage companies by congress. For New York that’s $625,500.
Wall Street’s pay practices are also making it harder to buy, as financial firms increasingly pay bonuses in stock and deferred cash, said Alan Johnson, managing director of compensation consultant Johnson Associates Inc.
Morgan Stanley, Credit Suisse Group AG and Citigroup Inc. have all reduced senior investment bankers’ pay for last year as revenue slows. Morgan Stanley is capping immediate cash bonuses at $125,000, people with knowledge of the move said last month.

Shorter Commitment

“It’s not a great sign for the financial sector contributing to purchasing apartments because there’s no sense of urgency to buy,” said Johnson. “Rentals are a much shorter commitment.”
Renters outnumber homeowners in the country’s largest cities including New York, Los Angeles and Chicago. More than 77 percent of Manhattan’s occupied units were rented in the decade ended 2010, compared with nearly 23 that were owned, data from the Census Bureau showed.
Nationally, the home ownership rate fell 1.1 percent to 65.1 percent from 2000 to 2010, the largest decrease since the Great Depression, according to the U.S. Census Bureau.
Low vacancy rates and rents that are likely to continue climbing this year have made apartments the “darling” of commercial real estate, according to Ryan Severino, economist at research firm Reis Inc.

Apartment Indices

The Bloomberg REIT Apartment Index (BBREAPT) of 16 publicly traded landlords returned 10 percent in the past year, including reinvested dividends, compared with returns of 6.8 percent for the Bloomberg REIT Index (BBREIT) and 5.2 percent for the Standard & Poor’s 500 Index. Equity Residential (EQR), the largest U.S. apartment REIT, returned 11.2 percent in the past year, according to data compiled by Bloomberg, and UDR gained 10.8 percent.
Toomey said in August that the REIT planned to invest as much as $1.8 billion in Manhattan apartment buildings. Its most recent purchase, about 700 apartment units at Columbus Square on the Upper West Side, was a joint venture with MetLife Inc. (MET), the biggest U.S. life insurer.
They partly funded the purchase with $302.3 million of 10- year fixed- and floating-rate debt from Fannie Mae, the government-supported mortgage company, UDR said in a statement last month. The loans pay 3.8 percent interest.
That compares with a rate of 4.85 percent for a 30-year jumbo mortgage to an individual in New York (ILMJNY) and 4.73 percent nationally, according to Bankrate.com data. For conforming Freddie Mac (NMCMFUS) loans, rates are 3.95 percent, after falling to 3.87 percent this month, the lowest in records dating to 1971.

Housing Limits

Lenders have been wary to issue mortgages for non- conforming loans including jumbos since the housing market started falling in 2006 and losses on mortgage securities propelled the nation into the worst financial crisis since the Great Depression.
For Fannie Mae and Freddie Mac, the conforming limit is $625,500 in high-priced markets such as New York, San Francisco and the Florida Keys, compared with $417,000 for most of the rest of the country. The Federal Housing Administration (FHAVARM$), a government agency with the goal of expanding ownership for “underserved” communities, according to its website, will insure loans up to $729,750 in New York.
Banks and mortgage lenders issued $110 billion in jumbo loans last year, up 5.8 percent from 2010, according to Guy Cecala, publisher of Inside Mortgage Finance. The market has contracted from $348 billion in 2007 after peaking in 2003 at $650 billion.

Origination Volumes

Mortgage origination overall was down 17 percent year-over- year to $1.35 trillion, the lowest in over a decade, according to Cecala.
Lenders and bankers, no longer able to package jumbo loans and sell them to investors, are required to have enough capital to carry non-conforming debt on their books until maturity.
“Some don’t have the ability to keep it on their balance sheets,” Monte N. Redman, president of bank holding company Astoria Financial Corp., said in a telephone interview.
FHA loans are also harder to get in Manhattan, and aren’t available at all for co-op apartments, because borrowers purchase shares in the building’s management company instead of buying the property itself. The FHA does limited lending for condominiums, units individually grouped into a cluster. It insured 107 mortgages for condos in Manhattan last year, compared with 90 in 2010 and 42 in 2009, the FHA said.

Manhattan Sales

Manhattan co-op and condominium sales totaled 2,011 in the fourth quarter, 12.4 percent less a year earlier, according to Miller Samuel and Prudential.
Non-conforming loans nationally accounted for nearly 2 percent of all purchase applications last year, up 33 percent relative to 2010, according to the Mortgage Bankers Association’s monthly profile of state and national mortgage activity.
Those loans have tougher standards such as high interest rates and down payments ranging from 25 to 40 percent, according to Mike Fratantoni, vice president of research for the Mortgage Bankers Association.
“They’re only available to the best credit borrowers,” Fratantoni said.
Financing a purchase with loans above government limits won’t get easier until the secondary market grows an appetite for jumbo loans, according to Miller of Miller Samuel.
The secondary market comprises mortgage bankers, savings and loan associations and large private investment institutions that buy mortgages from primary lenders or investors.

MBS Sales

There are signs of revival for mortgage-backed securities, according to Jan Scheck, managing director at DE Capital Mortgage, a New York-based mortgage consulting firm.
Redwood Trust Inc. (RWT), a real estate investment trust based in Mill Valley, California, has completed four sales of bonds totaling about $1 billion tied to new U.S. home loans since 2010, according to Mike McMahon, managing director of Redwood, which specializes in jumbo loans.
Wells Fargo & Co., the nation’s largest home lender, plans to trim credit requirements this year as it aims to increase its loan volume, according to Greg Gwizdz, sales manager for the eastern U.S. for Wells Fargo Home Mortgage. The bank reduced the cost of loans over $2 million last month and is lowering post- closing requirements for cash reserves, he said.
“We’re seeing a fair amount of demand, we have a strong appetite and we’re doing a lot of volume,” Gwizdz said in a telephone interview.
Wells Fargo funded $13.7 billion in non-conforming loans across the nation for the nine month period ending September, the San Francisco-based lender said. In Manhattan its volume of loans without government backing increased 56 percent from a year earlier.

William Beaver House

For now, building owners don’t have time to wait for the rebound. William Beaver House in Manhattan’s Financial District was mostly empty in 2010, two years after the 47-story condominium tower was built. It’s almost 90 percent occupied after owner CIM Group converted the units to luxury rentals costing more than $8,000 a month for a three-bedroom. A down payment on a $3 million apartment at William Beaver would range anywhere from $750,000 to over $1 million, per jumbo loan standards. A pre-recession down payment, averaging 20 percent or less, would have cost $600,000.
“Without the conversion, the condos wouldn’t have sold or would have sold at half the price,” Bob Scaglion of Rose Associates, the company’s manager, said. Eventually, the owners want to put the condominiums back on the purchase market, according to Heather McDonough, broker for Prudential Real Estate who works to sell William Beaver units.
“The rentals are in high demand,” McDonough said. “In a few years, maybe it will be different.”
To contact the reporter on this story: Christine Harvey in New York at charvey32@bloomberg.net
To contact the editor responsible for this story: Rob Urban at robprag@bloomberg.net
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CIMB Holds Talks for RBS Asian Assets as Profit Hits Record

February 27, 2012, 10:33 PM EST
By Chong Pooi Koon
(Updates with analyst’s reaction in seventh paragraph.)
Feb. 28 (Bloomberg) — CIMB Group Holdings Bhd., Malaysia’s second-biggest bank, said fourth-quarter profit surged 30 percent to a record on increased lending as it seeks to grow its Asia-Pacific reach.
The Kuala Lumpur-based bank is in talks to buy part of the Royal Bank of Scotland Plc’s investment banking and securities business in the region, CIMB Chief Executive Officer Nazir Razak told reporters in Kuala Lumpur yesterday. It’s simultaneously in negotiations to acquire a stake in Manila-based Bank of Commerce, he said, declining to give details on both deals.
Net income climbed to 1.13 billion ringgit ($374 million), or 15.2 sen per share, in the three months ended Dec. 31 from 872.6 million ringgit, or 11.8 sen per share, a year earlier, the company said in an exchange filing. It declared a higher dividend of 10 sen per share, compared with 8 sen previously.
“I think 2012 could surprise on the upside as most of the downside risks are already quite visible,” Nazir said in a separate e-mailed statement. “The investment banking deal pipeline is good,” he told reporters.
CIMB wants to extend its regional reach after being Malaysia’s top underwriter for equity and rights offerings in the past three years. It has made acquisitions in Singapore, Thailand and Indonesia in the last seven years and may be one of two remaining bidders for RBS’s Asian equities, mergers and acquisitions businesses as well as its research arm, the Financial Times reported Feb. 7, citing people it didn’t name.
Philippine Talks
The Malaysian group is in separate talks with San Miguel Corp. and other shareholders to buy a 60 percent stake in Bank of Commerce, a person with knowledge of the matter said last month. It was the 16th largest lender in the Philippines by assets as of June 30 with 122 branches, according to the county’s central bank.
“Management again reassured that both mergers and acquisitions if successful won’t be financed through equity,” UOB-Kay Hian Holdings Ltd. said in a report today. “Financing will come mostly through internal funds.”
UOB upgraded the stock to “hold” and increased its price target to 6.90 ringgit from 6.20 ringgit, still below its unchanged market price of 7.14 ringgit at 11:05 a.m. in Kuala Lumpur trading today. Hong Leong Investment Bank Bhd. boosted its price target for CIMB to 7.78 ringgit from 7.69 ringgit, according to a separate broking report.
CIMB joined other Malaysian lenders Malayan Banking Bhd. and Public Bank Bhd. in posting increased earnings for the quarter as a domestic economy that expanded 5.1 percent last year helped spur demand for loans and financing. Hong Leong Bank Bhd. yesterday reported a 31 percent jump in quarterly net income, while RHB Capital Bhd. is expected to report today.
Net interest income, or revenue from borrowers after deducting interest paid to depositors, increased 7 percent to 1.76 billion ringgit in the quarter, CIMB said. Allowances for impairment losses on loans and financing grew 73 percent to 289 million ringgit, the company said.
–Editors: Barry Porter, Chan Tien Hin
To contact the reporter on this story: Chong Pooi Koon in Kuala Lumpur at pchong17@bloomberg.net
To contact the editor responsible for this story: Barry Porter in Kuala Lumpur at bporter10@bloomberg.net
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State Pensions Find Private Equity Bites as Blackstone Cuts Jobs

February 23, 2012, 12:58 AM EST
By William Selway and Martin Z. Braun
Feb. 23 (Bloomberg) — Shirley Kimber walked off the production line from her $17.56-an-hour job at a Birds Eye Foods plant in Fulton, New York, for the last time in November.
The new owners, Pinnacle Foods Group LLC, a company held by the private equity firm Blackstone Group LP, closed the factory and fired 270 workers. Kimber, 64, got eight weeks severance for her 12 years on the job and lives with her 37-year-old unemployed daughter in the rust-belt town of about 12,000, northwest of Syracuse.
“They just used us. That’s exactly what they did,” Kimber said. “And then they kicked us to the curb.”
While the closing killed union jobs, it may also help protect the retirement benefits that organized labor bargained for on behalf of public employees.
In addition to Blackstone, the world’s largest buyout firm, New York State’s two public employee pensions and four New York City pensions stand to gain from the drive for higher profits at Pinnacle foods. The retirement funds poured $920 million into the $20 billion Blackstone fund that owns Pinnacle, which took over Birds Eye in 2009.
Public pension funds — seeking to boost returns after failing to secure the 8 percent annual investment earnings needed to pay benefits for teachers, police officers and other civil servants — are the biggest source of cash for private equity firms.
Faster Pace
Companies owned by New York-based Blackstone added jobs at a faster pace than the U.S. economy for the past two years, said Peter Rose, a spokesman for the firm. Private equity’s investment returns “are one of the few ways that pension funds can help keep the promises that they have made to their retirees,” he said.
Pinnacle Foods closed the Fulton plant to cut transportation costs by moving operations closer to suppliers, said Michelle Weese, a spokeswoman for the company.
While firms such as Blackstone and Bain Capital LLC, co- founded by Republican presidential candidate Mitt Romney, have drawn scrutiny for their paring of jobs and the low tax rates enjoyed by executives, the role of taxpayer money in financing their acquisitions has received less notice.
By September 2011, public pensions with at least $1 billion in assets had an average of 11 percent of their money in private equity, more than triple their investments a decade earlier, according to Wilshire Associates, a Santa Monica, California- based consulting firm.
Rising Investment
Such funds have about $400 billion with private equity, 29 percent of the total, according to Prequin Ltd., a London-based private equity research firm. That’s more than twice what was put in by private pension funds, the next biggest investor.
Public pensions “have been the investors that have really fueled private equity’s rise,” said Steven Davidoff, a professor of law and finance at Ohio State University’s Moritz College of Law in Columbus, Ohio. “For those people who complain about private equity, the money is really coming from pension funds.”
Private equity firms buy companies and seek to trim costs, improve operations, boost profits and resell them. The takeovers are typically financed by debt taken on by the purchased companies.
The business has been drawn into the presidential contest as Romney parried attacks from Republican rivals who suggested he built a fortune of as much as $250 million with takeovers that cost workers their jobs. He has disputed this characterization.
Private equity executives, including Blackstone managing director and Pinnacle Foods director Prakash Melwani, have helped stock Romney’s campaign war chests. Melwani declined to comment.
Mayor Objects
Fulton Mayor Ronald Woodward, a Republican, said the Birds Eye takeover has devastated his town, adding that he is troubled to learn that New York pension money helped finance the acquisition.
“Isn’t that a slap in the face to the people in Fulton that are losing their jobs and paying the salaries of those union workers and they’re using their investments there,” Woodward said. “It’s like biting the hand that feeds you.”
Her severance exhausted, Kimber now lives off unemployment benefits of $1,620 a month, plus $100 a month in pension payments, she said. She pays 22 percent of that for health insurance. Her daughter, also named Shirley, has a biology degree but can’t find a job using that specialty. To make a few extra dollars, she babysits and sells books online.
Executive Compensation
Robert Gamgort is chief executive officer of Parsippany, New Jersey-based Pinnacle Foods, which also makes Dunkin Hines cake mix, Vlasic Pickles and Hungry Man frozen dinners.
Gamgort was awarded compensation valued at $5.5 million in 2010 and $11.6 million in 2009. Sara Genster Robling, head of the Birds Eye division, got pay packages worth $1.5 million in 2010 and $2.1 million the previous year. Most of the pay was in company stock. Gamgort and Robling weren’t available for comment, she said.
After the collapse of 1990s Internet bubble left pensions reeling from investment losses, state and local government funds poured money into private equity firms. The financial crisis of 2008 and subsequent recession left U.S. state public pensions $694.2 billion short of having enough assets to pay future benefits by the end of their 2010 budget years, according to data compiled by Bloomberg.
Higher Returns
Private equity deals promised higher returns than stocks and bonds. The 15-year median return on stocks for public pension funds with more than $1 billion assets, before fees, is 5.5 percent annualized as of Dec. 31, 2011, while the median return for private equity in that time period is 9.8 percent, according to the Wilshire Trust Universe Comparison Service.
The deals have served pensions well. New York state’s teachers pension’s private equity investments delivered an annual rate of return of 11.8 percent as of June 30, 2011. New York City’s private equity investments in four of its five pension funds have returns ranging from 9.2 percent to 11.1 percent.
That helps save taxpayers money. For workers and the acquired companies, the benefits can be harder to discern.
A study led by the University of Chicago’s Steven Davis, based on 3,200 private equity deals from 1980 to 2005 and published in September, sought to quantify the impact. It found that employment at acquired companies dropped 6 percent in the next five years relative to stand-alone peers as they shuttered lagging businesses.
‘Creative Destruction’
Still, the companies also added workers by opening new business lines and through acquisitions. The study concluded that such deals accelerated the “creative destruction” of jobs, with a “modest” impact on total payrolls.
“Private equity investors are remorseless in their perspective on business,” said Robert Bruner, the dean of the University of Virginia’s Darden School of Business. “That is a manifestation of the rigors of the capitalist system,” he said. “It accelerates the process.”
Rose Pitcher, 50, experienced that first-hand. After working 25 years at the Birds Eye plant in Fulton, she wrapped up her last shift in November, with eight weeks severance, as Pinnacle moved the plant’s jobs to Wisconsin and Minnesota. Other employers in the area, like an apple-packing plant in Oswego, pay less than half the $17 an hour she was making overseeing the machine sealing packages of Voila! ready-made meals at Birds Eye.
“There just doesn’t seem to be anything out there,” she said.
Portfolio Companies
Blackstone says it has a record of boosting employment overall. In 2011, Blackstone’s portfolio companies added 4.6 percent to their payrolls by creating new jobs, rather than through acquisitions, and increased them 3 percent in 2010, said Rose, the company spokesman. That outpaced job growth in the economy, he said.
“Private equity is a vital source of capital to grow and strengthen companies where public capital cannot or is unwilling to invest,” said Rose.
New York Comptroller Thomas DiNapoli, the sole trustee of New York’s $140 billion retirement fund, declined to comment. New York City Comptroller John Liu declined to comment. John Cardillo, a spokesman for New York state’s Teachers’ Retirement System, declined to comment.
Drivers coming into Fulton are greeted by the red-brick Nestle chocolate factory, where for 103 years the company made condensed milk, semi-sweet morsels and Crunch Bars. It shut down in 2003.
The Nestle factory employed 1,500 people at its height. In 1994, Miller Brewing also shut down a plant just outside of town, putting 900 people out of work.
Taking Down Signs
A couple of years after Miller shut its operations, city officials took down signs on Routes 481, 48 and 3, the thoroughfares entering Fulton, that read: “City with a Future.”
It’s a far cry from the 1930s, when the New York Sun wrote a story about Fulton entitled “The Mystery of Fulton, N.Y., the City the Depression Missed.” Then, factories powered by electricity generated by the Oswego River, which bisects the town, churned out knives, textiles and shotguns. The Fort Stanwix Canning Co. opened a plant in Fulton in 1902. In 1938 it began packaging Birds Eye vegetables.
Two Decades
The Birds Eye plant had survived during the past two decades as it passed from General Foods Corp. to Philip Morris Cos. to Dean Foods Inc. In 1998, Dean Foods sold it to Agrilink Foods Inc. for $400 million. In 2002, Agrilink sold a majority stake in the company for $175 million to Vestar Capital Partners, a private equity firm where Melwani was a managing director. Melwani is now at Blackstone.
Vestar transformed the company. In 2006, it shifted focus to brand-named foods and developing new product lines. It announced that it would jettison most of its non-brand frozen food businesses, affecting five facilities, including three in western New York, that employed about 740. In 2007, Birds Eye borrowed money to pay Vestar and Agrilink a one-time $298.2 million dividend, according to corporate filings.
Vestar turned Birds Eye into a smaller, profitable company. By 2009, Birds Eye earned $54 million on sales of $936 million, compared with a $131 million loss and sales of $1 billion in 2002. Its workforce had shrunk to 1,700 from 4,000, filings show.
In November 2009, Pinnacle Foods, owned by Blackstone, agreed to buy Birds Eye for $1.3 billion. The purchase was financed by $1.15 billion of debt. Blackstone contributed $260 million in equity. Carol Makovich, a Vestar spokeswoman, declined to comment.
$17 Million
Blackstone affiliates were paid $17 million in acquisition fees for arranging the Birds Eye deal. Pinnacle has also paid Blackstone at least $15.5 million in management fees since it was taken over by the firm in 2007, according to company filings.
Under Blackstone, Birds Eye’s sales and profits have risen. In the quarter that ended in September, sales were $248 million, an 11.2 percent increase from the year earlier. The growth was driven by expanded distribution and demand for new products, in addition to lower new product distribution expenses, the company said in a filing.
Charles Murphy, 66, had worked at the Birds Eye plant in Fulton through a series of owners for 22 years before retiring at the end of 2010. He said employees were optimistic that the factory would survive.
Schumer Press Conference
In January 2010, U.S. Senator Charles Schumer, the New York Democrat, held a press conference with workers in Fulton, saying he would keep pressuring the company until all the jobs were safe. Schumer said he called Stephen Schwarzman, Blackstone’s chairman and co-founder, and asked him to spare the factory.
“No one expected that place to close,” said Murphy.
Then Pinnacle started cutting jobs. In mid-2010, it began closing down the Rochester, New York headquarters where 200 worked. That December it announced the closure of a Tacoma, Washington, plant that employed 160 and would shift production to Iowa.
On April 13, 2011, a Wednesday, employees coming to work at the Fulton plant saw a makeshift sign taped to a window: A mandatory meeting for all employees would be held at the Fulton War Memorial, the town’s exhibition hall and gymnasium on the 15th.
A Birds Eye lawyer told those gathered that the company would close the Fulton plant and move some of the jobs to Wisconsin and Minnesota.
Paul Robinson, a 59 year-old who ran packing machines remembered asking managers, “What can we do to keep the plant open?”
‘Minds Made Up’
Nothing, he said Pinnacle managers replied. “They had their minds made up.”
Wisconsin had offered Pinnacle $1.3 million in incentives to shift production to the state. Worker’s compensation costs were also lower — an average of $1,100 per employee in Wisconsin compared with $12,000 in New York, Mayor Woodward said.
While new jobs were added elsewhere, the closures cut the Birds Eye’s payroll by about 300, or 17 percent, as it eliminated more jobs than were added elsewhere, according to Weese, the Pinnacle spokeswoman. She said such costs are common after corporate mergers.
“Synergies are true with every deal. It’s not unique to this particular deal,” Weese said. “It’s less expensive to run one company than two.”
Not all public pensions have stood by as a private equity firms managing their money announced job cuts.
Hugo Boss
In 2010, after hearing that clothing-company Hugo Boss AG was planning to close a factory in a Cleveland suburb where it manufactured suits, threatening the jobs of 300 workers, Ohio’s public employee pension fund contacted Hugo Boss’s owner, London-based private equity firm Permira Advisers LLP.
Ohio’s Public Employees Retirement System had invested $80 million in the Permira fund that owned Hugo Boss. After writing to Permira and not getting a response, the pension fund followed up with another letter saying it would “think long and hard” about investing any more money with Permira, said Hugh Quill, a former Ohio pension trustees. The plant was never closed.
“These guys could have cared less about a plant in Cleveland, Ohio, but they did care about not having institutional investors for their next $500 million offering,” Quill said. “I think it was the right thing to do, given the amount of pain and suffering that was going on in the state.”
The California Public Employees’ Retirement System and public pensions from Maryland and Pennsylvania, which invested in Permira, also lobbied the firm. So did New York City’s pension funds.
Liu’s Letter
“New York’s pension funds do not wish to be investing in job loss or in a global ‘race to the bottom,’” New York City Comptroller Liu wrote in a letter to Permira.
Chris Davison, director of communications for Permira, declined to comment.
In Fulton, Charles Murphy’s wife, Donna, had been out on medical leave since October 2010 when the Birds Eye closure was announced. Still struggling with lung cancer, she lost her job when she couldn’t return to work for the factory’s last two months. That meant she didn’t get any severance pay. She worked there for 25 years.
Pinnacle’s Weese said details about medical leave and severance pay were worked out in negotiations with the employees’ union, Workers United Local 1822.
‘Devoting Your Life’
“You spend that many years devoting your life to the company, coming in to work every day, and they think nothing of you,” said Murphy, who lives in nearby Oswego. “This hurt a lot of people’s livelihoods.”
Fulton mayor Woodward, who was a maintenance supervisor with Nestle when the plant shut in 2003, said his story is another sign of the times.
“What you’re doing by doing that — you are systematically eliminating the middle class,” he said. “You’re going to be rich or you’re going to be poor. There’s no in between.”
–Editors: Jeffrey Taylor, Larry Edelman
To contact the reporters on this story: William Selway in Washington at wselway@bloomberg.net; Martin Braun in New York at mbraun6@bloomberg.net.
To contact the editor responsible for this story: Jeffrey Taylor at Jtaylor48@bloomberg.net
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Icelandic Anger Brings Debt Forgiveness in Best Recovery Story

February 20, 2012, 2:31 AM EST
By Omar R. Valdimarsson
Feb. 20 (Bloomberg) — Icelanders who pelted parliament with rocks in 2009 demanding their leaders and bankers answer for the country’s economic and financial collapse are reaping the benefits of their anger.
Since the end of 2008, the island’s banks have forgiven loans equivalent to 13 percent of gross domestic product, easing the debt burdens of more than a quarter of the population, according to a report published this month by the Icelandic Financial Services Association.
“You could safely say that Iceland holds the world record in household debt relief,” said Lars Christensen, chief emerging markets economist at Danske Bank A/S in Copenhagen. “Iceland followed the textbook example of what is required in a crisis. Any economist would agree with that.”
The island’s steps to resurrect itself since 2008, when its banks defaulted on $85 billion, are proving effective. Iceland’s economy will this year outgrow the euro area and the developed world on average, the Organization for Economic Cooperation and Development estimates. It costs about the same to insure against an Icelandic default as it does to guard against a credit event in Belgium. Most polls now show Icelanders don’t want to join the European Union, where the debt crisis is in its third year.
The island’s households were helped by an agreement between the government and the banks, which are still partly controlled by the state, to forgive debt exceeding 110 percent of home values. On top of that, a Supreme Court ruling in June 2010 found loans indexed to foreign currencies were illegal, meaning households no longer need to cover krona losses.
Crisis Lessons
“The lesson to be learned from Iceland’s crisis is that if other countries think it’s necessary to write down debts, they should look at how successful the 110 percent agreement was here,” said Thorolfur Matthiasson, an economics professor at the University of Iceland in Reykjavik, in an interview. “It’s the broadest agreement that’s been undertaken.”
Without the relief, homeowners would have buckled under the weight of their loans after the ratio of debt to incomes surged to 240 percent in 2008, Matthiasson said.
Iceland’s $13 billion economy, which shrank 6.7 percent in 2009, grew 2.9 percent last year and will expand 2.4 percent this year and next, the Paris-based OECD estimates. The euro area will grow 0.2 percent this year and the OECD area will expand 1.6 percent, according to November estimates.
Housing, measured as a subcomponent in the consumer price index, is now only about 3 percent below values in September 2008, just before the collapse. Fitch Ratings last week raised Iceland to investment grade, with a stable outlook, and said the island’s “unorthodox crisis policy response has succeeded.”
People Vs Markets
Iceland’s approach to dealing with the meltdown has put the needs of its population ahead of the markets at every turn.
Once it became clear back in October 2008 that the island’s banks were beyond saving, the government stepped in, ring-fenced the domestic accounts, and left international creditors in the lurch. The central bank imposed capital controls to halt the ensuing sell-off of the krona and new state-controlled banks were created from the remnants of the lenders that failed.
Activists say the banks should go even further in their debt relief. Andrea J. Olafsdottir, chairman of the Icelandic Homes Coalition, said she doubts the numbers provided by the banks are reliable.
“There are indications that some of the financial institutions in question haven’t lost a penny with the measures that they’ve undertaken,” she said.
Fresh Demands
According to Kristjan Kristjansson, a spokesman for Landsbankinn hf, the amount written off by the banks is probably larger than the 196.4 billion kronur ($1.6 billion) that the Financial Services Association estimates, since that figure only includes debt relief required by the courts or the government.
“There are still a lot of people facing difficulties; at the same time there are a lot of people doing fine,” Kristjansson said. “It’s nearly impossible to say when enough is enough; alongside every measure that is taken, there are fresh demands for further action.”
As a precursor to the global Occupy Wall Street movement and austerity protests across Europe, Icelanders took to the streets after the economic collapse in 2008. Protests escalated in early 2009, forcing police to use teargas to disperse crowds throwing rocks at parliament and the offices of then Prime Minister Geir Haarde. Parliament is still deciding whether to press ahead with an indictment that was brought against him in September 2009 for his role in the crisis.
A new coalition, led by Social Democrat Prime Minister Johanna Sigurdardottir, was voted into office in early 2009. The authorities are now investigating most of the main protagonists of the banking meltdown.
Legal Aftermath
Iceland’s special prosecutor has said it may indict as many as 90 people, while more than 200, including the former chief executives at the three biggest banks, face criminal charges.
Larus Welding, the former CEO of Glitnir Bank hf, once Iceland’s second biggest, was indicted in December for granting illegal loans and is now waiting to stand trial. The former CEO of Landsbanki Islands hf, Sigurjon Arnason, has endured stints of solitary confinement as his criminal investigation continues.
That compares with the U.S., where no top bank executives have faced criminal prosecution for their roles in the subprime mortgage meltdown. The Securities and Exchange Commission said last year it had sanctioned 39 senior officers for conduct related to the housing market meltdown.
The U.S. subprime crisis sent home prices plunging 33 percent from a 2006 peak. While households there don’t face the same degree of debt relief as that pushed through in Iceland, President Barack Obama this month proposed plans to expand loan modifications, including some principal reductions.
According to Christensen at Danske Bank, “the bottom line is that if households are insolvent, then the banks just have to go along with it, regardless of the interests of the banks.”
–Editors: Jonas Bergman, Tasneem Brogger.
To contact the reporter on this story: Omar R. Valdimarsson in Reykjavik valdimarsson@bloomberg.net.
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Private-Equity Lobbying Helped Protect Romney’s Tax Benefits

February 07, 2012, 7:18 AM EST
By Steven Sloan
Feb. 7 (Bloomberg) — The largest U.S. private-equity funds and venture capital firms have relied on a five-year, multimillion-dollar lobbying campaign to protect the carried interest tax break that helped drive presidential candidate Mitt Romney’s 2010 effective tax rate below 14 percent.
With the issue gaining attention in this year’s U.S. presidential election campaign, the investment industry is again girding to defend its preferential tax treatment. Blackstone Group LP alone spent $5 million in 2011 lobbying Congress on issues including the tax treatment of carried interest.
“If anything preserves the status quo, it will be the very heavy lobbying campaign,” said Edward Kleinbard, a law professor at the University of Southern California. “There’s no other reason for the subsidy to survive.”
Opponents of the tax rate for carried interest see this as an opportunity to press for change. Romney released his 2010 tax returns on Jan. 24, revealing he paid an effective tax rate of 13.9 percent on income of $21.6 million.
Romney, a former Republican governor of Massachusetts and co-founder of Bain Capital LLC, has come to personify the debate over whether the carried interest paid to private-equity managers should be taxed at the capital gains rate of 15 percent while ordinary income is taxed at rates as high as 35 percent.
Tax Fairness Debate
Democrats view the carried interest issue as an element of the tax fairness theme that President Barack Obama is highlighting in his re-election campaign. Representative Sander Levin of Michigan, the top Democrat on the House Ways and Means Committee, plans to introduce a bill as soon as this week that would tax carried interest at the same rate as regular income, according to spokesman Josh Drobnyk. The bill probably won’t advance in the Republican-controlled chamber this year.
Carried interest is the profits-based compensation that private-equity managers, real estate investors and members of oil and gas partnerships often receive. They get a portion of their clients’ earnings as investment income if the underlying earnings are treated that way. Levin and Obama call carried interest compensation for work, which they say should be viewed like wages for tax purposes.
Private-equity firms invested more than $148 billion in 1,234 U.S.-based companies in 2010, according to the Private Equity Growth Capital Council. The industry says it employs more than 8 million people.
Washington Lobbyists
Companies opposed to changing the tax treatment of carried interest have hired veteran Washington lobbyists to make their case. Wayne Berman of Ogilvy Government Relations is Blackstone’s top lobbyist on the issue. He was an assistant commerce secretary during George H.W. Bush’s administration. Other Ogilvy lobbyists working for Blackstone include Drew Maloney, who was a staffer for former House Majority Whip Tom DeLay, a Texas Republican, and Moses Mercado, the former House Democratic Leader Richard Gephardt’s deputy chief of staff.
Kohlberg Kravis Roberts & Co. hired former Representative Vic Fazio, a California Democrat, to work with Congress on “tax issues affecting private-equity firms and their portfolio companies,” according to lobbying records. The New York-based private-equity company spent $150,000 in the fourth quarter on lobbyists from Akin Gump Strauss Hauer & Feld to work on issues that included tax policy.
Bain spent $80,000 during the fourth quarter to hire lobbyists from Public Strategies Washington Inc. to “monitor tax reform developments,” lobbying records show. Joseph O’Neill and Paul Snyder are lobbying for Romney’s former company.
O’Neill was chief of staff to former Senate Finance Committee Chairman Lloyd Bentsen and helped run the late Texas Democrat’s 1988 vice presidential bid. Snyder was a legislative assistant to former House Speaker Tip O’Neill, the late Massachusetts Democrat.
Budget Deficit
Raising taxes on carried interest compensation wouldn’t do much to narrow the U.S. budget deficit. In its fiscal 2012 budget request, the Obama administration said the proposal to tax carried interest as ordinary income would generate $14.8 billion over 10 years. In December, the deficit stood at almost $1.3 trillion.
The issue has divided Congress along mostly partisan lines. The last time the Senate considered a bill that would have increased taxes on carried interest — in June 2010 — every Republican voted against it, preventing the bill from advancing. Senator Ben Nelson of Nebraska was the only Democrat to oppose the legislation.
Few Defections
The same bill was passed in the House that year with 15 lawmakers in each party voting against their leaders.
As the debate over carried-interest taxation advanced in Congress, the Private Equity Growth Capital Council was formed in February 2007 so the industry could make its case more directly to lawmakers.
The group, whose members include the Carlyle Group LP, based in Washington, and New York-based Blackstone spent about $2.5 million that year lobbying Congress on issues that included measures to tax carried interest at the same rate as ordinary income. It spent $2.2 million on lobbying in 2011.
“We believe that tax policy should incentivize the kind of entrepreneurial risk-taking that private-equity firms take every day,” said Ken Spain, a spokesman for the Private Equity Growth Capital Council, a trade group based in Washington. “We remain vigilant in respect to this issue. Private equity as an asset class is going to be a topic of discussion throughout 2012.”
Spain is a former communications director for the National Republican Congressional Committee.
Comprehensive Overhaul
While the issue will be a central one in the presidential campaign and on Capitol Hill, the taxation of carried interest probably won’t change until Congress considers a comprehensive tax-code overhaul. That would be difficult to enact before 2013.
One potential challenge for private equity is something that otherwise would be seen as a favorable development for the industry: a Romney administration. Ending the preferential treatment of capital gains if Romney wins the presidency could dissolve notions that he is a captive to his former industry, said Martin Sullivan, a contributing editor at Tax Analysts, a nonprofit organization in Falls Church, Virginia.
“It will be much easier to repeal if Mitt Romney becomes president than if Mr. Obama remains president,” he said.
Still, Romney adviser Eric Fehrnstrom told reporters last month that the Republican presidential candidate thinks carried interest should be taxed at the same rate as a capital gain. The candidate has proposed eliminating the tax on capital gains for those with adjusted gross incomes of less than $200,000 a year.
‘Convoluted’ Code
Private-equity executives also rely on fairness arguments to make their case. In a Jan. 27 appearance on Bloomberg Television, Steve Pagliuca, the managing partner of Bain Capital, said the tax code is “convoluted” and “almost unintelligible.”
“We’ve got to have a fair tax code,” he said. “We don’t wake up every day saying ‘Well, what’s the tax code?’ We wake up trying to build great businesses and we pay all of the taxes that are necessary.”
Mark Heesen, president of the National Venture Capital Association, an industry trade group based in Arlington, Virginia, said his industry often reminds lawmakers of its differences from other investors such as private-equity firms. Venture capital firms typically invest in early-stage companies and don’t use as much leverage as private-equity investors do.
Creating Something
“We are able to demonstrate our belief that quintessential capital gains are all about creating something out of nothing,” he said. “That’s what venture capital does.”
Heesen said his message to Congress is that it’s important to maintain the link between carried interest and capital gains, even if the capital gains tax rate increases. Unless Congress acts, such gains will be taxed at 20 percent in 2013. High earners will face an additional 3.8 percent tax on capital gains and other unearned income as part of the 2010 health-care law.
On the other side of the issue is the AFL-CIO, which has lobbied in favor of changing how carried interest is taxed, and is prepared to do so again. Damon Silvers, the policy director for the labor organization in Washington, called the treatment of carried interest a “tax subsidy for leveraged buyouts.”
“We are going to be pressing the carried interest issue at whatever opportunity we get,” he said. “Mitt Romney’s tax returns are the world’s greatest educational tool about the impact of the carried-interest loophole.”
The AFL-CIO spent $1.1 million in 2007 to lobby Congress on issues that included a Senate bill to raise taxes on carried interest.
Lobbying on the carried-interest debate is only part of the reason the tax break has survived, said David Donnelly, the national campaigns director at the Public Campaign Action Fund, a Washington nonprofit group that tracks political contributions. Investors who are paid in carried interest are often the well-heeled donors that members of both parties turn to for campaign contributions, he said.
“I don’t think it’s simply the lobbying,” Donnelly said. “The people who are interested in this particular provision are high net-worth individuals. That’s a constituency that Congress always cares about when they have to raise money to fund their campaigns.”
–With assistance from Richard Rubin in Washington and Cristina Alesci in New York. Editors: Jodi Schneider, Robin Meszoly
To contact the reporter on this story: Steven Sloan in Washington at ssloan7@bloomberg.net
To contact the editor responsible for this story: Jodi Schneider at jschneider50@bloomberg.net


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Goldman Sachs Said to Seek Up to $3.5 Billion for Energy Fund

January 18, 2012, 1:51 PM EST
By Sabrina Willmer
Jan. 18 (Bloomberg) — Goldman Sachs Group Inc. is seeking $2 billion to $3.5 billion for its first dedicated energy private-equity fund, according to two prospective investors.
The fund, Broad Street Energy Partners, will invest globally in areas such as oil, gas and power, said the investors, who asked not to be named because the information is private.
Goldman Sachs joins a growing lineup of firms raising pools of capital to take advantage of increased demand for energy and commodities. Barclays Natural Resource Investments, a unit of Barclays Capital, is raising its first dedicated private-equity energy fund to make investments globally. Blackstone Group LP, the largest private-equity firm, and Apollo Global Management are also marketing debut energy funds.
Andrea Raphael, a spokeswoman for Goldman Sachs, declined to comment.
The new fund will be managed by the principal investment team of the bank. Kenneth Pontarelli, head of natural resources and a managing director in the merchant-banking division at Goldman Sachs, is heading the effort, according to the investors.
The Goldman Sachs merchant-banking division has made energy private-equity investments in the past out of its global private-equity funds, and Pontarelli managed those energy deals.
Past energy deals by GS Capital Partners included the $45 billion buyout of electric utility company TXU, now called Energy Future Holdings Corp., Cobalt International Energy Inc. and Kinder Morgan Inc.
–Editors: Christian Baumgaertel, Steven Crabill
-0- Jan/18/2012 13:55 GMT
-0- Jan/18/2012 14:00 GMT
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
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Caixin Online: China pension funds closer to stock investing

By Lan Fang
BEIJING (
Caixin Online
) — China’s struggling securities market is getting a psychological shot in the arm on rising expectations that pension funds may soon provide hundreds of billions of yuan in new investment cash.
Since his appointment in late October, China Securities Regulatory Commission (CSRC) Chairman Guo Shuqing has mentioned several times that he wants to widen securities market access for pension and housing provident funds.
Chen Liang, director of fund oversight at the Ministry of Human Resources and Social Security (MHRSS), said a consensus could be reached soon among key parties involved in pension fund investment talks.

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Various government authorities including the CSRC, MHRSS and the National Development and Reform Commission have been discussing since late last year broad issues such as investment target qualifications, government policies, fund operations, market oversight and legal responsibilities, Chen said. They’ve also discussed opening the stock market to housing provident funds, which companies manage for employees’ future housing purchases.
A “breakthrough development” that would let urban pension funds — government-run social security funds for most workers in China’s cities — buy and sell stock was recently reached, said Ji Ning, deputy head of the Employment and Income Distribution Department at the National Development and Reform Commission (NDRC).
Discussions are likewise continuing over whether private insurance schemes for rural workers, few of whom are eligible for social security, will be allowed to follow suit.
Neither securities regulators nor fund managers have set a possible timetable for unleashing the full power of pension funds on the nation’s stock exchanges. For now, the government limits market access to certain social security and annuity funds, which can invest up to 40% of their assets in securities.
As of the end of 2010, the nation’s urban pension funds controlled a cumulative 1.5 trillion yuan ($238 billion), including 857 billion yuan managed by the National Social Security Fund Council. The rural insurance plan, an option for farm workers and other self-employed launched in 2009, held 42.3 billion yuan.

Two sides

Supporters and skeptics of pension fund stock investing are among those participating in the ongoing negotiations. The former include government officials, who say funds would help stabilize the nation’s securities markets, which weakened in 2011. Doubters include State Council members, who call stock investing too risky for public funds earmarked for retirees.

A hard landing for the Chinese economy

Mark Faber, Editor and Publisher of The Gloom, Boom & Doom Report in Hong Kong, talks to Barron’s Michael Santoli at the 2012 Barron’s Roundtable conference about the consequences of a coming economic slowdown in China.

These and related disagreements have brewed for years while, according to reports, some pension-linked insurance funds have gone ahead and invested in stocks.
The State Council’s official position is that any change in pension investment policy should put safety first. The cabinet wants strict supervision of stock trading by pension funds, for example, and has called for tighter laws and regulations before regulators broaden investment channels.
For officials at MHRSS and NDRC, however, a main sticking point has been a disagreement over which government agency would actually invest pensioners’ money.
Caixin has learned MHRSS, NDRC and other agencies have reached a basic consensus on most pension-securities issues. For example, they’ve agreed individual accounts and a trust model should be used for all stock investing.
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Fisker Gets New Funding; Total Investment Reaches $876 Million

Fisker Automotive Inc., a California maker of plug-in hybrid sports cars, received about $110 million in financing, boosting the company’s total private investment to $876 million.
The company disclosed the investment today in a filing that didn’t identify the investors. It said in December it had received $133 million as part of the same financing round.
Fisker, based in Anaheim, California, is backed by investors including Kleiner Perkins Caufield & Byers, Palo Alto Investors LLC and the lithium-ion battery maker A123 Systems Inc. (AONE)
To contact the reporter on this story: Andrew Herndon in San Francisco at aherndon2@bloomberg.net
To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net
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SEP and SSE Join Forces to Establish New £95 Million Green Energy Fund

LONDON and GLASGOW , January 9, 2012 /PRNewswire/ –
- New secondaries fund acquires cleantech portfolio from SSE plc
Scottish Equity Partners (SEP) has raised a new £95 million fund to invest in innovative green energy businesses in a deal involving the acquisition of a portfolio of clean energy assets from SSE Ventures, the investment arm of FTSE 100 utilities company SSE plc.
SEP raised the new secondaries fund from four institutional investors, headed by Lexington Partners, the world’s largest independent manager of secondary private equity and co-investment funds with $20 billion under management.  The syndicate also comprises UK based investors, Hermes GPE and F&C Private Equity, as well as Swiss-based Partners Group.
The new Environmental Energies Fund (EEF) has acquired nine companies from the SSE Ventures portfolio and will operate as a partnership between SSE and the financial institutions, with SSE maintaining a significant interest in the portfolio through becoming an investor alongside the financial institutions.  SEP has formed a separate team to manage the fund headed by SEP partner Gary Le Sueur .
The fund’s portfolio companies are market leaders from across the European clean energy spectrum, including solar energy, ground source heat pumps, energy efficiency services, electricity grid management solutions, domestic water recycling and heat recovery, wave energy, small scale hydro-electric projects and low-carbon based community heating systems (see Notes to Editor for full details of the nine companies).
EEF will have substantial fresh capital available for investment in the portfolio and also has agreement to add up to a further five SSE investments to the portfolio in future.
This marks the first move into the secondary fund market for SEP, the UK’s leading growth equity and venture capital firm. It is SEP’s second significant recent fundraising, following the successful close of its new £200m SEP IV fund announced last week, bringing the total raised in recent months to £300 million.
SEP Managing Partner, Calum Paterson said:  “We are excited by the opportunity that this partnership with SSE brings and pleased to have secured such blue chip investor backing for the fund.  Energy-related technology investments have always been an area of strong interest for us and there will be synergies between our involvement with the new secondary fund and SEP’s standalone primary investment activity.”
SSE’s Finance Director, Gregor Alexander , said: “SEP has a strong track record in helping innovative companies grow and mature. By moving our cleantech investments into the Environmental Energies Fund we can ensure the companies are able to benefit from the track record and expertise of SEP, draw upon the financial resources of the new partners and ultimately deliver a better return on our initial investment”.
“We continue to believe that cleantech companies have an important role to play in developing new technologies and that is why we continue to be involved as a major partner in the EEF.”
Marshall Parke , Managing Partner in Lexington Partners’ London office, said:  “The clean energy sector is relatively new to the secondary market, and we expect to see more secondary activity in this space in the future.”  Pål Ristvedt, Partner, added: ”Selecting the right partners is absolutely critical to the success of these deals.  We believe the three way partnership between a major strategic player like SSE, the substantial energy and general investment expertise of SEP plus the secondary experience of Lexington Partners creates a very strong platform for managing these assets.”
Notes to Editors
About the Environmental Energies Fund:
The Environmental Energies Fund is a £95 million secondaries fund formed by SEP to acquire and invest in a portfolio of innovative UK based green energy businesses originally backed by SSE plc. The fund is managed by leading UK growth equity and venture capital firm SEP and will operate as a partnership between FTSE-100 listed SSE plc, one of the UK’s largest energy companies, and the fund’s blue-chip financial backers Lexington Partners, Hermes GPE, F&C Private Equity and Partners Group.
The fund’s portfolio of assets was acquired from SSE Ventures, the investment arm of SSE plc and comprise the following nine companies:
Anesco: http://anesco.co.uk
(Energy efficiency services and solutions)
Aquamarine Power: http://www.aquamarinepower.com
(Marine renewable power technology)
Cyberhawk Innovations: http://www.cyberhawkinnovations.co.uk
(Unmanned aerial inspection of energy installations)
Geothermal International: http://www.geothermalint.co.uk
(Turnkey services in ground and air source heat pumps)
Green Highland Renewables: http://www.greenhighland.co.uk
(Small and medium scale hydro-power schemes)
Smarter Grid Solutions: http://www.smartergridsolutions.com
(Electricity grid management technologies)
SolarCentury: http://www.solarcentury.co.uk
(Solar power design and installation)
Vital Energi: http://www.vitalenergi.co.uk
(Energy centre installation and services)
Waterevolution: http://www.waterevolution.co.uk
(Water recycling and heat recovery)
About Scottish Equity Partners
Scottish Equity Partners (SEP) is a leading independent, owner-managed growth equity and venture capital firm with a 20 year track record of successful investing. Operating from offices in Glasgow and London , it invests in innovative, high growth potential companies in the IT, healthcare and energy sectors.  With significant funds available and an integrated investment team, SEP has the resource and experience to add value from investment through to exit and has been selected as the partner of choice by many of the UK’s leading technology companies.
Recent portfolio exits include the sale of web traffic management company Zeus Technology to Riverbed Technology Inc (NASDAQ: RVBD – News) for a total price of up to $140m , recently named Best Venture Investment of the Year. SEP also sold multimedia home networking company Gigle Networks to Broadcom Corp (NASDAQ: BRCM – News).  SEP also exited from cancer therapy company BioVex which was acquired by Amgen Inc. (NASDAQ: AMGN, SEHK: 4332) in a deal worth $1bn which earned SEP won the Venture Deal of the Year award in the Unquote British Private Equity Awards 2011.
SEP’s current portfolio comprises award-winning high growth companies including oil technology business Deep Casing Tools (http://www.deepcasingtools.com); energy-related technology specialist ARKeX (http://www.arkex.com); Media Ingenuity (http://www.mediaingenuity.com) a specialist in online marketing services and technology for the financial services sector; managed IT services provider Control Circle (http://www.controlcircle.com); flight search engine Skyscanner (http://www.skyscanner.net); wireless communications leader ipaccess (http://www.ipaccess.com);  IT analytics company Sumerian (http://www.sumerian.com/); Cmed (http://www.cmedgroup.com) which combines full clinical research services with advanced clinical data capture and management technology; and healthcare informatics company Aridhia (http://www.aridhia.com).
For more information visit http://www.sep.co.uk/

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Breaking into travel journalism: advice from the experts

Jill Starley-Grainger is a freelance journalist specialising in ethical and luxury travel
Use your blog to showcase to editors what you can do: They would want to see that you can write well-crafted, engaging copy, that you can sniff out good angles and that you are dedicated enough to have stuck with the blog for more than a few posts. Once you start getting commissions chances are your blog will slide. If you are getting paid travel writing gigs, then your time for unpaid work will rapidly diminish. But until you get those paid commissions, a blog is a good, easy starting point. As for getting followers, don’t worry about that. Focus on well-crafted, insightful travel journalism, perhaps with a niche angle, such as ‘travelling with a baby’ or ‘all about Germany’, and if your writing is up to scratch, people will follow you. Trying to SEO the heck out of your copy will only make it seem stilted.
You need to be able to dig out the angles the travel guides don’t cover: So many people think that because they are passionate about travel and can string a sentence together, that qualifies them to be a travel journalist. It doesn’t. You need to understand how to dig out facts – and to determine that they are facts – and how to find hidden gems and insider info. If it’s already in a guidebook, what are you adding to it? And you need to know how to write. I really can’t stress that enough. It’s a skill and not everyone has it, but so many people think they do. But you can learn it.
Travel journalism is hard work and the pay isn’t always great either: Forget fantasies of being sent round the world on an assignment with a huge commission, all expenses paid, and having endless days lolling on the beach or people-watching in cafes. Very few publications pay freelancers’ travel expenses (and getting a full-time writing or editing job on a major travel publication is just not going to happen until you have years of experience, and even then, chances are slim). Take a sample 1,000 word feature. If you are lucky and have years of experience, you might be commissioned to write a 1,000-word travel feature for a major publication. You will need to spend around a day crafting the pitch that wins the commission in the first place, three to five days working out your itinerary and arranging accommodation and so on. Another three to five days on the trip. Then at least two to four days writing the article to a standard high enough for this type of publication. If you are lucky, for this, you will be paid £400.
If you are pitching unusual destinations, make sure you’ve got a good angle: Breaking in by going to less popular locations – this is a tricky one. On the one hand, going somewhere unusual definitely gives you an edge. On the other hand, it’s hard to commission those features. The fact is, most people want to read about destinations they actually want to go to or are interested in. Hence the huge number of articles on France, Italy and so on. This is because it is these types of articles that sell papers and magazines.
On the other hand, people do like reading about unusual destinations, so while editors might not have as much scope to commission those places, if you pitch a good angle for one of them, then when they do come to commission a quirky one, your pitch might just be in the back of their mind. But do not pitch just a general ‘guide’ to an unusual destination. You still need an angle, whether it’s Baku’s beach scene or skiing in Iraq.
Emily Mathieson is Word of Mouth editor at Condé Nast Traveller
Demonstrating your knowledge and understanding of the magazine will endear you to an editor: The simple best way to get your writing published (and get paid for it) is to actually read the publication you’re pitching to. I am constantly surprised by how many people send me ideas that are clearly not relevant to the section I edit, or to Condé Nast Traveller in general (no, we don’t review youth hostels). If someone begins a pitch by clearly demonstrating their knowledge and understanding of the magazine, I am always more likely to read on.
Pitches which paraphrase press releases won’t be welcome. Keep it short, sweet and to the point. But PLEASE don’t just paraphrase a press release. It’s likely I’ll already have seen it, and why would I pay someone to do something I could do myself?
Include a signature at the bottom of your e-mail with your specialisms. I find it really helpful if writers have a signature at the bottom of their e-mail telling me about them, the specialisms and where they live (and it’s also often helpful if you can remind me at the beginning of an email who you are too). This will often jog my memory, or help me decide why a particular person is suitable for a certain piece.
Amanda Statham is travel editor of Cosmopolitan and You & Your Wedding magazines
A potted guide to pitching:
- Keep it short – no travel editor has half an hour to wade through 10 pages of pitch.
- Know the publication – I’m always being offered pieces for my Cosmopolitan travel news page. There isn’t a Cosmo travel news page…
- Check to see what the publication has covered recently; if it has covered your story or specific place, don’t pitch.
- If you refer the travel editor to your personal website, make sure it works and is up-to-date.
- Have an original hook; amazingly, backpacking around Thailand has been covered before.

Pat Riddell is the editor of National Geographic Traveller (UK)
Twitter can help your industry knowledge and give you ideas for pitches: Follow journalists, editors, newspapers and magazines but also follow travel blogs, tourist boards, airlines, tour operators, attractions, museums, hotel groups and so on. The more you know about travel and how it ‘works’, the better. Which destinations will be talked about in 2013, where are the new air routes, what are the new attractions… these are the pitches for the future. And by establishing a Twitter presence you can make a name for yourself as well as boosting traffic to your blog – or indeed titles you’ve written for.
Glen Mutel is the editor of ABTA Magazine and a regular columnist and contributor for National Geographic Traveller
Different approaches suit different titles: For trade titles such as ABTA Magazine, we’ve already got a fair idea of the destinations we want to cover over the next six to 12 months. So, unlike other titles, we don’t necessarily want budding writers to pitch us specific angles. Instead, I’d much sooner be sent a short email, detailing where a writer has been and where they know, with links to previous examples of their work. This last bit is absolutely crucial. Many travel editors will already have a list of writers that they rely on and it can be hard to get them to try new people. I’ve learned to turn a deaf ear when writers tell me they’ve written for the nationals, because it’s so seldom a guarantee they can write. I’d much sooner they show me specific examples of their work – proof they can put words in a readable order. If they can do that, there’s a good chance I’ll try them out with a general destination feature. Then, a few pieces down the line, I’ll start accepting ideas from them.
Postgraduate courses can equip you with everything you need: I don’t think the type of degree is necessarily that important. Earlier this year we were looking to fill the deputy editor position, and I don’t think we looked to hard at the type of degree. What mattered more was whether there was some type of postgraduate qualification – it needn’t be an MA. There are several shorter postgraduate schemes that can equip you with everything you need (I did a three-month course with PMA).
Peter Grunert is the editor of Lonely Planet Magazine
A particular specialism might give you an advantage: I definitely believe it’s a good idea to build a rapport with a commissioning editor before sending them a pitch. They will need to know that you share a wavelength and will also want to see evidence of the quality of your writing – ideally, writing that would suit their publication. I also feel that anyone with a specialism has an advantage. Are you based in a particularly interesting location? Can you bring fascinating travel insights from the point of view of someone who has great knowledge of art, motoring, history, sports and so on?
Check out all the advice from the live Q&A here.
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General Atlantic, Sequoia Invest $108 Million in Analytics Firm Mu Sigma

Mu Sigma, a company that helps businesses make decisions by analyzing data, attracted a $108 million investment, the largest round of private-equity financing in the analytic-services industry.
The funding was led by General Atlantic LLC and followed a $25 million round in April, Northbrook, Illinois-based Mu Sigma said today in a statement. Sequoia Capital led the earlier investment and participated in the new round, raising its stake in Mu Sigma, according to the statement.
Mu Sigma will use the capital to add 600 to 700 employees to its 1,500 within the next year, said Dhiraj Rajaram, chairman and chief executive officer of Mu Sigma.
“The whole area of big data and data analytics and support, we think, is very large and will continue to grow,” Pat Hedley, a managing director at General Atlantic, based in Greenwich, Connecticut, said in an interview. “Mu Sigma has a great client base and a strong management team.”
The deal is the largest investment on record by a private- equity or venture-capital firm in the data-processing and enterprise-software services industries, according to data compiled by Bloomberg. The second-largest is Penta Capital LLC’s $94 million investment earlier this year in Six Degrees Technology Group Ltd., a company that specializes in cloud computing.
William Ford, General Atlantic’s CEO, will join the Mu Sigma board.
Mu Sigma’s revenue will increase 35 percent to 40 percent in 2012 and profit will “dip slightly” as the company increases investments in a training program, marketing and services for clients such as Microsoft Corp. and Dell Inc. (DELL), Rajaram said. The money raised will also be used for hiring and to buy out early investors, he said.
Mu Sigma helps clients analyze larger sets of data than software tools ordinarily are capable of handling. The amount of data in the world is doubling every two years, according to EMC Corp.
“It’s a big problem that we’re trying to solve,” Rajaram said in an interview.
To contact the reporter on this story: Danielle Kucera in San Francisco at dkucera6@bloomberg.net
To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net
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Indonesia Regains Investment Grade as Fitch Raises Its Rating

December 15, 2011, 4:18 PM EST
By Novrida Manurung
Dec. 16 (Bloomberg) — Indonesia regained investment grade rating for its sovereign debt at Fitch Ratings after 14 years, as Southeast Asia’s largest economy withstands faltering global growth and contains borrowings.
The country’s long-term foreign and local currency debt was raised to BBB- from BB+, Fitch said in a statement yesterday. The outlook on both ratings is stable. Indonesia lost the investment grade rating in December 1997, during the Asian financial crisis. The rating puts the nation on the same level as India.
“The upgrades reflect the country’s strong and resilient economic growth, low and declining public-debt ratios, strengthened external liquidity and a prudent overall macro policy framework,” Philip McNicholas, director in Fitch’s Asia- Pacific Sovereign Ratings group, said in the statement.
Indonesia’s standing with rating companies has improved as President Susilo Bambang Yudhoyono targets growth of as much as 6.6 percent on average through the remainder of his term ending in 2014, pledging to spur investment and reduce the budget deficit. The country’s economy, which avoided the contraction that neighbors Singapore, Malaysia and Thailand suffered during the 2009 global slump, has expanded more than 6 percent this year even as Europe’s debt crisis threatens Asian exports.
“This doesn’t give us immunity,” Helmi Arman, an economist at Citigroup Inc. in Jakarta, said after Fitch released the announcement. “But they’re going to have a broader investor base in the market because of this move. It will certainly improve our resilience.”
Rupiah Performance
The rupiah has outperformed every Asian currency except the Japanese yen, Chinese yuan and the Hong Kong dollar this year, and Indonesia’s benchmark stock index is the fourth-best performer in the region. The currency slid 0.04 percent to 9,090 a dollar yesterday, according to prices from local banks compiled by Bloomberg.
Government bonds gained earlier yesterday. The yield on the 8.25 percent note due July 2021 declined four basis points, or 0.04 percentage point, to 6.25 percent, according to midday prices from the Inter-Dealer Market Association. It reached 6.06 percent on Dec. 6, the lowest since the securities were sold in July last year.
Demand for Indonesian bonds will increase following Fitch’s move, Rahmat Waluyanto, director general at the finance ministry’s debt management office, said in Jakarta yesterday. Capital inflow, especially foreign direct investment, will likely increase, he said in a mobile-phone text message.
‘Waited a Long Time’
“We’ve waited for this upgrade for a long time, in line with our effort to implement consistent and careful economic policies,” Hartadi Sarwono, deputy governor at the central bank, said in a mobile-phone text message in Jakarta yesterday. “Indonesia’s economic prospects will be better with lower risk and borrowing costs supporting financing of economic activities.”
Moody’s Investors Service raised the nation’s rating in January to Ba1. In April, Standard & Poor’s increased Indonesia’s long-term foreign-currency rating one level to BB+ from BB, with a positive outlook. The ratings are one level below investment grade.
Indonesia’s performance contrasts with that of European nations, whose borrowing costs have soared as the debt crisis deepened.
European Union
European Union leaders agreed at a Dec. 8-9 summit in Brussels to tighter control of tax and spending by governments that overstep the bloc’s deficit limit of 3 percent of gross domestic product. They also pledged a faster start to a 500 billion-euro ($652 billion) rescue fund. Standard & Poor’s and Moody’s Investors Service are reviewing the agreement and its implications for credit ratings on euro countries.
Fitch projects Indonesia’s GDP growth will average more than 6 percent per annum over the period to 2013, it said in yesterday’s statement.
“Indonesia’s domestically-oriented economy and success in delivering relatively strong economic growth without the creation of external imbalances, or a reliance on short-term external financing suggests economic growth prospects should prove resilient to external shocks, as was the case in 2008,” Fitch said. “Low public debt and positive real interest rates give the authorities policy flexibility to respond to any slowdown.”
–With assistance from Berni Moestafa and Hidayat Setiaji in Jakarta. Editors: Stephanie Phang, Greg Ahlstrand.
To contact the reporter on this story: To contact the reporter on this story: Novrida Manurung in Jakarta at nmanurung@bloomberg.net
To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net

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Swan Forecasts Record Investment as Australia’s Economy ‘Growing Solidly’

Australia’s economy is “growing solidly” and capital expenditure by businesses is forecast to rise 32 percent to a record A$158 billion ($161 billion) this financial year, Treasurer Wayne Swan said yesterday.
“That spending, although a drag on productivity now, will increase our economy’s capacity down the track,” Swan said in his weekly economic note. His office also released for public comment an interim report on the tax treatment of losses, in a move he said could “encourage investment in businesses that are struggling or that are just starting up.”
Australia, the only economy in the Group of 10 to avoid a recession during the global credit crisis, expanded 1 percent in the third quarter, faster than earlier estimated. Still, the country’s central bank cut its benchmark interest rate on Dec. 6 for a second straight month, citing Europe’s “much more difficult” financing conditions.
The cut marked the RBA’s first consecutive easing since the depths of the world financial crisis in 2009 and reflected a worsening global outlook that’s weighing on Australia’s exports.
“There’s no doubt the global instability is hitting our economy and our budget,” Swan said. “European leaders made progress during the week on addressing the sovereign debt crisis, but clearly the world now wants to see the talk turned into action. The global community and international financial markets need to see the full details and swift implementation of Europe’s plans.”
Swan said the government intends to boost productivity in Australia, which has declined following “a decade of neglect of investment in critical infrastructure and skills.”
To contact the reporter on this story: Soraya Permatasari in Melbourne at soraya@bloomberg.net
To contact the editor responsible for this story: Jim McDonald at jmcdonald8@bloomberg.net

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