HONG KONG, February 20 (Reuters) – News and developments in Asia private equity from Reuters News for Lunar New Year and the week ending Feb. 17.
FEBRUARY 17
CARLYLE GROUP has begun the process of selling its over $300 million stake in Taiwan’s Ta Chong Bank Ltd, sources said, as it joins other private equity firms in looking to exit the island’s low-margin financial sector.
MMI INTERNATIONAL, a technology company owned by private equity fund KKR & Co LP, will price its $300 million five-year bond at 8 percent in New York, the bottom end of price guidance, after receiving strong support from U.S. investors, according to a source familiar with the matter.
AUSTRALIAN SURFWEAR company Billabong International rebuffed a $820 million private equity bid from TPG Capital , announcing plans to sell a stake in its Nixon watch brand and close up to 150 stores, sending its shares up by more than 50 percent.
CHINA HAS launched a 50 billion yuan ($7.93 billion) fund in Shanghai to aid overseas acquisitions by Chinese companies as part of efforts to promote international use of the yuan and build the commercial hub into a global financial center.
HANA FINANCIAL Group said that it had reached a deal with the labour union of Korea Exchange Bank (KEB) which had threatened to strike over possible job losses following Hana’s acquisition of KEB.
FEBRUARY 16
WINS INVESTMENT, the fund arm of Chinese property developer Gemdale, says it plans to double funds under management to take advantage of a government clampdown on property financing that could see smaller developers starved of funds.
L CAPITAL Asia, the private equity arm of the world’s biggest luxury goods group LVMH Moët Hennessy Louis Vuitton SA , could begin raising a new fund of more than $1 billion this year, as competition from Western brands creates opportunities to invest in Chinese retailers, its top executive said.
CANADA PENSION Plan Investment Board, which manages the country’s second largest pension fund, has hired former Goldman Sachs banker Mark Machin to head its Asia-Pacific business, according to a source close to the matter.
FEBRUARY 15
L CAPITAL has bought the 8 percent stake held by Wolfensohn Capital Partners in unlisted Indian ethnic wear chain Fabindia, two sources with direct knowledge of the matter said.
SOUTH KOREA’S National Pension Service (NPS), the world’s No.4 largest pension fund, plans to invest around $300 million in a real estate opportunity fund led by Blackstone Group , an NPS official said, amid the fund’s efforts to step up its investments in real estate assets.
U.S PRIVATE equity fund Norwest Venture Partners has invested $15 million in Manthan Systems, an unlisted Indian software products company, for a minority stake, the Indian company said on Wednesday.
WANT WANT China Holdings, the buyer of private equity fund MBK Partners’ Taiwan cable TV unit, will have to give more information to the island’s broadcast regulator concerning its media operations, the latest delay in the $2.4 billion deal.
JAPANESE PRIVATE equity secondary fund Ant Capital Partners said it closed its third Japanese secondaries fund at the end of December 2011 raising $140 million, attracting commitments from 15 Japanese institutional investors.
SOUTH KOREA’S SK Group is in talks to take over U.S. oil and gas company Chaparral Energy, a company 36 percent owned by CCMP, according to a source familiar with the matter.
FEBRUARY 14
TALKS BETWEEN Yahoo Inc and China’s Alibaba Group over the U.S. Internet giant’s Asian assets have hit an impasse, throwing their plans for a $17 billion tax-free asset swap into question, according to sources briefed on the situation.
CARLYLE SAID it would sell Talaris, a provider of cash-counting equipment, to Japan’s Glory Ltd for 650 million pounds ($1 billion), twice the value of its original investment.
INDONESIA WILL not implement a planned regulation to limit ownership in domestic banks, since it does not want to scare away potential foreign investors from the sale of state-owned Bank Mutiara, the state deposit agency (LPS) said.
FIDELITY GROWTH Partners, the private equity arm of Fidelity Worldwide Investment, along with existing investors have invested 2 billion rupees ($40.6 million) in Aptuit Laurus Pvt Ltd, an unlisted Indian pharma company.
EXCLUSIVE-AN Abu Dhabi sovereign wealth fund is exploring the sale of its $1.3 billion stake in Malaysian lender RHB Capital Bhd six months after buying the shares, sources familiar with the matter told Reuters, and has engaged in early talks with Japan’s Sumitomo Mitsui Banking Corp (SMBC).
FEBRUARY 13
U.S.-BASED private asset management firm Rohatyn Group said on Monday that it has agreed to acquire 60 percent of CapAsia, the private equity arm of Malaysia’s CIMB Group Holdings Bhd .
FEBRUARY 10
INDIA’S RELIANCE Communications reported its 10th straight quarter of declining profit as interest costs soared, with investors betting on a sale of the No. 2 mobile operator’s tower business to pare its heavy debt load.http://tourism9.com/ http://vkins.com/
2012年2月18日星期六
Flooded businesses eligible for low-interest loans
Low-interest loans of up to $2 million are now available to small businesses, farms and nonprofits in Brevard and five other counties hit by heavy rains in early October, the U.S. Small Business Administration has announced.
The federal economic injury disaster loans will be provided to small businesses, agricultural cooperatives, aquaculture operations, and most private non-profit groups in Florida harmed by excessive rain, flooding and high winds that hit the region Oct. 7-9, 2011.
The five other eligible counties are Indian River, Martin, Okeechobee, Osceola and Saint Lucie.
“When the Secretary of Agriculture issues a disaster declaration to help farmers recover from damages and losses to crops, the Small Business Administration issues a declaration to eligible entities affected by the same disaster,” Frank Skaggs, director of SBA’s Field Operations Center East in Atlanta, said in a release.
Under the declaration, the SBA’s Economic Injury Disaster Loan program is available to eligible farm-related and nonfarm-related operations that suffered financial losses as a direct result of the disaster. With the exception of aquaculture, SBA can’t provide disaster loans to agricultural producers, farmers or ranchers, SBA said in the release.
The loans can be up to $2 million with interest rates of 3 percent for private non-profit groups and 4 percent for small businesses, with terms up to 30 years. The SBA determines eligibility based on the size of the applicant, type of activity and its financial resources.
The SBA determines the loan amounts and terms and are based on each applicant’s financial condition. The working capital loans may be used to pay fixed debts, payroll, accounts payable, and other bills that could have been paid had the disaster not happened. But they aren’t intended to replace lost sales or profits.
Completed loan applications must be returned to SBA no later than October 9, 2012.
Contact Waymer at 321-242-3663 or jwaymer@floridatoday.com
For information, call 1-800-659-2955 (800-877-8339 for the deaf and hard-of-hearing) or e-mail to disastercustomerservice@sba.gov.
Loan applications can be downloaded from www.sba.gov.
Completed applications should be mailed to: U.S. Small Business Administration, Processing and Disbursement Center, 14925 Kingsport Road, Fort Worth, TX 76155.
You can also apply for disaster loans electronically from SBA’s website at https://disasterloan.sba.gov/ela/.
Completed loan applications must be returned to SBA no later than Oct. 9, 2012.
http://tourism9.com/ http://vkins.com/
The federal economic injury disaster loans will be provided to small businesses, agricultural cooperatives, aquaculture operations, and most private non-profit groups in Florida harmed by excessive rain, flooding and high winds that hit the region Oct. 7-9, 2011.
The five other eligible counties are Indian River, Martin, Okeechobee, Osceola and Saint Lucie.
“When the Secretary of Agriculture issues a disaster declaration to help farmers recover from damages and losses to crops, the Small Business Administration issues a declaration to eligible entities affected by the same disaster,” Frank Skaggs, director of SBA’s Field Operations Center East in Atlanta, said in a release.
Under the declaration, the SBA’s Economic Injury Disaster Loan program is available to eligible farm-related and nonfarm-related operations that suffered financial losses as a direct result of the disaster. With the exception of aquaculture, SBA can’t provide disaster loans to agricultural producers, farmers or ranchers, SBA said in the release.
The loans can be up to $2 million with interest rates of 3 percent for private non-profit groups and 4 percent for small businesses, with terms up to 30 years. The SBA determines eligibility based on the size of the applicant, type of activity and its financial resources.
The SBA determines the loan amounts and terms and are based on each applicant’s financial condition. The working capital loans may be used to pay fixed debts, payroll, accounts payable, and other bills that could have been paid had the disaster not happened. But they aren’t intended to replace lost sales or profits.
Completed loan applications must be returned to SBA no later than October 9, 2012.
Contact Waymer at 321-242-3663 or jwaymer@floridatoday.com
How to apply
U.S. Small Business Administration loans available for those affected by Oct. 7-9 heavy weather:For information, call 1-800-659-2955 (800-877-8339 for the deaf and hard-of-hearing) or e-mail to disastercustomerservice@sba.gov.
Loan applications can be downloaded from www.sba.gov.
Completed applications should be mailed to: U.S. Small Business Administration, Processing and Disbursement Center, 14925 Kingsport Road, Fort Worth, TX 76155.
You can also apply for disaster loans electronically from SBA’s website at https://disasterloan.sba.gov/ela/.
Completed loan applications must be returned to SBA no later than Oct. 9, 2012.
http://tourism9.com/ http://vkins.com/
2012年2月6日星期一
Asia Private Equity Weekly News, February 6, 2012
HONG KONG, February 6 (Reuters) – News and developments in Asia private equity from Reuters News for the Lunar New Year and week ending Feb. 3.
FEBRUARY 3
HONG KONG’S Hutchison 3G will buy Orange Austria from France Telecom SA and Mid-Europa Partners in a deal valued at 1.3 billion euros ($1.7 billion) including debt, expanding the corporate footprint of Asia’s richest man in Europe (Chicago Options: ^REURUSD – news) .
BLACKSTONE GROUP LP, the largest publicly listed alternative asset manager, reported lower fourth-quarter earnings as performance fees declined, but management fees increased from assets that grew to a record $137 billion.
FEBRUARY 2
ANALYSIS-It’s the year’s hottest initial public offering, but some wealth managers find themselves having a hard time recommending Facebook to their clients.
PRIVATE EQUITY firm TPG Capital LP has held initial discussions with a group of eight banks to fund a takeover bid for Australian underwear maker Pacific Brands Ltd, according to a source familiar with the matter.
THE U.S. private equity industry’s lobbying group said on Thursday that it has launched a campaign to tackle what it called a lack of understanding of the industry in the face of attacks on Republican presidential contender Mitt Romney.
CHINA INVESTMENT Corp (CIC) has acquired a minority stake in Washington-based asset manager EIG Global Energy Partners, the latest energy-related investment from China’s $410 billion sovereign wealth fund.
LOS ANGELES-based media and communications investment firm Saban Capital Group, which has Asia investments including Media Nusantara Citra PT and China’s Taomee Holdings Ltd , said it has opened a Hong Kong office led by Sumeet Jaisinghani.
FEBRUARY 1
CARLYLE GROUP and Warburg Pincus LLC took advantage of India’s recent market gains to pare stakes in two financial companies in deals worth $440 million, a sign of investor wariness about the sustainability of the rally.
CARYLE SOLD about 20 million shares of Housing Development Finance Corp Ltd in market deals on Wednesday, the chief executive of the Indian mortgage lender said, citing market sources.
WARBURG PINCUS sold about 17.5 million shares in India’s Kotak Mahindra Bank Ltd via stock market deals to raise about $170 million, three sources with direct knowledge of the matter said.
A UNIT (Berlin: UN7.BE – news) of the Swire group of companies, a Hong Kong conglomerate with interests ranging from properties to airlines, is among bidders for electronics and furniture retailer Courts Asia Ltd, two sources close to the matter said, an asset that could fetch close to $400 million.
UNITAS CAPITAL has acquired Carlyle’s stake in China restaurant chain Babela Group, said a source familiar with the matter, in a small deal but one that underscores the tough exit conditions for private equity investors.
BAIN CAPITAL and Unitas are among suitors to submit second-round bids to buy Prestolite Electric Inc from First Atlantic, two sources told Reuters, in a deal worth about $400 million.
INDIAN MICROFINANCE company Ujjivan Financial Services said on Wednesday that it has raised $25.5 million by diluting a minority holding in the company to private equity funds including Netherlands Development Finance Co, Wolfensohn Capital Partners and existing investors.
JANUARY 30
JAPAN (EUREX: FMJP.EX – news) ‘S ORIX Corp has dropped out of the race to buy software developer Yayoi, a source familiar with the matter told Reuters on Tuesday, which could be a blow to MBK Partners’ plan to sell the business. (Compiled by Stephen Aldred; Editing by Chris Lewis)
http://tourism9.cm/ http://vkins.com/
FEBRUARY 3
HONG KONG’S Hutchison 3G will buy Orange Austria from France Telecom SA and Mid-Europa Partners in a deal valued at 1.3 billion euros ($1.7 billion) including debt, expanding the corporate footprint of Asia’s richest man in Europe (Chicago Options: ^REURUSD – news) .
BLACKSTONE GROUP LP, the largest publicly listed alternative asset manager, reported lower fourth-quarter earnings as performance fees declined, but management fees increased from assets that grew to a record $137 billion.
FEBRUARY 2
ANALYSIS-It’s the year’s hottest initial public offering, but some wealth managers find themselves having a hard time recommending Facebook to their clients.
PRIVATE EQUITY firm TPG Capital LP has held initial discussions with a group of eight banks to fund a takeover bid for Australian underwear maker Pacific Brands Ltd, according to a source familiar with the matter.
THE U.S. private equity industry’s lobbying group said on Thursday that it has launched a campaign to tackle what it called a lack of understanding of the industry in the face of attacks on Republican presidential contender Mitt Romney.
CHINA INVESTMENT Corp (CIC) has acquired a minority stake in Washington-based asset manager EIG Global Energy Partners, the latest energy-related investment from China’s $410 billion sovereign wealth fund.
LOS ANGELES-based media and communications investment firm Saban Capital Group, which has Asia investments including Media Nusantara Citra PT and China’s Taomee Holdings Ltd , said it has opened a Hong Kong office led by Sumeet Jaisinghani.
FEBRUARY 1
CARLYLE GROUP and Warburg Pincus LLC took advantage of India’s recent market gains to pare stakes in two financial companies in deals worth $440 million, a sign of investor wariness about the sustainability of the rally.
CARYLE SOLD about 20 million shares of Housing Development Finance Corp Ltd in market deals on Wednesday, the chief executive of the Indian mortgage lender said, citing market sources.
WARBURG PINCUS sold about 17.5 million shares in India’s Kotak Mahindra Bank Ltd via stock market deals to raise about $170 million, three sources with direct knowledge of the matter said.
A UNIT (Berlin: UN7.BE – news) of the Swire group of companies, a Hong Kong conglomerate with interests ranging from properties to airlines, is among bidders for electronics and furniture retailer Courts Asia Ltd, two sources close to the matter said, an asset that could fetch close to $400 million.
UNITAS CAPITAL has acquired Carlyle’s stake in China restaurant chain Babela Group, said a source familiar with the matter, in a small deal but one that underscores the tough exit conditions for private equity investors.
BAIN CAPITAL and Unitas are among suitors to submit second-round bids to buy Prestolite Electric Inc from First Atlantic, two sources told Reuters, in a deal worth about $400 million.
INDIAN MICROFINANCE company Ujjivan Financial Services said on Wednesday that it has raised $25.5 million by diluting a minority holding in the company to private equity funds including Netherlands Development Finance Co, Wolfensohn Capital Partners and existing investors.
JANUARY 30
JAPAN (EUREX: FMJP.EX – news) ‘S ORIX Corp has dropped out of the race to buy software developer Yayoi, a source familiar with the matter told Reuters on Tuesday, which could be a blow to MBK Partners’ plan to sell the business. (Compiled by Stephen Aldred; Editing by Chris Lewis)
http://tourism9.cm/ http://vkins.com/
2012年1月17日星期二
China's bad debt risks expose systemic shortcomings
BEIJING (Reuters) – Bad debts in China’s banks painfully expose the shortcomings of an archaic financial system geared to lend to the beck and call of government economic policy, rather than when it is profitable.
The crux of the problem is rising distrust of official appraisals of China’s 10.7 trillion yuan local government loans, which surged on the orders of government as it rolled out a 4 trillion yuan economic stimulus programme at the end of 2008.
Banks say less than 1 percent of the loans are in trouble, a number some investors say is too low to be real as lending unleashed to spur economic growth at its weakest point implies a rising risk of bad debt as the economy slows again.
“I talk to so many people and they say the same thing: they do not trust the data coming from Chinese banks,” said James Antos, a bank analyst at Mizuho Securities Asia in Hong Kong.
China’s state audit office said earlier this month it had uncovered 530 billion yuan worth of irregularities with local government debt, leaving investors wondering how much clean-up work remains to be done.
Lacking information, investors are jumping to conclusions. Some think all local government loans are bad. More sober guesstimates assume 2-3 trillion are sour and banks’ non-performing ratios may quadruple to 5 percent, from an average 1.1 percent.
Investors’ worst fears are a cover-up that threatens financial stability in the world’s No. 2 economy.
This is especially so if Beijing orders banks to lend aggressively this year to support the economy and counter Europe’s slowdown, fuelling a vicious cycle of state-directed lending with poor credit judgment that leads to bad loans.
More immediately, the risk is that rising loan losses hit banks’ net profits and capital bases, forcing another government-led bailout like that a decade ago when Beijing spent billions on capital injections to shore up state-backed lenders.
OPTIMISTS EYE REPAYMENT
Optimists say Beijing will pay the debt, or let local governments sell bonds to repay loans used mainly for building infrastructure. Investors like the former option as it is clean and fast, but Beijing is non-committal.
Markets hate that uncertainty, which is one reason why Chinese bank shares have underperformed.
Their average price-to-book ratio of 1.3 is half that of Indonesian banks, according to Reuters data, after the Shanghai financial index plunged some 37 percent in the last two years.
“Certainly a good number of loans made in the last three years will go bad,” said David Madden, a managing partner at DAC Financial Management, a $425 million private equity firm in Hong Kong focused on trading Chinese bad debt.
“They weren’t necessarily made with the highest levels of credit analysis.”
China’s cumulative loan growth is the second fastest in the world’s emerging economies at around 55 percent, after Belarus, and a third faster than India’s 40 percent, Fitch Ratings said.
Yet Chinese banks insist bad loans are falling, not rising.
Their weighted-average non-performing loan ratio dipped 0.1 percent in the third quarter from the previous three months, Citi data showed. In contrast, Indian banks’ weighted-average ratio rose 7.5 percent, hurt in part by a falling rupee.
Non-performing loans are those where borrowers have not made payments for at least 90 days and are in or close to default.
Investors suspect banks are concealing bad loans by adamantly refusing to label them as non-performing when cash-strapped governments cannot repay.
Instead, analysts say banks have — or will — quietly restructure loans by extending maturities, violating best practice where loans are marked non-performing before being restructured.
China’s top state-owned banks declined to comment.
CONSTRAINED BY ACCOUNTING RULES
“The market does not like the fact that you are trying to hide loans which do not meet current terms,” said an analyst at a foreign bank in Hong Kong who declined to be identified.
That Chinese banks are concealing bad debt would be even more apparent if they continue to report enviably low non-performing loans in their 2011 results in March, analysts said, since a fifth of all local government loans matured last year.
In banks’ defence, they could argue their provision coverage of 190 percent is among the highest in Asia, meaning they have put aside 1.9 yuan for every yuan of dud loan — although this ratio looks good when banks recognise lower levels of bad debt.
Margarita Ho at PricewaterhouseCoopers in Beijing said banks are also constrained by China’s accounting rules.
“The accounting rules do not permit banks to provide reserves for losses based on future events, regardless of how probable they are,” she said.
But some investors argue the economic reality is that China has more bad loans than it is admitting to, especially with its economy now slowing, and so its financial stability is at stake if Beijing does not act more forcefully.
“You kind of let the bad news ride until you are forced to accept it,” said Madden from DAC. “But I don’t think kicking the can down the road is, ultimately, a smart thing to do.”
(Reporting by Koh Gui Qing; Editing by Nick Edwards & Kim Coghill)
http://tourism9.cm/ http://vkins.com/
The crux of the problem is rising distrust of official appraisals of China’s 10.7 trillion yuan local government loans, which surged on the orders of government as it rolled out a 4 trillion yuan economic stimulus programme at the end of 2008.
Banks say less than 1 percent of the loans are in trouble, a number some investors say is too low to be real as lending unleashed to spur economic growth at its weakest point implies a rising risk of bad debt as the economy slows again.
“I talk to so many people and they say the same thing: they do not trust the data coming from Chinese banks,” said James Antos, a bank analyst at Mizuho Securities Asia in Hong Kong.
China’s state audit office said earlier this month it had uncovered 530 billion yuan worth of irregularities with local government debt, leaving investors wondering how much clean-up work remains to be done.
Lacking information, investors are jumping to conclusions. Some think all local government loans are bad. More sober guesstimates assume 2-3 trillion are sour and banks’ non-performing ratios may quadruple to 5 percent, from an average 1.1 percent.
Investors’ worst fears are a cover-up that threatens financial stability in the world’s No. 2 economy.
This is especially so if Beijing orders banks to lend aggressively this year to support the economy and counter Europe’s slowdown, fuelling a vicious cycle of state-directed lending with poor credit judgment that leads to bad loans.
More immediately, the risk is that rising loan losses hit banks’ net profits and capital bases, forcing another government-led bailout like that a decade ago when Beijing spent billions on capital injections to shore up state-backed lenders.
OPTIMISTS EYE REPAYMENT
Optimists say Beijing will pay the debt, or let local governments sell bonds to repay loans used mainly for building infrastructure. Investors like the former option as it is clean and fast, but Beijing is non-committal.
Markets hate that uncertainty, which is one reason why Chinese bank shares have underperformed.
Their average price-to-book ratio of 1.3 is half that of Indonesian banks, according to Reuters data, after the Shanghai financial index plunged some 37 percent in the last two years.
“Certainly a good number of loans made in the last three years will go bad,” said David Madden, a managing partner at DAC Financial Management, a $425 million private equity firm in Hong Kong focused on trading Chinese bad debt.
“They weren’t necessarily made with the highest levels of credit analysis.”
China’s cumulative loan growth is the second fastest in the world’s emerging economies at around 55 percent, after Belarus, and a third faster than India’s 40 percent, Fitch Ratings said.
Yet Chinese banks insist bad loans are falling, not rising.
Their weighted-average non-performing loan ratio dipped 0.1 percent in the third quarter from the previous three months, Citi data showed. In contrast, Indian banks’ weighted-average ratio rose 7.5 percent, hurt in part by a falling rupee.
Non-performing loans are those where borrowers have not made payments for at least 90 days and are in or close to default.
Investors suspect banks are concealing bad loans by adamantly refusing to label them as non-performing when cash-strapped governments cannot repay.
Instead, analysts say banks have — or will — quietly restructure loans by extending maturities, violating best practice where loans are marked non-performing before being restructured.
China’s top state-owned banks declined to comment.
CONSTRAINED BY ACCOUNTING RULES
“The market does not like the fact that you are trying to hide loans which do not meet current terms,” said an analyst at a foreign bank in Hong Kong who declined to be identified.
That Chinese banks are concealing bad debt would be even more apparent if they continue to report enviably low non-performing loans in their 2011 results in March, analysts said, since a fifth of all local government loans matured last year.
In banks’ defence, they could argue their provision coverage of 190 percent is among the highest in Asia, meaning they have put aside 1.9 yuan for every yuan of dud loan — although this ratio looks good when banks recognise lower levels of bad debt.
Margarita Ho at PricewaterhouseCoopers in Beijing said banks are also constrained by China’s accounting rules.
“The accounting rules do not permit banks to provide reserves for losses based on future events, regardless of how probable they are,” she said.
But some investors argue the economic reality is that China has more bad loans than it is admitting to, especially with its economy now slowing, and so its financial stability is at stake if Beijing does not act more forcefully.
“You kind of let the bad news ride until you are forced to accept it,” said Madden from DAC. “But I don’t think kicking the can down the road is, ultimately, a smart thing to do.”
(Reporting by Koh Gui Qing; Editing by Nick Edwards & Kim Coghill)
http://tourism9.cm/ http://vkins.com/
Analysis: China's bad debt risks expose systemic shortcomings
BEIJING (Reuters) – Bad debts in China’s banks painfully expose the shortcomings of an archaic financial system geared to lend to the beck and call of government economic policy, rather than when it is profitable.
The crux of the problem is rising distrust of official appraisals of China’s 10.7 trillion yuan ($1.7 trillion) local government loans, which surged on the orders of government as it rolled out a 4 trillion yuan economic stimulus program at the end of 2008.
Banks say less than 1 percent of the loans are in trouble, a number some investors say is too low to be real as lending unleashed to spur economic growth at its weakest point implies a rising risk of bad debt as the economy slows again.
“I talk to so many people and they say the same thing: they do not trust the data coming from Chinese banks,” said James Antos, a bank analyst at Mizuho Securities Asia in Hong Kong.
China’s state audit office said earlier this month it had uncovered 530 billion yuan worth of irregularities with local government debt, leaving investors wondering how much clean-up work remains to be done.
Lacking information, investors are jumping to conclusions. Some think all local government loans are bad. More sober guesstimates assume 2-3 trillion are sour and banks’ non-performing ratios may quadruple to 5 percent, from an average 1.1 percent.
Investors’ worst fears are a cover-up that threatens financial stability in the world’s No. 2 economy.
This is especially so if Beijing orders banks to lend aggressively this year to support the economy and counter Europe’s slowdown, fuelling a vicious cycle of state-directed lending with poor credit judgment that leads to bad loans.
More immediately, the risk is that rising loan losses hit banks’ net profits and capital bases, forcing another government-led bailout like that a decade ago when Beijing spent billions on capital injections to shore up state-backed lenders.
OPTIMISTS EYE REPAYMENT
Optimists say Beijing will pay the debt, or let local governments sell bonds to repay loans used mainly for building infrastructure. Investors like the former option as it is clean and fast, but Beijing is non-committal.
Markets hate that uncertainty, which is one reason why Chinese bank shares have underperformed.
Their average price-to-book ratio of 1.3 is half that of Indonesian banks, according to Reuters data, after the Shanghai financial index plunged some 37 percent in the last two years.
“Certainly a good number of loans made in the last three years will go bad,” said David Madden, a managing partner at DAC Financial Management, a $425 million private equity firm in Hong Kong focused on trading Chinese bad debt.
“They weren’t necessarily made with the highest levels of credit analysis.”
China’s cumulative loan growth is the second fastest in the world’s emerging economies at around 55 percent, after Belarus, and a third faster than India’s 40 percent, Fitch Ratings said.
Yet Chinese banks insist bad loans are falling, not rising.
Their weighted-average non-performing loan ratio dipped 0.1 percent in the third quarter from the previous three months, Citi data showed. In contrast, Indian banks’ weighted-average ratio rose 7.5 percent, hurt in part by a falling rupee.
Non-performing loans are those where borrowers have not made payments for at least 90 days and are in or close to default.
Investors suspect banks are concealing bad loans by adamantly refusing to label them as non-performing when cash-strapped governments cannot repay.
Instead, analysts say banks have — or will — quietly restructure loans by extending maturities, violating best practice where loans are marked non-performing before being restructured.
China’s top state-owned banks declined to comment.
CONSTRAINED BY ACCOUNTING RULES
“The market does not like the fact that you are trying to hide loans which do not meet current terms,” said an analyst at a foreign bank in Hong Kong who declined to be identified.
That Chinese banks are concealing bad debt would be even more apparent if they continue to report enviably low non-performing loans in their 2011 results in March, analysts said, since a fifth of all local government loans matured last year.
In banks’ defense, they could argue their provision coverage of 190 percent is among the highest in Asia, meaning they have put aside 1.9 yuan for every yuan of dud loan — although this ratio looks good when banks recognize lower levels of bad debt.
Margarita Ho at PricewaterhouseCoopers in Beijing said banks are also constrained by China’s accounting rules.
“The accounting rules do not permit banks to provide reserves for losses based on future events, regardless of how probable they are,” she said.
But some investors argue the economic reality is that China has more bad loans than it is admitting to, especially with its economy now slowing, and so its financial stability is at stake if Beijing does not act more forcefully.
“You kind of let the bad news ride until you are forced to accept it,” said Madden from DAC. “But I don’t think kicking the can down the road is, ultimately, a smart thing to do.” ($1 = 6.3095 Chinese yuan)
(Reporting by Koh Gui Qing; Editing by Nick Edwards & Kim Coghill)
http://tourism9.cm/ http://vkins.com/
The crux of the problem is rising distrust of official appraisals of China’s 10.7 trillion yuan ($1.7 trillion) local government loans, which surged on the orders of government as it rolled out a 4 trillion yuan economic stimulus program at the end of 2008.
Banks say less than 1 percent of the loans are in trouble, a number some investors say is too low to be real as lending unleashed to spur economic growth at its weakest point implies a rising risk of bad debt as the economy slows again.
“I talk to so many people and they say the same thing: they do not trust the data coming from Chinese banks,” said James Antos, a bank analyst at Mizuho Securities Asia in Hong Kong.
China’s state audit office said earlier this month it had uncovered 530 billion yuan worth of irregularities with local government debt, leaving investors wondering how much clean-up work remains to be done.
Lacking information, investors are jumping to conclusions. Some think all local government loans are bad. More sober guesstimates assume 2-3 trillion are sour and banks’ non-performing ratios may quadruple to 5 percent, from an average 1.1 percent.
Investors’ worst fears are a cover-up that threatens financial stability in the world’s No. 2 economy.
This is especially so if Beijing orders banks to lend aggressively this year to support the economy and counter Europe’s slowdown, fuelling a vicious cycle of state-directed lending with poor credit judgment that leads to bad loans.
More immediately, the risk is that rising loan losses hit banks’ net profits and capital bases, forcing another government-led bailout like that a decade ago when Beijing spent billions on capital injections to shore up state-backed lenders.
OPTIMISTS EYE REPAYMENT
Optimists say Beijing will pay the debt, or let local governments sell bonds to repay loans used mainly for building infrastructure. Investors like the former option as it is clean and fast, but Beijing is non-committal.
Markets hate that uncertainty, which is one reason why Chinese bank shares have underperformed.
Their average price-to-book ratio of 1.3 is half that of Indonesian banks, according to Reuters data, after the Shanghai financial index plunged some 37 percent in the last two years.
“Certainly a good number of loans made in the last three years will go bad,” said David Madden, a managing partner at DAC Financial Management, a $425 million private equity firm in Hong Kong focused on trading Chinese bad debt.
“They weren’t necessarily made with the highest levels of credit analysis.”
China’s cumulative loan growth is the second fastest in the world’s emerging economies at around 55 percent, after Belarus, and a third faster than India’s 40 percent, Fitch Ratings said.
Yet Chinese banks insist bad loans are falling, not rising.
Their weighted-average non-performing loan ratio dipped 0.1 percent in the third quarter from the previous three months, Citi data showed. In contrast, Indian banks’ weighted-average ratio rose 7.5 percent, hurt in part by a falling rupee.
Non-performing loans are those where borrowers have not made payments for at least 90 days and are in or close to default.
Investors suspect banks are concealing bad loans by adamantly refusing to label them as non-performing when cash-strapped governments cannot repay.
Instead, analysts say banks have — or will — quietly restructure loans by extending maturities, violating best practice where loans are marked non-performing before being restructured.
China’s top state-owned banks declined to comment.
CONSTRAINED BY ACCOUNTING RULES
“The market does not like the fact that you are trying to hide loans which do not meet current terms,” said an analyst at a foreign bank in Hong Kong who declined to be identified.
That Chinese banks are concealing bad debt would be even more apparent if they continue to report enviably low non-performing loans in their 2011 results in March, analysts said, since a fifth of all local government loans matured last year.
In banks’ defense, they could argue their provision coverage of 190 percent is among the highest in Asia, meaning they have put aside 1.9 yuan for every yuan of dud loan — although this ratio looks good when banks recognize lower levels of bad debt.
Margarita Ho at PricewaterhouseCoopers in Beijing said banks are also constrained by China’s accounting rules.
“The accounting rules do not permit banks to provide reserves for losses based on future events, regardless of how probable they are,” she said.
But some investors argue the economic reality is that China has more bad loans than it is admitting to, especially with its economy now slowing, and so its financial stability is at stake if Beijing does not act more forcefully.
“You kind of let the bad news ride until you are forced to accept it,” said Madden from DAC. “But I don’t think kicking the can down the road is, ultimately, a smart thing to do.” ($1 = 6.3095 Chinese yuan)
(Reporting by Koh Gui Qing; Editing by Nick Edwards & Kim Coghill)
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2012年1月16日星期一
Asia Private Equity Weekly News, January 16, 2011
HONG KONG, December 26 (Reuters) – News and
developments in Asia private equity from Reuters News for the
holiday period, and the week ending Jan. 13.
JANUARY 13
TPG Capital LP is willing to invest about $1
billion in Japan’s Olympus Corp in a joint deal with
Sony Corp or another suitor circling the scandal-hit
company, a person familiar with TPG’s thinking said.
INVESTORS HAVE approved a year-long extension of a $4.7
billion property megafund from Morgan Stanley, a company
spokesman told Reuters on Friday.
JANUARY 12
HONY CAPITAL, one of China’s most successful private equity
funds, said on Thursday that it had raised nearly $4 billion
from investors, defying the increasingly tight fundraising
climate.
THE SALE of Indian developer DLF Ltd’s luxury hotel
chain, Amanresorts International, has stalled due to
lower-than-expected bids by shortlisted companies, two sources
with direct knowledge of the matter said.
JANUARY 11
ALIBABA GROUP has reduced the size of its debut
loan to $3 billion, three sources told Reuters.
LUNAR CAPITAL, a China-focused private equity fund, will pay
close to $100 million to buy a controlling stake in China’s
Yeehoo Group Ltd, a baby products maker, a source familiar with
the matter told Reuters.
AUSTRALIA’S BRAMBLES Ltd, the world’s top pallet
supplier, received first offers from private equity groups for
its U.S. document management business valued at more than $2
billion, three sources said.
JANUARY 10
JAPANESE STATE-sponsored fund, Innovation Network of Japan,
said its investment in overseas acquisitions by Japanese
companies is likely to increase this year, helped by a stronger
yen and an increase in asset sales abroad.
MALAYSIA-BASED private equity firm Navis Capital Partners
said it has completed the sale of its Dunkin’ Donuts and Au Bon
Pain businesses in Thailand to Sub Sri TPC Pcl for 1.32
billion baht ($41.56 million).
AUSTRALIAN PRIVATE equity firm Pacific Equity Partners
baulked at sweetening its A$711 million ($730 million) offer for
cleaning services company Spotless Group Ltd, raising
the prospect it could walk away from the bid.
KKR & Co has made a buyout approach to Australian
underwear manufacturer Pacific Brands Ltd that a
newspaper said could be worth $614 million, boosting its shares
20 percent and sparking talk other firms could attract similar
offers.
INDIA’S ASK Property Investment Advisors is close to raising
10 billion rupees ($192 million) for a fund that will invest in
property projects in five Indian cities, Chief Executive Amit
Bhagat said.
AMSTERDAM-BASED law firm Loyens & Loeff said it is opening a
Hong Kong office to capitalise on increased Asian interest in
investing in Benelux countries.
JANUARY 5
BLACKSTONE GROUP LP will conclude fundraising for its
latest buyout fund in January, raising just over $16 billion,
three people familiar with the matter said.
NEWQUEST CAPITAL Partners said it plans to invest up to $200
million in the next 12-18 months to acquire private equity
portfolios in Asia.
JANUARY 4
JAPAN’S RECRUIT Co has paid $410 million to buy two
temporary staffing agencies in the U.S. and Europe from buyout
firm Cerberus Capital Management, the human resources
company said, as it seeks to expand overseas.
JANUARY 3
TEMASEK HOLDINGS Pte Ltd said it has set up a new
subsidiary called Pavilion Capital Pte Ltd that will invest
primarily in privately owned firms in North Asia.
RED FORT Capital, an India-focussed real estate private
equity firm, is set to raise a $500 million fund that will
invest in commercial and residential assets, two sources told
Reuters.
DECEMBER 30
NATURAL GAS fuel firm Clean Energy Fuels Corp,
whose investors include Chesapeake Energy Corp,
Temasek’s Seatown Holdings and Asia private equity fund RRJ
Capital, said it has received $150 million from investors
including Boone Pickens.
DECEMBER 29
CHINESE WIRE maker Fushi Copperweld Inc said it
received a revised proposal from co-chief executive Li Fu, Abax
Global Capital and TPG Growth Asia Inc to take the company
private for $9.50 per share in cash.
DEALTALK – TOUGH IPO conditions in India are driving
secondary deals between private equity investors.
CHINA NO longer wants foreign-funded automobile factories or
polysilicon plants, but would welcome overseas investment in
hospitals and financial leasing firms, according to updated
inward investment guidelines.
ALIBABA has hired a Washington lobbying firm in a sign that
the Chinese e-commerce company would be willing to make a bid
for all of Yahoo Inc in the event that talks to unwind
their Asian partnership fail.
DECEMBER 28
AN AFFILIATE of U.S. private equity giant Blackstone has
bought a company that owns a special economic zone in India from
the country’s top listed developer DLF Ltd and its partner for
8.1 billion rupees ($153 million).
JAPANESE PRIVATE equity firm Unison Capital said it will buy
Asahi Tec, a maker of iron castings used in automobiles
that is majority owned by Belgian private equity investor RHJ
International SA, for $310 million excluding debt.
BANKRUPT JAPANESE consumer lender Takefuji Corp
gained a new lifeline when financial group J Trust Co Ltd
said it would invest $325 million after a previous
agreement with struggling A&P Financial of South Korea fell
through.
NOMURA HOLDINGS Inc said it would become the first
Japanese financial group to be allowed to make private equity
investments in China and would invest in a private equity fund
managed by Jiu You Equity Investment Management LLP.
DECEMBER 26
CARLYLE GROUP said it has named Kazuhiro Yamada as
co-head of its Japanese operations, replacing Masao Hirano, who
will resign from the private equity firm.
DECEMBER 23
DEALTALK-ASIA’S private equity firms face a shrinking pool
of bank loans as European lenders pull back from the region,
crimping both investments and re-financings for buyout-backed
companies and adding to the list of challenges the industry will
meet in 2012.
AUSTRALIAN PAPER manufacturer PaperlinX Ltd said it
has received an incomplete and conditional proposal from an
unnamed private equity firm for its business, while it predicted
a loss for the first half as European markets weakened.
http://tourism9.com/ http://vkins.com/
developments in Asia private equity from Reuters News for the
holiday period, and the week ending Jan. 13.
JANUARY 13
TPG Capital LP is willing to invest about $1
billion in Japan’s Olympus Corp in a joint deal with
Sony Corp or another suitor circling the scandal-hit
company, a person familiar with TPG’s thinking said.
INVESTORS HAVE approved a year-long extension of a $4.7
billion property megafund from Morgan Stanley, a company
spokesman told Reuters on Friday.
JANUARY 12
HONY CAPITAL, one of China’s most successful private equity
funds, said on Thursday that it had raised nearly $4 billion
from investors, defying the increasingly tight fundraising
climate.
THE SALE of Indian developer DLF Ltd’s luxury hotel
chain, Amanresorts International, has stalled due to
lower-than-expected bids by shortlisted companies, two sources
with direct knowledge of the matter said.
JANUARY 11
ALIBABA GROUP has reduced the size of its debut
loan to $3 billion, three sources told Reuters.
LUNAR CAPITAL, a China-focused private equity fund, will pay
close to $100 million to buy a controlling stake in China’s
Yeehoo Group Ltd, a baby products maker, a source familiar with
the matter told Reuters.
AUSTRALIA’S BRAMBLES Ltd, the world’s top pallet
supplier, received first offers from private equity groups for
its U.S. document management business valued at more than $2
billion, three sources said.
JANUARY 10
JAPANESE STATE-sponsored fund, Innovation Network of Japan,
said its investment in overseas acquisitions by Japanese
companies is likely to increase this year, helped by a stronger
yen and an increase in asset sales abroad.
MALAYSIA-BASED private equity firm Navis Capital Partners
said it has completed the sale of its Dunkin’ Donuts and Au Bon
Pain businesses in Thailand to Sub Sri TPC Pcl for 1.32
billion baht ($41.56 million).
AUSTRALIAN PRIVATE equity firm Pacific Equity Partners
baulked at sweetening its A$711 million ($730 million) offer for
cleaning services company Spotless Group Ltd, raising
the prospect it could walk away from the bid.
KKR & Co has made a buyout approach to Australian
underwear manufacturer Pacific Brands Ltd that a
newspaper said could be worth $614 million, boosting its shares
20 percent and sparking talk other firms could attract similar
offers.
INDIA’S ASK Property Investment Advisors is close to raising
10 billion rupees ($192 million) for a fund that will invest in
property projects in five Indian cities, Chief Executive Amit
Bhagat said.
AMSTERDAM-BASED law firm Loyens & Loeff said it is opening a
Hong Kong office to capitalise on increased Asian interest in
investing in Benelux countries.
JANUARY 5
BLACKSTONE GROUP LP will conclude fundraising for its
latest buyout fund in January, raising just over $16 billion,
three people familiar with the matter said.
NEWQUEST CAPITAL Partners said it plans to invest up to $200
million in the next 12-18 months to acquire private equity
portfolios in Asia.
JANUARY 4
JAPAN’S RECRUIT Co has paid $410 million to buy two
temporary staffing agencies in the U.S. and Europe from buyout
firm Cerberus Capital Management, the human resources
company said, as it seeks to expand overseas.
JANUARY 3
TEMASEK HOLDINGS Pte Ltd said it has set up a new
subsidiary called Pavilion Capital Pte Ltd that will invest
primarily in privately owned firms in North Asia.
RED FORT Capital, an India-focussed real estate private
equity firm, is set to raise a $500 million fund that will
invest in commercial and residential assets, two sources told
Reuters.
DECEMBER 30
NATURAL GAS fuel firm Clean Energy Fuels Corp,
whose investors include Chesapeake Energy Corp,
Temasek’s Seatown Holdings and Asia private equity fund RRJ
Capital, said it has received $150 million from investors
including Boone Pickens.
DECEMBER 29
CHINESE WIRE maker Fushi Copperweld Inc said it
received a revised proposal from co-chief executive Li Fu, Abax
Global Capital and TPG Growth Asia Inc to take the company
private for $9.50 per share in cash.
DEALTALK – TOUGH IPO conditions in India are driving
secondary deals between private equity investors.
CHINA NO longer wants foreign-funded automobile factories or
polysilicon plants, but would welcome overseas investment in
hospitals and financial leasing firms, according to updated
inward investment guidelines.
ALIBABA has hired a Washington lobbying firm in a sign that
the Chinese e-commerce company would be willing to make a bid
for all of Yahoo Inc in the event that talks to unwind
their Asian partnership fail.
DECEMBER 28
AN AFFILIATE of U.S. private equity giant Blackstone has
bought a company that owns a special economic zone in India from
the country’s top listed developer DLF Ltd and its partner for
8.1 billion rupees ($153 million).
JAPANESE PRIVATE equity firm Unison Capital said it will buy
Asahi Tec, a maker of iron castings used in automobiles
that is majority owned by Belgian private equity investor RHJ
International SA, for $310 million excluding debt.
BANKRUPT JAPANESE consumer lender Takefuji Corp
gained a new lifeline when financial group J Trust Co Ltd
said it would invest $325 million after a previous
agreement with struggling A&P Financial of South Korea fell
through.
NOMURA HOLDINGS Inc said it would become the first
Japanese financial group to be allowed to make private equity
investments in China and would invest in a private equity fund
managed by Jiu You Equity Investment Management LLP.
DECEMBER 26
CARLYLE GROUP said it has named Kazuhiro Yamada as
co-head of its Japanese operations, replacing Masao Hirano, who
will resign from the private equity firm.
DECEMBER 23
DEALTALK-ASIA’S private equity firms face a shrinking pool
of bank loans as European lenders pull back from the region,
crimping both investments and re-financings for buyout-backed
companies and adding to the list of challenges the industry will
meet in 2012.
AUSTRALIAN PAPER manufacturer PaperlinX Ltd said it
has received an incomplete and conditional proposal from an
unnamed private equity firm for its business, while it predicted
a loss for the first half as European markets weakened.
http://tourism9.com/ http://vkins.com/
2012年1月3日星期二
Red Fort Capital to raise $500 mln property fund
MUMBAI (Reuters) – Red Fort Capital, an India-focussed real estate private equity firm, is set to raise $500 million fund that will invest in commercial and residential assets in Asia’s third-largest economy, two sources with knowledge of the matter told Reuters.
The company is in the final stages of fund raising, at a time when global fund raising markets are besieged by economic growth concerns, and will formally announce a “closure soon”, said the sources, who declined to be named as they were not authorised to speak to the media.
Subhash Bedi, founding partner at Red Fort, declined to comment.
The private equity fund has made a first close of about $80 million in April last year.
Private equity investments in Indian property sector grew 14.5 percent to $1.26 billion in 2011, compared with $1.1 billion a year ago, data from industry tracker VCCircle.com showed.
Higher interest costs and nearly dried-up public markets forced developers to look out for alternative options for funds last year.
The Sensex shed 24.6 percent in 2011 to be the world’s worst-performing major equity market, while 13 interest rate increases since March 2010 by the central bank have pushed up borrowing costs and slowed down economic growth, making investors wary.
The latest property fund is Red Fort Capital’s second fund. It has fully invested a $400 million fund earlier, said one of the sources.
Last March, Red Fort Capital said it has returned more than $100 million to investors since 2009. In the first quarter of 2011, the firm exited four investments in residential and office sectors located in New Delhi and Chennai, it said.
(Reporting by Indulal PM and Rajesh Kurup; editing by Malini Menon)
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The company is in the final stages of fund raising, at a time when global fund raising markets are besieged by economic growth concerns, and will formally announce a “closure soon”, said the sources, who declined to be named as they were not authorised to speak to the media.
Subhash Bedi, founding partner at Red Fort, declined to comment.
The private equity fund has made a first close of about $80 million in April last year.
Private equity investments in Indian property sector grew 14.5 percent to $1.26 billion in 2011, compared with $1.1 billion a year ago, data from industry tracker VCCircle.com showed.
Higher interest costs and nearly dried-up public markets forced developers to look out for alternative options for funds last year.
The Sensex shed 24.6 percent in 2011 to be the world’s worst-performing major equity market, while 13 interest rate increases since March 2010 by the central bank have pushed up borrowing costs and slowed down economic growth, making investors wary.
The latest property fund is Red Fort Capital’s second fund. It has fully invested a $400 million fund earlier, said one of the sources.
Last March, Red Fort Capital said it has returned more than $100 million to investors since 2009. In the first quarter of 2011, the firm exited four investments in residential and office sectors located in New Delhi and Chennai, it said.
(Reporting by Indulal PM and Rajesh Kurup; editing by Malini Menon)
http://tourism9.com/
2012年1月2日星期一
Tough India IPO market drives deals between private equity funds
MUMBAI (Reuters) – When Ind-Barath Power Infra Ltd dropped plans for a $200 million IPO earlier this year, it not only thwarted the fundraising plans of its controlling shareholder, but blocked an exit route for a clutch of private equity investors.
Those funds, including Sequoia Capital, Citigroup’sventure capital arm and 3i , invested a combined $223 million in Ind-Barath and may get a breather as the firm is in talks to sell a big chunk to buyout giants such as TPG Capital and Apollo Global Management .
So-called secondary deals, when a private equity investor sells its holding to another such investor, have traditionally been less favored by buyout firms than an exit through an IPO or the sale of a company to an industry rival.
But with weak capital markets shutting off the IPO option for now and mergers between domestic corporate rivals still rare, owners of Indian companies and their private equity investors eyeing the exits will be forced to look at alternatives, including secondary market deals.
KPMG figures roughly $95 billion in maturing Indian private equity investments made during the bull market years of 2006-2008 will come up for sale over the next three years.
“Logic suggests that a good time for exits is not a good time for investing and vice versa,” said Raja Parthasarathy, managing director at IDFC Private Equity, one of India‘s largest private equity funds.
“But the current environment appears to be challenging on both fronts, largely on account of continuing uncertainties around the macro outlook,” he said.
In India, companies tend to want to go public, ready or not.
But India‘s benchmark stock index <.bsesn> is down more than a fifth this year, and 13 rate interest increases since early 2010 by the central bank have pushed up borrowing costs, slowed economic growth and made investors wary.
Private equity exits through the Indian IPO market dropped 66 percent this year to $85 million in 15 deals, according to data from VCCircle.
Overall, some $7 billion worth of public offers were either scrapped or deferred in 2011, of which $1.8 billion was backed by private equity investors, SMC Global said in a recent study.
However, secondary market private equity transactions are up 9 percent this year to $704 million in 29 deals, from $646 million in 14 deals last year, according to VCCircle data, and industry players expect that figure to grow.
SECOND-HAND SHOPPING
While private equity investors in India have generally been reluctant to sell to another buyout firm, as a partial exit through a secondary sale does not provide the liquidity that an IPO does, the current environment and pressure to exit are forcing a re-think.
“A secondary sale should not be viewed as a forbidden option, as it sometimes is,” KPMG said in a recent report on Indian private equity.
“Secondary transactions offer relatively high returns…As the industry matures, more and more PE-funded companies will come up for sale,” it said.
Recent deals include the partial exit in November by UK-based Aureos Capital, when it sold part of its $15 million investment in Continental Warehousing Corp to U.S. fund Warburg Pincus, which invested about $100 million in the company.
Earlier this year, Kotak Realty Fund, a unit of India’s Kotak Mahindra Banksold its holding in Peepul Tree Properties to local rival Tata Realty Fund for $115 million.
The KPMG study said about one-third of private equity investments in India are in the red.
“In an exit environment driven by IPOs, such underperformers would indeed be hard to exit,” it said.
GHOSTS OF INVESTMENTS PAST
Private equity funds invested more than $31.5 billion in India between 2006 and 2008, according to KPMG.
Assuming a five-year holding period and funds’ expectations for returns of roughly three times, Indian exits valued at roughly $95 billion are poised to take place over the next three years, or $28 billion of exits per year, the study found.
By comparison, private equity funds spent a total of just $14 billion in Indian in their most active year of 2007, KPMG said.
Investors in private equity funds, known as limited partners, typically commit their money for 10 years, but fund managers generally like to turn over specific investments after roughly five years.
“Fund managers are definitely under pressure…as their average holding period is increasing,” said Ajit Kumar, India head of Dubai-based fund Evolvence Capital, who expects a growing number of secondary exits as the industry matures.
Evolvence has invested about $400 million in India and is raising a $400 million India-dedicated fund.
“We may see improvement in secondary deal volumes in the second half of 2012. The public markets are also likely to turn better,” he said.
Meanwhile, worries about the fate of boom-era investments have dampened sentiment in the fundraising market, as some 60 India-focused funds attempt to raise about $15 billion.
Investors whose previous investments in Indian private equity deals have not yet borne fruit may be reluctant to write checks to fund managers this time around.
“Ironically, those investments made then are proving to be one of the most vital roadblocks confronting the industry today,” said Subbu Subramaniam, who was a founding partner at Baring India before setting up his own private equity firm, M-Cap fund advisors.
(Editing by Tony Munroe and Matt Driskill)
http://tourism9.com/
Those funds, including Sequoia Capital, Citigroup’s
So-called secondary deals, when a private equity investor sells its holding to another such investor, have traditionally been less favored by buyout firms than an exit through an IPO or the sale of a company to an industry rival.
But with weak capital markets shutting off the IPO option for now and mergers between domestic corporate rivals still rare, owners of Indian companies and their private equity investors eyeing the exits will be forced to look at alternatives, including secondary market deals.
KPMG figures roughly $95 billion in maturing Indian private equity investments made during the bull market years of 2006-2008 will come up for sale over the next three years.
“Logic suggests that a good time for exits is not a good time for investing and vice versa,” said Raja Parthasarathy, managing director at IDFC Private Equity, one of India‘s largest private equity funds.
“But the current environment appears to be challenging on both fronts, largely on account of continuing uncertainties around the macro outlook,” he said.
In India, companies tend to want to go public, ready or not.
But India‘s benchmark stock index <.bsesn> is down more than a fifth this year, and 13 rate interest increases since early 2010 by the central bank have pushed up borrowing costs, slowed economic growth and made investors wary.
Private equity exits through the Indian IPO market dropped 66 percent this year to $85 million in 15 deals, according to data from VCCircle.
Overall, some $7 billion worth of public offers were either scrapped or deferred in 2011, of which $1.8 billion was backed by private equity investors, SMC Global said in a recent study.
However, secondary market private equity transactions are up 9 percent this year to $704 million in 29 deals, from $646 million in 14 deals last year, according to VCCircle data, and industry players expect that figure to grow.
SECOND-HAND SHOPPING
While private equity investors in India have generally been reluctant to sell to another buyout firm, as a partial exit through a secondary sale does not provide the liquidity that an IPO does, the current environment and pressure to exit are forcing a re-think.
“A secondary sale should not be viewed as a forbidden option, as it sometimes is,” KPMG said in a recent report on Indian private equity.
“Secondary transactions offer relatively high returns…As the industry matures, more and more PE-funded companies will come up for sale,” it said.
Recent deals include the partial exit in November by UK-based Aureos Capital, when it sold part of its $15 million investment in Continental Warehousing Corp to U.S. fund Warburg Pincus, which invested about $100 million in the company.
Earlier this year, Kotak Realty Fund, a unit of India’s Kotak Mahindra Bank
The KPMG study said about one-third of private equity investments in India are in the red.
“In an exit environment driven by IPOs, such underperformers would indeed be hard to exit,” it said.
GHOSTS OF INVESTMENTS PAST
Private equity funds invested more than $31.5 billion in India between 2006 and 2008, according to KPMG.
Assuming a five-year holding period and funds’ expectations for returns of roughly three times, Indian exits valued at roughly $95 billion are poised to take place over the next three years, or $28 billion of exits per year, the study found.
By comparison, private equity funds spent a total of just $14 billion in Indian in their most active year of 2007, KPMG said.
Investors in private equity funds, known as limited partners, typically commit their money for 10 years, but fund managers generally like to turn over specific investments after roughly five years.
“Fund managers are definitely under pressure…as their average holding period is increasing,” said Ajit Kumar, India head of Dubai-based fund Evolvence Capital, who expects a growing number of secondary exits as the industry matures.
Evolvence has invested about $400 million in India and is raising a $400 million India-dedicated fund.
“We may see improvement in secondary deal volumes in the second half of 2012. The public markets are also likely to turn better,” he said.
Meanwhile, worries about the fate of boom-era investments have dampened sentiment in the fundraising market, as some 60 India-focused funds attempt to raise about $15 billion.
Investors whose previous investments in Indian private equity deals have not yet borne fruit may be reluctant to write checks to fund managers this time around.
“Ironically, those investments made then are proving to be one of the most vital roadblocks confronting the industry today,” said Subbu Subramaniam, who was a founding partner at Baring India before setting up his own private equity firm, M-Cap fund advisors.
(Editing by Tony Munroe and Matt Driskill)
http://tourism9.com/
India tycoon’s got tons of cash, nowhere to invest
The problem isn’t opportunity, he said. It’s India.
“Every large investment, there was no transparency,” Piramal said.
Advertisement: Story continues below
His dilemma is a worrying sign for India. With the country mired in corruption, bureaucratic red tape and unclear and changing government policies, many of the men who made their billions here are saying maybe it’s time to quit India. It’s got to be easier to do business elsewhere.In May last year, Piramal’s healthcare business sold its generic drug operations to US pharmaceutical giant Abbott Laboratories for $3.8 billion. Piramal, a tall big man in a country that still measures prosperity by girth, was eager to set that cash pile to work. He wanted to expand one of his chemical plants, but was told it would take five years.
“The same plant could be set up in China in two years,” he said. “I love India, but my customer is not going to wait.”
India, still a beacon of relatively fast growth despite a troubled world economy, should be a magnet for capital. Instead, since the beginning of 2010, the amount that Indians have invested in businesses overseas has exceeded the amount foreigners are investing in India, according to central bank figures.
In part this reflects the confidence and aptitude of India’s maturing companies and the current malaise in the global economy and financial markets. But it also reflects deep problems at home. India’s big coporations may be cash rich but the failure to invest that money domestically is bad news for a developing country that needs capital to build the roads, power plants and food warehouses that could help lift hundreds of millions out of dire poverty.
The frustration of India’s business elite with corruption, political paralysis, log-jammed approvals, regulatory flip-flops, lack of access to natural resources and land acquisition battles – to pick a few of the top complaints – has reached a pitch perhaps not heard since India began liberalizing its economy in the early 1990s. “If you are an honest businessman in India, it’s very difficult to start up anything,” said Jamshyd Godrej, chairman of manufacturing giant Godrej & Boyce. “Companies are going to operate where they see the best opportunities and efficiency for their capital.”
Increasingly, that’s outside India.
In 2008, foreigners poured roughly twice as much direct investment into India – $33 billion – as Indians plowed into businesses overseas. By 2010, that had reversed: Indians invested $40 billion abroad – twice as much as foreigners invested in India – a trend that’s continued this year.
There is another, unspoken element to all the complaints. To the extent that business in India ran on corruption, some of the old, dirty ways of doing things are being disrupted, freezing India’s already glacial bureaucracy, business leaders say.
Scandals in the staging of the Commonwealth Games, the pilfering of homes meant for war widows and the irregular auction of cellphone spectrum that cost the country billions has sent parliamentarians and even a Cabinet minister to prison.
With Indians tiring of the incessant graft, tens of thousands of middle-class protesters poured into the streets and pushed an anti-corruption bill onto the floor of Parliament.
Steelmakers can’t get enough iron ore because a massive mining scandal in the southern state of Karnataka prompted a court to order the closure of illicit mines that account for a fifth of iron ore production in the country.
The bureaucrats – even the honest ones – are reportedly so scared of being punished they are refusing to make the decisions needed to make the country run.
Piramal is not unpatriotic. Each room in his executive suite is named after an Indian epic hero: Arjuna, the most pure; Dhananjay, acquirer and master of wealth. There’s a quote from the Upanishads scriptures on the wall.
His office sits in a one million square foot office park in Mumbai his family built. The buildings around him – white with blue glass that flashes back the unforgiving sun – bear his own name in large black letters: Piramal Towers.
Piramal had the will and the means to build power plants and roads.
Instead, his Piramal Group’s largest investment to date has been in one of the office park’s tenants: the Indian subsidiary of the British telecom giant Vodafone Plc.
Last September, when he got the first payout, of $2.2 billion, from Abbott, the phone started ringing.
“Because people knew we had money, we had so many people approaching us for projects in the infrastructure sector,” he said. “These people had no experience and no knowledge and no track record of having built a business in any area. And yet they were coming to us saying we have licenses and approvals. That just didn’t sound right or smell right.”
Each day, they paraded through his office: The investment banker who decided to build a 500 megawatt power plant, the coal trader assured of a government coal allocation, small-time miners with pretty presentations promising land, licenses and financing.
“They’d name politicians from the center and the state who had it all tied up for them,” he said. “It didn’t sound right. Obviously there were things going on in the system.”
Road and port projects weren’t much better, he said.
Piramal also looked at investing in engineering and infrastructure services companies, but couldn’t make sense of their books.
“We couldn’t find anything,” he said. “People get greedy. In their desire to get good valuations they resort to, if I can say, creative accounting.”
Today, India’s infrastructure companies are known as great wealth destroyers.
“Infrastructure investment has become untouchable, a sure way of losing money,” said Jagannadham Thunuguntla, head of research at SMC Global Securities. He calculates that four of India’s top infrastructure companies – GMR Infrastructure, GVK Power and Infrastructure, Lanco Infratech and Punj Lloyd – have lost over 80 percent of their value since 2007. A fifth, Larson & Toubro is down 50 percent.
Piramal may have dodged a bullet, but shareholders in Piramal Healthcare aren’t happy. Despite a $600 million special dividend and share buyback, the share price has sagged since the Abbott deal was announced on May 21 last year. They’d like to see the Abbott cash productively deployed. Instead, much of it is sitting in fixed deposit accounts.
Piramal said he really does want to run a pharmaceutical company and be the first Indian company to discover a world-class drug – despite his dabbling in telecom, financial services and real estate financing. It’s just that pharma can’t absorb all his cash. He plans to sell the 5.5 percent stake he picked up in Vodafone Essar for $640 million in a few years, when Vodafone Essar issues shares in an initial public offering, he said.
He has also launched Piramal Capital, to make real estate and infrastructure loans, and spent about $50 million to acquire IndiaReit, a real estate investment company.
Meanwhile, his thoughts have turned to Boston, where he set up IndUS Growth Partners with a professor from Harvard Business School to look for buying opportunities in the US, in security, financial services and biotechnology. And he said he’s still planning to spend over a billion dollars on biotechnology acquisitions in North America and Europe.
“India was going more towards capitalism than socialism,” Piramal said. “I think we’re going back. Capitalism went to too much excess. Corruption levels went to the extreme.”
He said he’ll announce his first overseas acquisition by March.
AP
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