Apollo

Lots of buyout debt coming due

Jim Kim — Mon, 03 Nov 2008 07:42:17 -0500

We noted recently that many of the biggest deals of the boom years seem to faring OK. But that doesn't mean every deal is going to work out. There are lots of worries right now, chief of which is concern over coming-due debts. The New York Times notes that many private equity firms face a refinancing wave at a very uncertain time. How bad will it be? Let's hope not as bad as the 1986-89 bust when nearly 30 percent of big leveraged buyouts defaulted, according to one study. The Times notes that many of the financing agreements allow companies to continue operating even if they can't make payments. Six of Apollo's portfolio companies have said that they will pay a portion of their bonds' interest by issuing more debt. Still, you can't underestimate the depth of the on-going economic contraction. Some firms may end up fading away. Others will survive. A lucky few might even thrive, picking up companies on the cheap.

For more:
- here's the article

Top deals faring surprising well

Jim Kim — Thu, 30 Oct 2008 12:07:10 -0400

TheDeal.com offers a nice rundown of the top 10 deals of the boom years, concluding that they are holding up well. This is something of a surprise given the pathetic valuations for leveraged loans and senior debt as well as the tough economic climate. But it's not over until someone defaults, and that doesn't seem to be in the offing. The article notes that some deals look like home runs for the sponsors. TPG and Goldman Sachs Capital Partners may rake in a $1.3 billion profit on their $4.53 billion in Alltel when the sale to Verizon closes. Hilton Hotels is also said to be performing well for the Blackstone Group. One exception is Harrah's, which was supposed to be immune to economic slowdown. But tough times have hit, and Apollo has written down the value of its investment by 25 percent.

For more:
- here's the article from TheDeal.com

Deal gone bad: Huntsman's big bet tanks

Jim Kim — Fri, 27 Jun 2008 08:16:35 -0400

Seems like there's a story to every deal that has gone bad in this credit crunch, with most ending in anger and a flurry of suits. About a year ago, Hexion, a company controlled by private equity giant Apollo, agreed to buy Huntsman for $10.6 billion, or $28 a share. It was an all-cash bid to be financed 100 percent by loans from Deutsche Bank and Credit Suisse. The market displayed doubts that the deal would go through. But Peter Huntsman, founder of the chemical firm, and his dad saw a buying opportunity. They were so confident the deal would happen they bought up more than $18 million worth of Huntsman stock, recounts the New York Times. The stock is now worth about $9 billion. Huntsman told the Times, "I've got egg on my face. I shouldn't have trusted these guys," referring to Apollo principals Leon Black and Joshua Harris.

For more:
- here's the Times article

Related Article:
Another busted private equity deal

Another busted private equity deal

Jim Kim — Thu, 19 Jun 2008 07:27:38 -0400

Jon Huntsman, founder of chemical company Huntsman, is vowing to make Leon Black, of private equity firm Apollo, pay for backing out of a deal to buy Huntsman for $6.5 billion. Some thought the leveraged financing environment had improved. This suggests otherwise. Article

Private equity IPOs faring well

Fri, 09 May 2008 06:59:56 -0400

Most of us could use a bit of good news. How's this? According to Financial News Online, private equity backed initial public offerings have fared well over the past five years. In fact, they delivered average aftermarket gains of 25 percent, compared with 16.3 percent for non-financial sponsor-backed offerings. In 2007, the performance apparently widened. The best sponsor-backed deals came from Apollo Advisors, Goldman Sachs Capital Partners and the Blackstone Group, the article notes. Apollo's returns were a whopping 68 percent on average. It's unclear how things will turn out in 2008. The IPO market itself is reeling. The immediate aftermarket has been tough as well.

For more:
- here's the Financial News Online article

What's up at CalPERS?

Fri, 02 May 2008 06:59:54 -0400

When Fred Buenrostro, CEO of the California Public Employees' Retirement System, said he would step down after more than six years, he joined some other top executives in leaving the giant pension. Chief Investment Officer Russell Read announced his resignation to pursue opportunities in "green" investments. Christianna Wood, who was in charge of stocks and some hedge funds, also left this year. So what's going on? CalPERS lost 1.2 percent in the year ending Feb. 29. But over five years, it has generated an average annual return of 14.2 percent, Forbes notes. There have been rumors of clashes between top executives and the always-hard-to-get-along-with board. But people are publicly downplaying that. It may be good old-fashioned greed. These guys can make a whole lot more money in the private sector.

For more:
- here's the Forbes article

Economy hitting portfolio companies of big private equity firms

Tue, 29 Apr 2008 06:59:58 -0400

As if private equity firms didn't have enough problems. Investment Dealers' Digest suggests that the rocky economy may be a problem for restaurant-chains, home furnishing companies and others whose fortunes are tied to the consumer economy. Linens Holding Co., owned by Apollo Global Management, recently asked its lenders for--and received--forbearance. Kohlberg Kravis Roberts' Sealy Corp., a maker of mattresses, may see problems as consumers restrain spending, the magazine notes. Moody's issued a negative outlook on the company, citing worsening economic conditions, among other things. Also, Sun Capital's Real Mex Restaurant chain was downgraded and hit with a negative outlook; it runs El Torito, Chevys Fresh Mex and Acapulco Mexican restaurants.

For more:
- here's the article from Investment Dealers' Digest (for FierceFinance readers)

Related Article:
Consumers could turn to bane of banks

Can Citigroup sell $12 billion in leveraged loans?

Wed, 16 Apr 2008 06:59:56 -0400

Citigroup's strategy for selling of $12 billion in leveraged loans--crucial to its efforts to clean up its balance sheet--features an interesting gambit. Rather than sell off the loans in discrete packages, it is letting potential private equity buyers such as the Blackstone Group, TPG and Apollo do a bit of à la carte shopping. The Financial Times reports the firms are allowed to pick and choose from a menu of all deals. That suggests that the buyers will gravitate toward the deals they deem the soundest, leaving the rest to Citigroup. Citigroup is not the only bank marketing such debt. Deutsche Bank is as well. Perhaps the competition is forcing sellers to get creative.

For more:
- here's the article

ALSO NOTED: Analyst: Morgan Stanley holds the most risk; Creative financing at Lehman Brothers?; and much more...

Mon, 14 Apr 2008 06:59:50 -0400

Company News:
> Morgan Stanley lands underwriting deal in Saudi Arabia. Article
> Apollo struggles with Linens 'n Things. Article
> Lehman shorts scared by Bear probe? Article
> Creative financing at Lehman Brothers? Article
> Analyst: Morgan Stanley holds the most risk. Article
> Bear Stearns details financial condition. Article

Industry News:
> Individuals trapped in auction-rate securities. Article
> Small investor lost in the carnage? Article

And Finally... Can talking to yourself help you at work? Article

ALSO NOTED: Shorts getting squeezed on Lehman Brothers stock; Morgan Stanley sells Outsourced Trading; and much more...

Fri, 11 Apr 2008 06:59:50 -0400

Company News:
> Morgan Stanley sells Outsourced Trading. Article
> Wells Fargo boosts credit line for SunPower. Article
> Shorts getting squeezed by Lehman Brothers. Article
> Bank of America to consolidate its health plans. Article
> Criticism of Citigroup's leveraged loan deal. Article
> Does Apollo's IPO make sense? Video

Industry News:
> Party over for investment bankers. Article
> More on term auction failures. Article

Regulatory News:
> Hedge fund group vows to fight regulation. Article

And Finally... The benefits of a powerful mentor. Article