Yesterday, 8:09 AM
- David Swenson - the investment manager of the Yale endowment - ushered in the private-equity era nearly three decades ago with his success in allocating part of the portfolio to "alternative" assets, writes Andy Kessler. The so-called Swenson model has been widely copied since, and last year 765 P-E funds raised $266B, up 11% from 2013.
- Private-equity, however, has peaked, argues Kessler, noting a number of reasons, among them the ending of the three-decade-plus decline in interest rates, a slowdown in bank lending for the leveraged deals upon which P-E runs, and the threat of tax reform in which interest rate deductions for debt could be targeted.
- Most importantly though, says Kessler, P-E is an economic growth killer. Buying out a drugstore chain and loading it with debt isn't investing in the productivity of the economy. Instead, it does just the opposite - generating wealth for the endowments and pension funds invested, but destroying it for the economy.
- Kessler throws in one more reason P-E is done: The industry is fresh out of big targets. The bust of Energy Future Future holdings means utilities are out, and what's left in food following the Kraft purchase? Tech? Forget it, as the money required to service debt squeezes out what's needed for R&D.
- Among those reading this morning: BX, KKR, CG, APO, FIG.
- ETFs: PSP, PEX
Thu, Mar. 26, 11:37 AM
- Private-equity buyouts of $17.14B YTD are at their lowest level since 2012 as banks - with regulators looking over their shoulders - cut back on the amount of debt they'll extend for takeovers. Leveraged loan volume this year of $26.5B is 82% less than the same time frame in 2014, and the lowest since 2009.
- Fewer and smaller deals, along with less leverage means less risk, but also means lower returns for buyout firms. It also means lower prices for sellers.
- “The limitation on leverage has taken away some buying power and in some cases, created a gap between sellers’ expectations and the price that private-equity firms can justify paying,” says Carlyle Group's (CG -1%) Pete Clare.
- According to S&P Capital IQ, 21% of P-E deals this year have been financed with leverage at or above levels deemed risky by regulators; that's down from 35% in Q4 and 60% in Q3.
- Along with Carlyle, Blackstone (BX -0.9%) in its annual report warned leverage restrictions could hurt its business. Apollo Global (APO -1.7%) and KKR (KKR -1.2%) included similar language in both their 2013 and 2014 filings.
- Source: WSJ
- ETFs: PSP, PEX
Wed, Mar. 18, 9:25 AM
- A JPMorgan-led group holding the paper on a $1B revolver on the natural gas producer is nearing a deal to give Samson a waiver for an expected covenant breach, reports the NYPost. This comes as the Fed presses JPMorgan and other lenders to increase their reserves against energy-related loans.
- As part of the waiver deal, JPMorgan is expected to reduce the size of Samson's line of credit. A similar agreement last year cut the revolver from $1.8B to today's $1B.
- The waiver hardly gets Samson out of the woods as it has an interest payment due to junior creditors in August.
- KKR led the buyout of Samson for $7.2B in 2011.
- Previously: Report: KKR's Samson Resources near breaking loan covenants (March 11)
Tue, Mar. 17, 12:00 PM
- Apartment prices in North Dakota's oil patch - which last year rivaled those in NYC - have dipped 15-20% in the last two months, reports Reuters - a combination of frenzied building and the plunging oil prices.
- The town of Williston issued permits for 1,290 units in 2014, ten times the amount in 2009. At that city's Dakota Ridge apartments a 2-bedroom which went for $3.2K per month one year ago is going for $2.6K now, even with just-added perks like a hit tub and free alcohol/snacks in the common lounge.
- KKR upscale Prairie Pines has cut rents by nearly 20% since last summer.
- "I could see the quality of life improving for some people if they're not worried each month about how they're going to make rent," says Investors Real Estate's (IRET +0.3%) Justin Hammer. IRET owns apartments in Williston and Minot, some of which it's pricing below market to appeal to families and retirees.
Sun, Mar. 15, 5:47 AM
- In one of the biggest deals in the Asia-Pacific region so far this year, a consortium of KKR (NYSE:KKR), Varde Partners and Deutsche Bank (NYSE:DB) has agreed to buy GE (NYSE:GE) Capital's Australian and New Zealand consumer lending arm for about $A8.2B ($6.26B).
- The move comes after General Electric disposed of its appliances unit, real estate holdings and a stake in NBCUniversal, and shed more of its banking businesses to return to its industrial focus.
- Previously: GE reportedly weighing deeper cuts to banking business (Mar. 11 2015)
Wed, Mar. 11, 8:48 AM
- One of the country's largest privately-held natural gas producers, Samson Resources - owned by KKR - is expected to break its loan covenants within weeks, reports the NYPost.
- Samson last month hired restructuring advisers and is in talks with a JPMorgan-led group over its $1B revolver. Samson last year broke the covenant on this line and JPMorgan gave it a waiver while lowering the borrowing limit to $1B from $1.8B.
- KKR - which led the $7.2B buyout of Samson in 2011 - could see its equity stake wiped out less than a year after another of its energy portfolio, Energy Future Holdings, filed for bankruptcy.
Tue, Mar. 10, 2:18 PM
- KKR (NYSE:KKR) is in advanced talks to acquire Air Medical Group from Bain Capital in a deal that could value the U.S. helicopter ambulance company at around $2B including debt.
- A deal could be announced as early as this week.
- Bain acquired Air Medical in 2010 in a $1B deal.
- Bain is working with Barclays on an auction for Air Medical.
- Source: Reuters
Tue, Mar. 3, 12:37 PM
- Former CIA director David Petraeus will plead guilty to one count of unauthorized removal and retention of classified materials, and he could spend up to one year in prison.
- He's currently the head of KKR Global Institute - a unit of KKR charged with figuring how macroeconomic trends and government policy will affect its investments - and KKR has issued a statement suggesting Petraeus will remain in his position.
Fri, Feb. 27, 2:58 PM
- Craig Farr, 43, joined KKR in 2006 from Citigroup, where he co-led the North American capital markets business, and he helped build and syndicate the $900M IPO of KKR's first debt vehicle.
- As head of credit and capital markets at KKR, he oversees 125 rainmakers.
- Adam Smith will replace him as head of the capital markets unit, and Nat Zilkha and Alan Burke will take over the credit group.
- Capital markets generated 8.7% of KKR's pretax profit last year, write Devin Banerjee and Jason Kelly, and the public markets business - which includes hedge funds and credit strategies - was responsible for 14%.'
Thu, Feb. 19, 3:52 PM| Comment!
Tue, Feb. 10, 9:16 AM
Tue, Feb. 10, 8:43 AM
- Q4 economic net income of $86.6M down from $786.6M one year ago. ENI after taxes per unit of $0.05 vs. $1.04 a year ago.
- Private Markets revenue fell to $283.4M in Q4 from $1.013.7B a year ago, mostly thanks to markdowns on the company's energy investments. The portfolio appreciated 2.7% during the Q, but energy holdings were marked to about $0.76 on the dollar vs. $1.14 at the end of Q3.
- The dividend is cut to $0.35 per unit vs. a recent $0.45.
- Conference call at 10 ET
- Previously: KKR misses by $0.40, misses on revenue (Feb. 10)
- KKR -4.9% premarket
Tue, Feb. 10, 8:19 AM
Mon, Feb. 9, 5:30 PM
Mon, Feb. 2, 6:46 AM
- CRH (NYSE:CRH) is not planning to keep control of all the assets it has agreed to buy from Holcim (OTCPK:HCMLY) and Lafarge (OTCPK:LFRGY).
- The Irish building supplies company is now in talks with private equity firm KKR (NYSE:KKR) to partner on some.
- CRH +5.8% premarket
- Previously: CRH to buy Lafarge, Holcim assets (Feb. 02 2015)
Mon, Feb. 2, 4:07 AM
- Morgan Stanley (NYSE:MS) is shopping its oil-trading and storage business again after an earlier deal with Rosneft (OTC:RNFTF), valued at several hundred million dollars, fell through last month.
- Morgan Stanley is still seeking a similar price to that of its first offer, as oil storage prices soar due to the recent collapse of crude prices.
- Macquarie Group (OTC:MCQEF) and KKR (NYSE:KKR) have emerged as early contenders to acquire the unit.
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