When good opportunities are scarce, hedgies will seek them in rather unlikely places.
Take Sareb, the Spanish ‘bad bank’ in the process of raising €250m in new equity for the second round of asset transfers from the country’s beleaguered lenders. Read more
Spain’s Santander, the biggest bank in the eurozone by market capitalisation, is quietly trying to sell a €3bn ($4.1bn) package of thousands of repossessed homes and plots of land to foreign investors to clean up its balance sheet, the FT reports, citing people familiar with the talks. But they say at least two of the interested potential buyers – the property funds of Cerberus and Morgan Stanley – are asking for discounts so deep that Santander is unlikely to strike a deal before the end of the year for fear of denting its capital ratios. At the end of June, Santander had a total of €8.3bn in foreclosed Spanish property assets, including finished apartments, buildings under construction and land repossessed from homebuyers and developers. For the Spanish banking system as a whole, the total is about €86bn, according to the Bank of Spain. A Santander deal could pave the way for further deals by smaller banks and savings banks and provide indicative pricing.
Cerberus Capital Management and Chatham Lodging Trust terminated their $1.1bn agreement to buy 64 hotels from Innkeepers USA Trust, Bloomberg reports. The firms cited a possible adverse change in Florida-based Innkeeper’s business as the reason for backing out of the June transaction, a key element in the lodging company’s plan to exit bankruptcy. Cerberus and Chatham didn’t specify what triggered the decision to invoke what is known as a material adverse effect clause. Innkeepers said the companies acted “inappropriately,” and it will evaluate “all legal and equitable remedies.” The news agency says decision is a sign that the weakening economy is straining the private-equity market.
Some of the world’s largest hedge funds and private equity groups have held talks with Spain’s troubled savings banks, known as cajas, as they rush to secure €15bn ($21.3bn) in new capital to avoid a state bail-out, reports the FT. Funds including Paulson & Co, the US hedge fund, and buy-out groups Cerberus and Apax have held meetings in recent months with several Spanish savings banks to discuss possible investment. While Spain’s large listed banks have been largely protected from the domestic downturn due to their large international operations, the privately held cajas have been left desperate for capital after the souring of loans made during the country’s property bubble. The preliminary meetings with foreign investors, with cajas including Bankia, Banca Civica and smaller rivals, are believed to have stalled after the banks balked at the low valuations offered by foreign investors, investors said.
Toronto-Dominion Bank is close to reaching a deal to buy Chrysler Financial from Cerberus Capital Management for $6.3 bn, Reuters reports. A source said that a deal could be announced as early as today. The move would help Cerberus recoup some of its $7.4 bn purchase of Chrysler Group and help Toronto-Dominion build its East Coast assets. The Wall Street Journal reported that Cerberus would retain about $1bn of assets under the deal, although TD and Cerberus declined to comment, the news agency added. DealBook takes a closer look, saying that a deal would help Cerberus break a series of unfortunate auto-related investments.
US private equity firms Cerberus Capital Management, Lone Star and Fortress Group are among potential bidders for the failed Japanese consumer lender Takefuji Corp, in a deal that could be worth as much as $955m, reports Reuters, citing sources familiar with the deal. The first bidding round, in which firms must state the size of their offer and plans for restructuring Takefuji, will close on Dec 15. Bidders are likely to offer Y60bn to Y80bn ($715m-$955m) for the business. US buy-out firm JC Flowers, the top shareholder of Shinsei Bank, and Elliott Management, which operates a loan servicing business in Japan, may also submit bids, one source said. Meanwhile, reports Bloomberg citing the Sankei newspaper, Shinsei has agreed to advice Takefuji on the appointment of a bankruptcy sponsor.
Kinder Morgan, the pipeline company that was taken private by its chief executive and a group of private equity funds in 2006, has filed registration for an initial public offering of shares to raise up to $1.5bn, the FT reports. It joins a list of successful private equity portfolio companies that have lined up to take advantage of thawing public markets after the financial crisis mostly shut the window for IPOs. The shares being sold are owned by private equity funds controlled by Goldman Sachs, The Carlyle Group, Riverstone Holdings and Highstar Capital. They became partners in the leveraged buy-out, which acquired the company for $15bn, and took on $7bn in debt. Together, the firms own roughly 60 per cent of the shares. Meanwhile Bloomberg reports that Cerberus Capital Management is seeking buyers for Chrysler Financial, which it acquired in 2007, according to sources.
KKR and TPG have both said they are potentially interested in the wine business of Australian brewer Foster’s, but neither has so prepared a bid, sources have told Reuters. Cerberus was the mystery firm that saw a $2.5bn offer rejected by Foster’s this week, however, said sources. Both KKR and TPG have prior experience in managing alcoholic beverages businesses, which may count in taking over the depressed earnings of Foster’s wine business — opening the possibility of a consortium of private equity firms going after it.
Leading private equity groups, including KKR and TPG, are working on potential bids for Foster’s wine assets after the Australian company rejected a A$2.7bn ($2.5bn) offer from US buy-out group Cerberus, reports the FT. Foster’s declined to say who was behind the failed approach for its Treasury Wine Estates arm, but a person close to the situation confirmed media reports that the mystery bidder was Cerberus, and said groups including KKR and TPG were preparing similar bids. Analysts told The Australian newspaper that suitors will have to bid at least A$3.1bn for Treasury Wine, and may also need to team with another buyer willing to take the beer division.
General Motors said it had agreed to buy AmeriCredit, a Texas-based vehicle finance company, for $3.5bn in cash. The deal marks the Detroit carmaker’s first significant acquisition since its emergence from bankruptcy protection a year ago under the control of the US government, the FT reports. GM sold a majority stake in its former financing arm, GMAC, four years ago to Cerberus Capital Management.
Barcelona-based blood products maker Grifols has agreed to buy its Nasdaq-listed rival Talecris Biotherapeutics in a deal worth $4bn that will generate big profits for US private equity group Cerberus Capital Management, the FT reports. The deal, paid for with a mixture of cash and stock, values Talecris at more than the $3.1bn that Australian healthcare company CSL agreed to pay for it in 2008.
US buy-out firm Cerberus Capital management is in talks to sell its remaining stake in Talecris Biotherapeutics, a blood products firm, to Grifols of Barcelona, in a deal that could come as soon as Monday. Grifols is also seeking to buy out Talecris’s public shareholders. The cash-and-stock deal is expected to value Talecris at slightly above the $3.1bn that CSL, the Australian healthcare company, agreed to pay for it in 2008 before the deal collapsed in 2009 amid US regulatory opposition.
Shinsei, the Japanese bank, is preparing to raise about Y75bn ($830m) in fresh capital as it reconsiders its planned merger with a rival domestic lender. Shinsei believes that a merger with Aozora, the Japanese bank part-owned by US buy-out firm Cerberus, is no longer necessary, say insiders. The tie-up was agreed last July when Shinsei, part-owned by JC Flowers, faced a capital shortage. The deal’s collapse would be a blow to JC Flowers and Cerberus, which have tried but so far failed to transform the lenders into western-style ventures.
Cerberus is in advanced preparations for an IPO of Freedom Group, a little-known company that has become a dominant player in the rifle-and-ammunition business, reports the WSJ. Over a three-year span, the US buy-out group – while struggling with its ill-fated acquisitions of auto maker Chrysler and lender GMAC – has acquired at least seven US gun- and-ammunition makers and consolidated them into Freedom Group, making it one of the world’s largest makers of guns and ammunition.
Cerberus, the investment group, will bar investors in two new hedge funds from withdrawing money for three years to avoid a repeat of the large outflows that followed its lossmaking purchases of Chrysler and GMAC, the group’s executives said. The move is rare among hedge funds and could encourage other managers to follow suit. The lock-up would apply to two multibillion-dollar funds to be raised later this year specialising in distressed investments.
Who said leveraged loans are dead? There were echoes of the good old days of highly leveraged deal-financing with news that specialty drug maker Warner Chilcott is expected to announce as early as Monday the acquisition of Procter & Gamble’s prescription-drug business for more than $3bn.
In what the Wall Street Journal described as a “sign that the market for loans on more highly levered deals may be loosening”, six banks, led by JPMorgan Chase and Bank of America, and including Credit Suisse, Citigroup, Barclays and Morgan Stanley, are expected to put up as much as $4bn in financing for the transaction. Roughly $3bn will go toward the acquisition, with the remainder refinancing $1bn in existing Warner Chilcott debt, the Journal added. Read more
Shinsei and Aozora, two lossmaking Japanese banks backed by US buyout groups JC Flowers and Cerberus, are on Wednesday of their merger. The deal will create Japan’s sixth-largest banking group and help consolidate the Japanese government’s holdings. The government has a 23.9% stake in Shinsei and 465m Aozora preference shares. JC Flowers has 32.5% of Shinsei while Cerberus owns 50.5% of Aozora.
Japan’s Shinsei and Aozora banks – which are part-owned by US buyout groups – confirmed on Thursday they are in merger talks to create the country’s sixth-biggest banking group, with assets of about Y18,000bn ($187bn). The talks to link the banks, which were nationalised during Japan’s late 1990s banking crisis, underscore their recent difficulties. Shinsei is 32.5% owned by JC Flowers, and Aozora is 50.5% owned by Cerberus. See FT Alphaville’s take.
Shares in Aozora Bank, the Japanese lender controlled by Cerberus Capital Management, and Shinsei Bank, backed by billionaire Christopher Flowers, rose in Tokyo trading after the banks confirmed they are in merger talks, reports Bloomberg. Aozora gained nearly 9% and Shinsei 6% on news that the two are discussing creating Japan’s sixth-largest bank, with about Y18,000bn ($188bn) of assets.
Cue classical allusion about losing heads etc.
So depart Ken Leet and Jeff Lubin – the two senior-most partners at Cerberus in Europe. Full story over at Financial News. Read more
Cerberus, the US buyout firm, is in advanced discussions to close its Hong Kong office in the latest sign of industry giants scrambling to reduce costs amid the global economic slowdown. Cerberus’s move comes less than two years after it opened the Hong Kong office in expectation of a steady rise in China-related business.
Chrysler’s restructuring plan could see the combined equity of owners Cerberus and Daimler shrink to less than 10%, with the rest of the company divided between the US government, the United Auto Workers’ union, bank lenders and Italian carmaker Fiat. Chrysler and GM, which have been granted a combined $17.4bn in government loans, must present restructuring plans to the Obama administration by Feb 17 in order to retain that financing. Cerberus currently owns 80% of Chrysler and Daimler, 20%.
The year just seems to get worse for Cerberus, which is watching key investments such as Chrysler and GMAC flail as it tries to cut even its own staff and costs – and it’s only mid-February. Clearly, the acquisitive US buyout group is trying to put some investments in order – at home and abroad.
On Tuesday, Aozora Bank, the troubled Japanese mid-size bank controlled by Cerberus, underwent a management shakeup after forecasting a group net loss of Y196bn ($2.14bn) for the year ending March 31 – the fourth downward revision to its earnings projection. Chief executive and president Federico Sacasa stepped down to take responsibility andwas replaced by deputy president Brian Prince, who will be acting chief executive but is expected to be named chief executive and president pending a shareholders meeting in June. Read more
Focus DIY, the UK home improvement retail chain, has called for a government investigation after the company’s credit insurers withdrew almost all cover for its suppliers. Less than 5% of the stock Focus buys is now insured, down from about one-third in September. The company, owned by US private equity group Cerberus, said it had persuaded its 300 or so suppliers to stick to the standard 67-day payment terms, rather than demand up-front payment. Bill Grimsey, chief executive of the 200-store chain, said he had met a dozen suppliers in the past fortnight to discuss the issue.
Cerberus Capital Management, the private equity group specialising in stripping costs out of struggling companies, is taking some of its own medicine with plans to cut 10% of its 275 members of staff. While Cerberus is the latest in a string of big buy-out groups to announce cost-cutting measures, its move underlines the massive problems it faces in some of its most recent investments. The group has been forced to ask the US government for a bail-out of two of its biggest portfolio companies: Chrysler, the ailing carmaker, and GMAC, the auto finance company.
Is there no end to bailout creep and the many ingenious ways that US car makers and others are hatching fresh ideas to access federal bailout funds, government subsidies, loans and any other kind of public aid?
In the latest brazen attempt to double-dip into public coffers, Chrysler — barely before the ink dries on its $4bn bailout cheque received last Friday — has stepped up talks about changing the “status” of its Chrysler Financial unit in a way that will enable it to tap the federal troubled assets relief programme and other sources of credit. Read more
GM and Chrysler have reopened merger talks, as Chrysler owner Cerberus has signalled its willingness to give away part of its ownership in the auto maker, reports the WSJ. With cash running low at both companies, Cerberus took the initiative to restart discussions that sputtered just weeks ago. At that time, both GM and Chrysler viewed a business combination as impractical and as a distraction from their mounting liquidity problems.
The Woolworths brand could be sold within a week as potential buyers including Theo Paphitis, the entrepreneur and TV game show judge, line up possible bids for the failed variety retailer. Neville Kahn, the Deloitte partner who is leading the administration process, said Sunday that he would meet interested parties on Monday and expected to have a preferred bidder for the retailer’s brand and a large number of stores by the end of the week. The publicity surrounding the collapse of Woolworths, which fell into administration last week, putting 30,000 jobs at risk, appears to have encouraged shoppers into its stores, with like-for-like sales up 20% on the day after Deloitte was appointed administrator. Paphitis, who owns the Ryman stationery chain, is known to have expressed interest, as has Endless, the Leeds-based turnround investor, while other private equity groups likely to consider a bid include Cerberus, Sun European Capital and Alchemy Partners.
Investors in buy-out funds are so concerned that private equity returns will slump in coming years that they are selling their commitments for as little as 30% of their original value. If such stakes were available at all 18 months ago, they generally traded at a premium. The collapse in valuations reflects growing fears that many private equity-owned companies will implode as the economic contraction intensifies. Some of the largest deals, struck at the height of the buyout boom that ended in mid-2007, now look disastrous for the equity holders. Cerberus’s investment in crisis-hit Chrysler is among the most high-profile of the boom-time deals. Some investors said Cerberus fundholders were likely to have to accept the sharpest discounts on stake sales in the secondary market. TPG fundholders have been able to sell for slightly higher prices. One investor said he had just bought a piece of a TPG fund in the secondary market for 45 cents on the dollar, reflecting concerns about TPG’s stake in gaming company Harrah’s Entertainment and other companies hit by the slowdown.
General Motors and Chrysler are accelerating merger discussions amid strong support from potential lenders that are eager to see a deal done, reports the WSJ. GM is set to report dismal Q3 earnings in coming weeks and is scrambling to find new sources of funding, which is spurring the auto maker to complete the deal as soon as the end of October, said people close to the matter. Major banks that have long lent to both companies, such as JPMorgan, are also keen to do a deal to help reduce exposure to the auto industry. Cerberus Capital Management, which owns Chrysler, is looking to have a stake in a combined GM-Chrysler. While some lenders such as JPMorgan have shown interest in equity in such a deal, several other lenders approached by the parties have passed on the deal. JPMorgan and Citigroup are representing Chrysler and Cerberus, while Morgan Stanley and Evercore Partners are representing GM. While the talks are still far from a firm deal, GM’s management team is hammering out a potential takeover of Chrysler and top executives remain bullish on the prospects of a combined GM and Chrysler.