September 23, 2008
In all the commotion and hullabaloo surrounding the events effecting the financial world these past few weeks, little attention has been paid to the Federal Reserve relaxing rules concerning minority ownership of banks by Private Equity investors and other investment groups, allowing them to own up to 33% of a bank’s equity, including 15% of the voting shares.
Thus far banks have had to raise more than $350B thanks to write-downs in excess of half a trillion dollars, and the need for further infusions of capital is certain. With these lowered restrictions Private Equity firms could provide much needed additional funding. Look for Private Equity firms to invest in small and medium sized banks as funds won’t wish to put all their eggs in one large bank basket, especially after witnessing the difficulties that TPG has experienced with WaMu.
Moving the ceiling up to 33% is a step in the right direction, but it’s not enough to make PE a viable source of rescue.
September 9, 2008
In a time when some other large cap players are feeling a stinging cold shoulder from edgy institutional LPs (see Madison Dearborn having to cut it’s cap on a new fund, or Blackstone getting a reduced effort from Calstrs for it’s new effort), TPG has amassed a mighty impressive chunk of change to take advantage of opportunities in the currently depressed markets.
TPG plans to use the new fund to invest in a variety of targets, including Asian assets, distressed banks and corporate takeovers.
August 21, 2008
According to Standard and Poor’s cash-rich Private Equity firms are expected to continue to buy up leveraged loans at a high pace. Leading firms such as Apollo (who’s raising up to £1.1B to buy badly performing loans from European banks), Blackstone (who bought GSO Capital earlier this year), TPG (which has raised a distressed credit fund), Cinven (which recently acquired half of debt advisory and management firm Indicus Advisors), Carlyle (which closed it’s second distressed fund of $1.35B earlier this year) and others have gotten into the game recently at a much greater level than in the past.
After the credit crunch hit last year, the banks were left holding more than $200B of “hung” leveraged loans, which they underwrote on generous terms during the debt boom, and no where to move them. Enter the private equity firms with many fresh off of fundraisings to take the debt off the bank’s hands. However, not everyone (particularly John Moulton of Alchemy Partners), is under the mindset that this is a match made in heaven. Amongst his reasons he points to the limited possibility of returns if a firm uses a fund designated for buyouts to buy up debt as any gain would be capped versus the unlimited upside return potential of equity. Time will tell!