Remnant Of A Bygone Era.......

Nice due dilligence...... If an investors pumps money to "Pirate Equity" under such "favourable" terms they deserve to get ripped off...... The same is true for most of the hedge funds out there ( UPDATE via Naked Capitalsim : Hedge Funds Continuing to Take It on the Chin & Ospraie to Close Flagship Hedge Fund After 38% Loss ) ..... Lets´hope that not too much pension fund money is involved...... The mother of all pump & dumps is probably the Fortess IPO Plundered Fortress / Pump & Dump At Its Best . Enjoy!

Da kann man wohl getrost von ganz genauer Due Dilligence sprechen... Wer Pirate Equity unter solchen Bedingungen Geld in den Rachen wirft hat es verdient so abgezockt zu werden...... Gleiches kann fast ausnahmslos für die Gebührenstrukturen der Hedge Fonds behauptet werden ( Passendes Update viw Naked Capitalism Hedge Funds Continuing to Take It on the Chin &Ospraie to Close Flagship Hedge Fund After 38% Loss ). Bleibt zu hoffen das nicht zu viele Pensionskassen involviert sind.....Die Mutter aller Deals in Sachen Pirate Equity is vermutlich der Börsengang von Fortress gewesen ( siehe Plundered Fortress / Pump & Dump At Its Best ). Glückwunsch den Altaktionären!


You Must Remember This? KKR Hopes Not WSJ
Pitching its initial public offering of stock, KKR portrays itself as a kind of new, enlightened capitalist. Fourteen times throughout its SEC filing, KKR mentions plans to align its interests with potential shareholders. It gleefully contrasts itself to rival Blackstone Group, stressing how its partners won't be cashing out in the ostentatious style of Blackstone's founders . There's even a pledge to serve the environment and other "stakeholders" tied to the KKR ecosystem.

Then there's the KKR that the firm would prefer you forget: That it already has two publicly traded investment vehicles. They've both performed miserably and have needed restructuring. KKR has proposed rescuing one of them, KKR Private Equity Investors, by folding it into its parent. The shareholders of the other, KKR Financial Holdings LLC, known as KFN, are being left to fend for themselves.

KFN was forged in the credit-slinging days of 2004 and 2005, as a vehicle to invest in the mortgage-securities market. It was supposed to show that KKR could do more than just plain leveraged buyouts, an important step for building its resume as a public firm.

KFN didn't do much to buff that resume. Outside investors have put $2.4 billion into KFN since 2004. Its market cap is now just over half that. Admirably, its two founders and other partners personally injected $57 million when the company ran into credit-market trouble a year ago. Yet last April the company had to issue still more shares, priced below their own book value, to forestall credit problems.

Despite switching away from mortgages and into the healthier market for top-rated corporate debt, KFN still trades at $9.38 per share, a deep discount to its book value of $12.71 per share.
Perhaps one reason for that discount is investors' continued worries about KFN's fee structure, which looks like a remnant of a bygone era.

For example, KFN investors pay a 1.75% management fee based on the size of KFN's equity. This takes away an incentive for KKR to buy back stock, even though this seems an obvious path for a company trading at such a discount to book.

..... of the other, KKR Financial Holdings LLC, known as KFN, has no high-water-mark feature, a typical hedge-fund provision which keeps the funds from earning incentive fees until they completely make up any investor losses. Those incentive fees, which can award up to 25% of profits above a 2% quarterly hurdle rate, are paid quarterly, so managers just need to post a good three month's performance to cash in. Most hedge-fund managers need to hold things together for a year to get paid. During 2007, when KFN lost $100 million, its managers made incentive fees of $17.5 million

That's not all, because these executives are paid again for, well, doing their jobs. On top of the management fee, KFN compensates its own executives for legal, accounting, due diligence and other services "that outside professionals or outside consultants would otherwise perform."

No Kidding.... More Off Balance Sheet Vehicles For Citigroup

You really can´t make things up like the stuff you read and hear day in day out from Wall Street.

Es kommen fast täglich Sachen aus der Finanzwelt und besonders von der Wall Street bei denen man sich immer erstmal vergewissern muß ob nicht doch gerade der 1. April ist.

Thanks to Mike Calderon / Over The Edge Cartoons

While Citi teams up with KKR / FT
KKR and Citigroup are understood to have agreed to form an off-balance-sheet vehicle with about $5bn of equity and $10bn of debt to buy impaired loans, which could include some from Citi’s investment bank.

The joint venture brings together the private equity firm responsible for some of the biggest leveraged buyouts in the run-up to the credit crunch and the bank that agreed to finance many of those deals.

The vehicle could allow Citi to sell some leveraged buyout debt, which it has underwritten but is struggling to syndicate, as well as other troubled loans.

> "Could".... LOL! Conflict of interest...?

> "Könnte"....LOL! Interessenskonflikt......?

First Data Loans Delayed as KKR, Banks Keep Talking, People Say

It looks like the banks and investors have realised that they have gone too far. We can now take this cover "The trouble with private equity" and the men one step further...... Please click at the label to read more about the private equity mess.

Es sieht ganz so aus als wenn Banken und Investoren endlich realisiert haben das Sie heftigst überzogen haben. Ich denken wie können das Cover von "The trouble with private equity" erweitern und davon ausgehen das er sich jetzt auf dem "Abstieg" befindet.... Wenn Ihr mehr "schmutzige" Details zum Thema Private Equity lesen mächtet klickt bitte auf die Labels am Ende des Posts.

Sept. 12 (Bloomberg) -- Kohlberg Kravis Roberts & Co. may delay the sale of loans to fund its $26 billion buyout of First Data Corp. until at least next week after failing to agree on terms with its bankers, people with knowledge of the talks said.

KKR, the New York-based private-equity firm run by Henry Kravis, and banks led by Credit Suisse Group couldn't agree today on pricing or how much of the debt lenders will try to sell, said the people, who asked not to be identified because the negotiations are private.

As recently as April, buyout legend Henry Kravis proclaimed a "golden age" of private equity

The First Data sale is the biggest to be attempted since rising U.S. mortgage defaults triggered the highest leveraged buyout borrowing costs in four years. It's being watched by bankers and buyout firms as a gauge for how $320 billion in debt committed for pending LBOs may fare. The banks would have to hold the loans and bonds if they can't be sold to investors.

``The pricing environment in the credit markets reflects illiquidity and fear,'' said Peter Plaut, an analyst with Sanno Point Capital Management LLC, a New York-based hedge-fund manager. ``If First Data gets done, it will show a significant vote of confidence.''

KKR has other deals to finance after Greenwood Village, Colorado-based First Data, the largest processor of credit-card payments. The firm and TPG Inc. agreed in February to buy Dallas-based power producer TXU for $32 billion in the largest U.S. buyout. The acquisition, which has been approved by shareholders and regulators, is set to close by the end of December.

> If you read the details from the TXU deal it is no wonder that the banks are having trouble to unload this junk.

> Wenn man sich die Details des TXU Deals durchliest ist es nicht weiter verwunderlich das keiner diese waghalsigen Kredite aufnehmen möchte.

Investors Balk
Demand for LBO debt has evaporated. After buying a record $754 billion of leveraged loans this year, investors are balking at debt without covenants, or restrictions, that give them greater power over a company's finances. More than 50 deals have been abandoned or reworked.

KKR has yet to agree to terms that would give its banks confidence they can sell the loans to investors without making the acquisition potentially less profitable, the people said.

The two sides have discussed various structures, including adding a provision that dictates how much debt First Data can assume relative to earnings, people with knowledge of the negotiations said Sept. 10.

Marketwatch reports First Data LBO may be costly for banks involved
Even if the banks manage to sell all the loans, they will probably have to offer them at a discount to entice investors.

If the First Data loans are sold at 94 cents on the dollar, that would leave the banks with a loss of between three and four cents on the dollar. On a $14 billion loan deal, that translates to a loss of $420 million to $560 million.

Citigroup is particularly exposed to such problems, according to analysts.

Quote Prince CEO Citigroup just a few weeks ago The $1 Billion Break Up Fee & An Ignorant And Deaf CEO

“When the music stops, in terms of liquidity, things will be complicated. But as long as the music is playing, you’ve got to get up and dance. We’re still dancing".

The bank is a lead underwriter on five of the six largest leveraged loan pending, including debt to support the LBOs of BCE Inc. , TXU Corp. and Alltel Corp. according to Banc of America Securities. That's more than $70 billion worth of loans

> But they are not alone.....See this excellent table The Banks Behind The Biggest Buyouts

> Immerhin sind Sie nicht alleine...Hier eine erstklassige Übersicht The Banks Behind The Biggest Buyouts

Citigroup is also lead underwriter on three of the five largest pending high-yield bond deals, worth more than $20 billion, Banc of America Securities noted.

First Data is one of the last so-called covenant-lite deals. These types of loans, which give companies more leeway and creditors less power, have fallen out of favor in recent months.

Over the weekend, KKR agreed to add one covenant to the First Data debt, the Wall Street Journal reported on Tuesday. The company must now maintain a certain ratio of earnings, before interest, depreciation, tax and amortization (EBITDA) to senior debt, the newspaper explained.

However, that's not much of a concession, especially considering the LBO is already highly leveraged, KDP's Lee said.

This is just in from the FT Talks to start on TXU $45bn financing
Negotiations over the terms of the financing package for the $45bn buy-out of TXU, the Texas-based energy group, are set to begin after the purchase by US private equity groups KKR and TPG received final regulatory approval earlier than expected.

The banks funding the TXU takeover - Citigroup, Goldman Sachs, JPMorgan, Lehman Brothers and Morgan Stanley - are expected to push for the inclusion of covenants in $37bn of loan financing and higher interest payments to make the debt more palatable to investors. But the buy-out groups will be reluctant to make any concessions that could hurt returns. The bond portion, worth about $8bn, would be sold after the loans.

KKR Cancels $1.4 Billion Refinancing for Maxeda LBO

It is spreading.........No wonder KKR is rushing to file the IPO......

Der Anleihe/Kreditmarkt zeigt erste Zeichen von zurückkehrendem Risikobewußtsein....Kein Wunder das KKR so schnell wie möglich den eigenen Börsengang durchziehen will......

July 16 (Bloomberg) -- Kohlberg Kravis Roberts & Co. canceled 1 billion euros ($1.4 billion) of loans it was seeking for Dutch home-improvement retailer Maxeda BV, a person involved in the transaction said.

The deal is the third to be postponed or restructured by KKR in as many weeks as losses from the U.S. subprime mortgage rout reduce investor demand for risky debt. The New York-based buyout firm is trying to raise 9 billion pounds ($18 billion) this week to finance its takeover of Nottingham, England-based drugstore chain Alliance Boots Plc.

KKR abandoned the financing for Amsterdam-based Maxeda after failing to entice investors by cutting the price of the loans and offering covenants to limit borrowing, said the banker, who declined to be identified because the discussions are private.

``This tells you there's some nervousness out there,'' said Rob Jones, head of high-yield research at Barclays Capital in London.

Cut Costs
KKR had intended to use the loans to cut its financing costs for Maxeda, the biggest operator of home-improvement stores in the Benelux countries, following its LBO in 2004. The debt would have replaced 275 million euros of high-yield bonds and 523 million euros of pay-in-kind notes, which don't pay interest until maturity, with lower-rate senior loans.

London-based buyout firms Candover Investments Plc and Cinven Ltd. last week pulled their financing for publisher Springer Science+Business Media GmbH in Berlin, according to International Insider.

In leveraged buyouts, firms put up a little of their own money and borrow the rest, piling the debt onto the company being acquired

kkr/goldman spinning the txu deal as a "green deal"

read here more details on the deal/biggest buyout ever / hier mehr zum deal
http://immobilienblasen.blogspot.com/2007/02/next-biggest-buyout-everkkr-may-buy-txu.html

mhhhh, i´m having trouble giving goldman and kkr the "benefit of the doubt" that they have mutated to environmentalists. i look at this as an attempt to avoid the massive investments involved with the plan to build the coal power plants

irgendwie habe ich leichte probleme im zweifel für kkr und gs zu sein. mir scheint der gedanke das die beiden plötzlich zu umweltaktivisten mutiert sind zu abwegig. ich sehe es eher als versuch sich um die nötigen investitionen für die kohlekraftwerke zu drücken (über 10 mrd$)

"In 2006, TXU expects to invest $2.6 billion in capital expenditures, roughly 100 percent of expected net income, in order to improve reliability and customer service and meet the urgent and growing electricity needs of Texas. For 2006 through 2010, TXU plans to invest more than $17 billion in capital expenditures, more than 135 percent of expected net income"

it should be clear that when this investment plan stays in tact there would be almost no room for kkr to load up more debt to finance the usual "special dividend"..... and make the numbers/deal work

es sollte ziemlich klar sein das sich der deal nur rechnet wenn schnell hohe schulden aufgenommen werden können und die übliche "sonderdividende" ausgezahlt werden kann.

looks like the spin doctors have made a comeback......

die spin doctors feiern ein comeback......

but when the consequence of the takeover would be that more "green" power would be used and emissions could be avoided....i´m in danger of becoming a "private equity fan" :-)

but to be honest i think with this number in mind

"In 2000, North America had coal reserves of around 286 billion short tons, about 96 percent of which were located in the United States. North American coal reserves account for around 26 percent of total world coal reserves"

it is very hard to believe that the us would not tap into this massive resource. but there is always hope.....

wenn dieser übernahmewahn letztendlich dazu führt das mehr "grüne" energie und weniger emissionen produziert werden laufe ich am ende noch gefahr ein "private equity fan" zu werden... :-)

wenn man sich nüchtern betrachtet die riseigen kohlereserven der der usa und auch in texas ansieht beschleichen mich doch zwiefel ob dieses tatsächlich eintreffen wird. aber die hoffnung stirbt bekanntlich zuletzt......

In Big Buyout, Utility to Limit New Coal Plants / NYT

Under a proposed $45 billion buyout by a team of private equity firms, the TXU Corporation, a Texas utility that has long been the bane of environmental groups, will abandon plans to build 8 of 11 coal plants and commit to a broad menu of environmental measures....


The roster of commitments came through an unusual process in which the equity firms asked two prominent environmental groups what measures could be taken to win their support. The result is an about-face from the company’s earlier approach to climate-change issues, and includes a goal of returning the carbon-dioxide emissions by TXU to 1990 levels by 2020.




Environmental groups said yesterday that they had never known of a financial deal with such an ambitious built-in environmental component.

Two private equity firms, Kohlberg Kravis Roberts & Company and the Texas Pacific Group, have proposed to buy TXU in what would become the largest leveraged buyout ever.


The transaction will be put to the TXU board for a vote on Sunday.

People involved in the negotiations said that
Goldman Sachs, an adviser and lender to the buyers, helped broker peace with environmental groups and sought their support for the transaction. Goldman Sachs has been one of the most aggressive firms on Wall Street about taking action on climate change; the company sends its bankers home at night in hybrid limousines. ( i think we can expand this cartoon to other sectors as well / real estate, investmentbanks, pe etc / denke diesen cartoon kann man locker auf andere branchen wie die immobilienbranche, investmentbanken, pe etc.

For the investor groups, the effort was as much about making a sound business decision to ensure the deal’s completion as it was about any environmental concerns.

By bringing the environmental groups into the process, the buyers may have helped avert years of costly litigation over emissions from their plants. But they may also have raised new questions about how they will meet the energy needs that TXU intended to address by building all 11 plants; the company is said to be examining ways to expand in cleaner forms of energy......

“We have history’s largest purchase of a power company, with the new owners wanting to move the company in a direction that is consistent with a world that takes global warming seriously,” said David Hawkins of the Natural Resources Defense Council, ....

The commitments come at a time of uncertainty for utilities that are considering building coal-fired plants. They do not know if such plants will be grandfathered by Congress and excluded from future restrictions on carbon-dioxide emissions, or whether anything they build now will have to operate in a starkly different regulatory environment. (watch the deposits and i´ll bet that lobbyist are working overtime to exclude coal from the emisions.....bei den massiven vorkommen sind die lobbyisten sicher hart am arbeiten um für kohle ne sonderregelung zu finden)


TXU (or better kkr thats the 10q filing from txu in november http://biz.yahoo.com/e/061109/txu10-q.html / wohl eher kkr. lest das txu filing vom novmber) will discard plans to build eight of 11 proposed new coal plants, which would have been major new sources of emissions. Those plants — which would have added more than 9,000 megawatts of new capacity, the equivalent of 3.5 percent of the nation’s current coal-fired power — had been part of a planned $10 billion expansion of coal-fired electricity.

TXU, which is based in Dallas, also intends to expand the renewable energy portion of its portfolio and reduce or offset its emissions significantly, said people who were familiar with the plans. .......

.... Natural Resources Defense Council, said that the investment team was essentially asking “what would it take” to gain environmentalists’ support.

But people familiar with the investors’ thinking took pains to say that the investors brought the measures to the environmental groups, and were not acting out of any fear of the groups’ potential to wage a legal and public-relations campaign against them.

but lets hope that in the end "mother earth" can benefit ....

bleibt zu hoffen das die umwelt unterm strich davon profitieren kann