News

London G20 silent on private equity

The 2009 London G20 plan for ‘Recovery and Reform’ reported some favourable outcomes for regulation and supervision of financial markets. Hedge funds will be specifically targeted. However it did not go so far as to name private equity leveraged buyouts in the plan. There are statements making commitments to ‘prevent excessive leverage’ and ‘improving international consistency of capital’ however they are general in nature. UNI will continue to advocate to international regulators to include private equity leveraged buyouts in supervision and regulatory frameworks.



For a full copy of the London G20 declaration:

http://www.londonsummit.gov.uk/resources/en/PDF/final-communique





China’s huge state pension fund looks at private equity

At a time when most pension funds are reducing allocations to private equity, China is in a position to increase its allocation. This is a serious concern for the millions of Chinese who rely on the state pension to fund their retirement. Pension funds invested in private equity have seen investments plummet in the crisis. Leveraged buyout funds based on debt advantages can no longer meet debt repayments in the current environment. Pension funds are learning their lesson to be more diligent in researching investment allocations to private equity.

UNI Global Union’s advice to pension funds is to research contract commitments carefully before allocating funding. Pension funds should negotiate on fees paid to private equity firms. They should choose diligent fund managers to look for things like evidence of improvement and innovation. The UNI pension fund report on private equity should be consulted before allocating any funds to private equity. The report can be found at: http://www.uniglobalunion.org/UNIsite/In_Depth/PrivateEquity/PDF/PensionFunds-en.pdf

“China's national pension fund, the National Social Security Fund (NSSF), said it is looking for at least 3-5 private equity funds to help it manage part of its 563 billion yuan ($82 billion) portfolio.

The fund intends to reduce its bond exposure and buy more direct equity stakes.

"We will pick at least 3-5 private equity firms this year, focusing on investing in small and medium businesses and the service industry," Chairman Dai Xianglong said at the Boao Forum for Asia held in Hainan.

The NSSF is allowed by law to invest up to 20 percent of its assets in foreign markets but had only invested $1.66 billion outside of China as of the end of 2007.”

(China’s huge state pension fund eyes private equity, April 19 2009 Reuters)

Full story at: http://uk.reuters.com/article/privateEquity/idUKPEK32656720090419?sp=true





The current value of European private equity funds

The major private equity buyout firms operating in Europe have made huge losses on their funds. UNI Global Union affiliates represent workers interests in many of these funds/portfolio companies. Following are some of the big private equity firms invested in Europe who are making large losses.

“Guy Hands’ Terra Firma private equity house has emerged from the 2005-07 credit bubble as one of the worst performing European leveraged buy-out funds, according to year-end figures from investors in these funds.

Terra Firma has written down 70 per cent of the two investments in its 2006 fund: EMI, the music group, and Awas, the aircraft leasing company. But one investor marked down the latest Terra Firma fund by 79 per cent, suggesting it has written off almost all its investment in EMI.

Several of the world’s biggest private equity firms, including Terra Firma, Permira, Candover, Cognetas and Kohlberg Kravis Roberts, wrote down the value of their recent European funds by between 40 per cent and 70 per cent at the end of December.

Candover, Permira, KKR and Cognetas (the successor to Electra) had their funds marked down between 54 and 44 per cent. They have all taken heavy writedowns on portfolio companies bought using large amounts of debt during the credit bubble.”

(Funds write down European investments By Martin Arnold, Private Equity Correspondent. April 14 2009)

Full article:http://www.ft.com/cms/s/0/37952c56-2920-11de-bc5e-00144feabdc0,dwp_uuid=cf8c5ee0-aa15-11da-96ea-0000779e2340.html

EU legislation on Hedge Funds full of holes

A leaked copy of the European commission’s proposed legislation to regulate hedge funds and private equity appears to be full of loop holes. Poul Nyrup Rasmussen, president of the Party of European Socialists commented that it falls short of the demands of this month’s G20 summit in London. He thought it was “a scandal” that the European parliament had had to wait six months for the legislation, only to find it so inadequate, and said the hedge fund issue would be “central” to campaigning for June’s poll.



The leaked legislation includes:

· no distinction between private equity and hedge funds.

· plans to regulate managers of “alternative” funds, rather than the funds directly.

· managers of portfolios worth less than €250m ($323m, £222m) would enjoy a de minimis exemption from scrutiny.

· moves to improve transparency and address technical issues such as taxation and “naked” short-selling.



Mr Rasmussen said he had seen no signs of the Commission planning to make wholesale changes. This meant the leaked proposals might either be forced through with small adjustments or possibly postponed further if opposition grew.



The proposed legislation has not yet been formally published by the Commission. Officials say only that it was still being worked on. The official launch date was recently delayed until 29^th April 2009.



(EU draft rules for hedge funds attacked. By Nikki Tait in Brussels. April 20 2009)

Full article: http://www.ft.com/cms/s/0/ce034548-2df7-11de-9eba-00144feabdc0.html

Private equity on the prowl to invest in your company

Verizon Wireless - jointly owned by Vodafone Group Plc and Verizon Communications Inc. Blackstone Group LP and joint partners Carlyle Group and Kohlberg Kravis & Roberts & Co have made a bid for US based Verizon Wireless.

Skype - KKR, Warburg Pincus, Providence and Elevation Partners are backing founders of Skype, Niklas Zennstrom and Jannus Friis in a bid to repurchase the company they sold for $2.6 billion in 2005 to eBay.

Barclays - the banking group agreed to sell its iShares subsidiary to CVC Capital, the private equity group, for $4.2bn (£2.8bn, €3.2bn).