News

UK BVCA private equity transparency rules gain acceptance from private equity



Thirty two buyout groups and fifty five portfolio companies have agreed to adopt and comply with the British Private Equity and Venture Capital Association’s (BVCA) voluntary ‘Guidelines for Disclosure and Transparency in Private Equity’. These portfolio companies have been identified or volunteered for review with ‘The Guidelines Monitoring Group’, a group set up by the BVCA to measure compliance of the guidelines.



The BVCA released guidelines in November last year to encourage members of their association to change reporting practices with the intension of being more transparent with the public. A monitoring group was set up in conjunction with the guidelines to report on member adherence to the voluntary reporting practices. Chairman of The Guidelines Monitoring Group, Sir Michael Rake announced that private equity is responding positively to the code. Some sovereign wealth funds with investments in the UK have also expressed interest in complying with the guidelines. A list of private equity signatories and those under review can be found at: http://www.walker-gmg.co.uk/



UNI Global Union believes the guidelines do not go far enough to address workers concerns for consultation, transparency and rights under international labour codes. Private equity will not sign up to a labour code for employees working in their portfolio companies.



To read more: http://www.ft.com/cms/s/0/705d6a50-5cc3-11dd-8d38-000077b07658.html







Toxic debt sold in fire sale indicates credit crisis is as bad as it was a year ago



US investment bank Merryl Lynch this week wrote down more debt indicating the continued affects of the credit crisis. Merryl has sold $US30 billion of collaterialised debt obligations (COD) at 78% discount. This form of toxic debt is said to be the reason for the sub-prime collapse and has been kept on balance sheets in the hope that it might improve. The fire sale by Merryl this week indicates that in fact the COD debt has got worse than the collapse a year ago.



‘CDOs are bundles of mortgages that in recent years were packaged up or "securitised" by investment banks such as Merrill and on-sold to banks and other investors who accepted the CDOs' AAA ratings without doing their own checking on the creditworthiness of the mortgages, many of which are now in default in the 20 per cent marked-down US property market.’ Andrew Main, business editor The Australian July 30. 2008



It is claimed today that many banks may follow suit, including Citi group, UBS and Lehmann brothers. Analysts say this could be the beginning of a new wave of huge markdowns. The flow on effect is expected to manifest in many forms.



To read more: http://www.theaustralian.news.com.au/story/0,25197,24098783-643,00.html





Japan to consider setting up a SWF



Troubled Japanese public pension fund begins to consider setting up a sovereign wealth fund (SWF).

Japan has the world’s largest public pension fund with over 150 trillion Yen in assets. The fund has not been performing well for a number of years and if it is left to continue in this way, the old age pension paid to Japanese citizens will have to be reduced. Last year the fund lost $47 billion.



The ruling Japanese Liberal Democratic Party is proposing the set up of a Japanese SWF as a solution to the problem. The majority of the funds are currently invested in safe Japanese government bonds which deliver a small return of approximately 1.6%. Politicians proposing the set of a Japanese SWF hope it could be an opportunity to investing in more creative assets to increase return and spark new momentum in the Tokyo stock market.



To read more: http://www.economist.com/finance/displaystory.cfm?story_id=11793172



KKR goes public



One of the largest private equity firms that made its money by taking companies private is now going to list publicly. KKR has decided to merge with one of its listed private equity funds and take the company to the New York stock market. The unusual listing will entail selling the shares of the newly formed company ‘KKR & Co. LP’ to an internal group consisting of the shareholders of the current private equity fund KKR Private Equity Investors (KPE), to KKR Executives, employees and saving some in reserve for future employee stock options.



The move to take KKR public is said to be a way of bailing out under performing European listed KKR Private Equity Investors. This company has been underperforming and in the last year posted a loss of 40%. KPE indicate there are two particularly badly performing businesses, one being ProSiebenSat.1 Media. UNI Global Union affiliates have been active in this company supporting workers who are ‘living out’ the affects of poor decisions made by private equity. The merge of the public and private KKR entities will dissolve KKR Private Equity Investors.



“The timing of the IPO suggests that KKR is not expecting a significant recovery in the buyout market any time soon,” Isabel Schauerte, an analyst with Celent, a Boston-based financial research and consulting firm, told Reuters.



To read more: http://www.reuters.com/article/innovationNews/idUSN2741395420080728