The IUF's Private Equity Buyout Watch

Locusts into…Horticulture? PE to Buy into Indian Roses, Food

Wed, 02 Jul 2008 13:51:32 +0000

Karuturi, India's largest floriculture company and the world's largest rose grower (580 million stems annually, mainly for export to Europe), is seeking to sell a 10-15% stake in its Ethiopian subsidiary to private equity in order to finance further expansion of its food and floriculture operations. Karuturi has acquired 40,000 hectares of farmland in Ethiopia where it plans to expand its food processing operations for export (rice, vegetables, palm oil, sugarcane and gherkins). With an infusion of pe cash, the company also hopes to expand in Ecuador and Colombia.

Ethiopia, with cheap land and labour, has become a magnet for capital investing in the cut flower industry. Air freight to Europe is approximately half the rate of that from India, where cut flower cultivation has been expanding rapidly. Karuturi became number one globally in roses when it acquired the Dutch floriculture company. Another Indian flower company, Sher Agencies, recently acquired Mauritius-based Globeagro Holdings, which owns three Ethiopian companies employing some 1,000 workers: Alliance Flowers Plc, Holetta Roses PLc, and Oromia Wonders Plc.

SEIU Targets Buyout Fund KKR for Global Action

Wed, 02 Jul 2008 13:29:44 +0000

Massive use of high-risk debt, aggressive restructuring, asset stripping, "quick flips" and the systematic exploitation of tax loopholes (many of which their lobbying efforts have inspired) - these are the tools behind the enormous profits raked in by private equity, or leveraged buyout funds. Workers, public revenue and the public interest generally are the big losers in these financial engineering operations. One of the oldest and biggest of the funds is the US-based KKR - Kohlberg, Kravis, Roberts & Company - the "barbarians at the gate" behind the USD 31 billion buyout of RJR Nabisco which effectively destroyed the company and led to the loss of an estimated 40,000 union jobs.

IUF at ILO Highlights Role of Financial Speculation in Food Price Crisis

Thu, 26 Jun 2008 12:51:13 +0000

As part of this year's International Labour Conference, which included the first discussion in 20 years on rural employment issues, the ILO on June 11 convened a “High-Level Panel on the Food Crisis, Production, Investment and Decent Work”. Speaking on the panel, IUF general secretary highlighted the impact of recent investment flows into commodity markets in helping fuel the hyperinflation in the price of basic food staples which has provoked global hunger riots. "While international agencies have suddenly discovered underinvestment, investment in commodity indexes has climbed from US$13-billion in 2003 to $260-billion in March 2008 - and according to some analysts may soon hit a trillion US dollars. Yet the FAO briefing paper for the Rome summit devoted a dismissive two paragraphs to the phenomenon in its 'assessment of recent developments', and nothing in its concluding 'policy options'. Private equity and hedge funds - investors focused on short-term, high-yield gains - have been expanding beyond futures markets and are now pouring billions into acquiring farmland, inputs and infrastructure. The real world has been left behind - and with it production, investment and decent work. The real issue is what kind of investment, what kind of production, and who benefits."

For the full IUF presentation (also available French, German, Japanese, Spanish and Swedish) click here.

Slash and Burn Sun Capital Extends Reach in Produce, Coffee, Restaurants

Thu, 26 Jun 2008 12:47:59 +0000

Private equity fund Sun Capital Partners on June 24 acquired Sunrise Growers-Frozsun Foods, the largest US producer of frozen strawberries and a leading distributor of fresh strawberries and other produce.

No Deleveraging in PE Buyouts: New Study Points to Rising Debt, Rising Risk of Default

Sat, 07 Jun 2008 15:52:42 +0000

According to a new report by Standard & Poor's, the "deleveraging" expected in the wake of the credit crunch has not only failed to materialize, but debt levels in private equity buyouts in Europe have actually risen, heightening the risk of default. The head of research at Standard & Poor's, who have released a new study, told the Financial Times on June 5: "In the current market where the availability of debt has declined and business prospects are deteriorating, you would expect deals would get more conservative."

According to the study, however, in private equity buyouts between €250-500 million, leverage has actually substantially risen. In the first quarter of 2008, debt to cash flow multiples rose to 6.8, as against an average of 5.8 for 2007. Purchase prices multiples also increased to 10.4 times EBIDTA compared with an average 8.7 last year. Cash available to companies taken private through leveraged buyouts for paying off their debt has fallen to 2.2 times their debt levels, compared with 2.5 in 2007 and 4 in 2003.

The conclusion? "Record levels of leverage in deals, rising purchase price multiples and the falling ratio of cash that companies have available to cover debt will make it harder for them to repay their loans and put pressure on default rates."

A convenient survey of recent US pe-banked bankruptcies can be found here. Among the pe-owned companies in the IUF sectors in the US which have recently filed for bankruptcy are the restaurant chains Vicorp Restaurants Inc., which will be closing 56 Village Inn and Bakers Square Restaurants, and Buffets Inc., the largest national steak restaurant chain. According to the report, the cookie maker Mrs. Fields Famous Brands is preparing to file for bankruptcy soon.

Financializing Food: Deregulation, Commodity Markets and the Rising Cost of Food

Sat, 07 Jun 2008 15:04:09 +0000

Deregulation and the systematic exploitation of US regulatory loopholes have facilitated a recent surge in speculative investment in commodity markets, much of it by institutional investors including pension funds. The influx is one of the driving forces behind the hyperinflation of basic food staples.

Lion Capital Picks Up Russia's Biggest Vodka Maker

Mon, 26 May 2008 14:35:23 +0000

Buyout fund Lion Capital has followed its August 2007 USD 500 million purchase of Russian juice drinks company Nidan Soki with the acquisition of a majority stake in the Russian Alcohol Group, the country's largest producer of vodka and ready-to-drink (RTD) alcoholic beverages. Russian Alcohol's Green Mark vodka is the largest brand by volume in Russia and one of the top 5 global brands.

Socialist Group in European Parliament Links Financial Crisis to Soaring Food Prices

Fri, 23 May 2008 12:35:12 +0000

The Socialist Group in the European Parliament has highlighted the crucial role of financial markets in stimulating the hyperinflation of global food prices and called for urgent action by regulatory authorities. The group tabled three amendments to a motion on EU action to deal with food price inflation.

"The food crisis is closely linked to the financial crisis", said Hannes Swoboda, vice-president of the Group. "It is outrageous that some banks are inviting their clients to speculate on rising food prices. One of our amendments calls for a Europe-wide ban on such speculation. We also want the European Commission to examine the powers of national supervisory bodies to ensure that they can guarantee stable and secure markets and that speculation does not violate the right to food."

More information and a link to the text of the motion are available here.

New SEIU Report on Sovereign Wealth Funds Highlights Need for New Regulation

Tue, 06 May 2008 06:08:06 +0000

The SEIU has released a new report on Sovereign Wealth Funds to highlight glaring gaps in the rules for assessing foreign investments in U.S. companies, which continue to depend principally on voluntary disclosure. As the report points out, these regulations were largely designed to address foreign entities taking a direct ownership interest in domestic assets, and therefore faile to address the indirect ownership structures that characterize private equity.

The report is available online at www.behindthebuyouts.org.

Sovereign Wealth Funds and Private Equity

Tue, 06 May 2008 05:35:20 +0000

Sovereign Wealth Funds (SWF) – state-owned, state-run investment entities– have begun to generate controversy and debate as they have recently emerged as significant global financial players. SWFs have recently taken large stakes in public stock exchanges, major manufacturing, service and infrastructure transnationals, and thrown a lifeline to private equity funds searching for "permanent money". This introductory briefing was prepared for the IUF Executive Committee, which met in Geneva April 17-18, 2008.

Global Credit Crisis? Record 2008 Fund Raising for PE Firms

Mon, 05 May 2008 17:43:46 +0000

Despite the global credit crisis, private equity firms have raised record amounts of cash so far this year - and that cash will be seeking outlets.

Locusts into Vultures 2: Funds in $12.5 Billion Debt Buyback Deal

Fri, 11 Apr 2008 15:32:56 +0000

Desperate to move off the books over USD 43 billion in leveraged loans - loans it couldn't securitize and unload when the global credit crisis hit - Citigroup has found the ideal buyer: the private equity firms whose buyouts generated the loans.

IUF at the European Parliament Highlights Dangers, Risks of Private Equity Buyouts

Thu, 10 Apr 2008 09:28:57 +0000

The IUF gave evidence of the destructive impact of private equity buyouts at a public hearing on hedge funds and private equity organized by the European Parliament's Committee on Economic and Monetary Affairs in Brussels on April 8. In addition to describing the impact on jobs and working conditions, the IUF emphasized the dangers of high levels of LBO debt in the context of the current global economic crisis.

Night of the LBO Dead

Tue, 01 Apr 2008 15:44:48 +0000

Linguistic innovation has grown apace with financial creativity in recent years. "Covenant lite" has morphed into "zombie", the term for what a Financial Times article of March 25 described as "companies with unsustainable financial structures but no triggers for the banks to force them to renegotiate."

The Debenhams Deal: Autopsy of a Quick Flip

Tue, 01 Apr 2008 13:17:20 +0000

In 2003, Debenhams, a department store chain with 142 units in the UK and Ireland, was taken private by three private equity funds: CVC, TPG and Merrill Lynch Private Equity.