From the WSJ
New Century Financial Corp. is expected to make an announcement early Monday about the home-mortgage company's efforts to cope with a cutoff of credit from its lenders, people familiar with the situation said.
The company is widely expected to seek relief from creditors through a bankruptcy filing.
As mentioned here on March 12, this was inevitable with the warehouse lines cut off.
The WSJ takes an benign view of publicly traded buyout funds with a focus on foreign publicly traded management companies, primarily 3i (UK) and Onex (Canada). Still, the Blackstone structure provides weaker protection to public shareholders and is probably coming at close to a cyclical peak...we will see...
Full article here (registration required).
One of the largest of the publicly traded private-equity firms, London-based 3i Group PLC, says it is buying companies at a record clip. "We've been growing our investment levels and getting into new business lines," Chief Executive Philip Yea said in an interview. Being publicly traded enables 3i to use its own balance sheet to start new businesses quickly or buy minority stakes in other companies, he added.
Beginning as a government agency to finance start-ups in the aftermath of World War II, 3i dates back about 60 years and has had shares publicly traded since 1994. The company's shares are up 67% over the past two years on the London Stock Exchange. On Thursday, 3i said it will return an additional £800 million ($1.57 billion) to shareholders after windfall gains from selling companies it had taken over and restructured. On Friday, its shares closed at £11.36, down four pence.
"Their core business areas across buyouts, growth capital and venture capital continue to perform strongly," said Simon Haines, a fund manager at Threadneedle Investments, one of the largest 3i shareholders, with more than 3% of the company. The recent payment to shareholders "underlines their success."
Going public has several advantages for firms in an industry dominated by private partnerships. The ones that have made the leap say it can make them appear more reputable and enduring than rivals that operate funds that typically exist for no more than 10 years. It also can help them raise money from the stock market for a variety of uses, cash that is better suited to more long-term investments because it doesn't need to be paid back like money raised from institutional investors and the wealthy. (Blackstone and Fortress Investment Group LLC, a hedge fund and private-equity firm that recently went public, are selling stock in their management companies, not in the funds they use to buy companies, so public stockholders won't own a direct stake in the firms' buyouts.)
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Canada's Onex Corp. was founded in 1984 with money from rich individuals and institutions. Three years later, Gerald Schwartz, the former Wall Street banker and founder of Onex, realized a permanent pile of capital was needed to fund his long-term acquisition ambitions as private-equity shops specializing in leveraged buyouts were still a novelty to Canadian investors. Going public has produced "a very steady and regularly increasing amount of capital for us to invest," said Mr. Schwartz, Onex's chief executive.
Since raising 240 million Canadian dollars (US$207.9 million) in its 1987 initial public offering on the Toronto Stock Exchange, Onex now has C$4 billion in capital, which it invests along with private money it raises from outside investors, known as limited partners. In total, it has C$7.5 billion in assets under management and has made some high-profile acquisitions. The firm is part of a consortium that recently launched a buyout offer for Australia's Quantas Airways.
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Onex shares have climbed an average of 18% each year since it went public. Friday, Onex shares closed down 1.4%, or 44 Canadian cents, to C$32.06, up about 13% this year.
There will more of this coming as things turn negative. This is also, in some ways, a response to the heads I win, tails you lose attitude some hedge funds have had towards their LPs. From Bloomberg
March 30 (Bloomberg) -- Amaranth Advisors LLC was sued by the San Diego County retirement fund for securities fraud, a step the hedge-fund firm said may delay refunds to clients hurt when it collapsed under $6.6 billion in losses in September.
Amaranth lied about trading strategies and made ``excessively risky and volatile investments,'' according to a complaint filed yesterday by the San Diego County Employees Retirement Association. Amaranth said fighting the lawsuit, the first tied to the largest-ever hedge-fund failure, will drain remaining assets earmarked for investors.
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The San Diego fund accuses Amaranth of defrauding clients by misrepresenting itself as a fund that invested in many different assets, according to the complaint.
``The fund, against its own espoused investment policies, effectively operated as a single-strategy natural-gas fund that took very large and highly leveraged gambles and recklessly failed to apply even basic risk-management techniques and controls,'' the complaint says.
I wonder when the Fed will admit the same!
The Bank of England deliberately stoked the consumer boom that has led to record house prices and personal debt in order to avert a recession, the former Bank Governor Eddie George admitted yesterday.
Lord George said he and his colleagues on the Monetary Policy Committee "did not have much of a choice" as they battled to prevent the UK being dragged into a worldwide economic slump by slashing interest rates. And he said his legacy to the current MPC was to "sort out" the problems he had caused.
Lord George, who headed the Bank for a decade from 1993, revealed to MPs on the Treasury Select Committee that he knew the approach was not sustainable. "In the environment of global economic weakness at the beginning of this decade... external demand was declining and related to that, business investment was declining," he said. "We only had two alternative ways of sustaining demand and keeping the economy moving forward - one was public spending and the other was consumption.
"We knew that we were having to stimulate consumer spending. We knew we had pushed it up to levels which couldn't possibly be sustained into the medium and long term. But for the time being, if we had not done that, the UK economy would have gone into recession just as the United States did."
He said he was "very conscious" that stimulating consumer demand could give rise to problems in the future. "My legacy to the MPC, if you like, has been 'sort that out'," he said. Under Lord George's governorship, rates were slashed from 6 per cent in 2001 to 3.5 per cent in 2003, pushing house price inflation above 25 per cent and high street spending growth to its highest since the late-Eighties boom.
Full article from the Independent