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Legal Shield for the Gun Industry Is Starting to Crack; Franklin Templeton Rises as Private-Markets Investor
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Good day and welcome to WSJ Pro Bankruptcy's Daily Briefing. It's Monday, April 15. In today's briefing, the gun industry faces a growing threat of civil liability over gun violence despite a federal law intended to shield manufacturers from costly lawsuits. And asset manager Franklin Templeton, long known as a big investor in stocks and bonds, has quietly become a major force in private markets through a string of acquisitions.
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The gun industry’s exposure to negligence and public-nuisance lawsuits was once assumed to be largely settled. PHOTO: LUIS SANTANA/ZUMA PRESS
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Gun industry faces a growing threat of civil liability. Mexico's government is pursuing billions of dollars in damages from gun companies for allegedly arming cartels. Eight Democratic-led states have enacted laws making it easier to bring civil lawsuits against gun makers. And courts are weighing several lawsuits brought by families of mass-shooting victims.
The gun industry’s exposure to negligence and public-nuisance lawsuits was once assumed to be largely settled. Now, the issue looks destined for Supreme Court review.
In 2005, gun industry lobbyists persuaded a Republican-led Congress to pass a statute giving dealers, distributors and manufacturers broad immunity from a torrent of tort litigation.
Gun-control advocates and trial lawyers have spent years refining their legal theories and lobbying for new state laws to get around the federal statute’s constraints.
The firearms industry says gun-control activists are defying Congress’s intent when it enacted the immunity law.
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Private-markets firms have found advantages in selling themselves to traditional asset managers such as Franklin. PHOTO: ALAMY
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Franklin Templeton turns toward private investing. The 77-year-old asset manager, which made its name marketing mutual funds for individual investors, now manages more than $260 billion in so-called alternative assets such as private credit—thanks to a recent spate of acquisitions.
In just the past five years, Franklin acquired private-credit manager Benefit Street Partners; private real-estate investment firm Clarion Partners—as part of a deal for asset manager Legg Mason; Lexington Partners, a major player in the business of buying stakes in private-equity funds; and European credit manager Alcentra. Alternatives accounted for 18% of assets and 25% of management fees as of the end of last year.
The firm needs to pivot.
The actively managed funds that were the bread and butter of Franklin and other traditional asset managers underperformed the broader market during the recovery from the 2008-09 financial crisis and began to lose favor with investors who gravitated instead toward cheaper index and exchange-traded funds that passively track the market.
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Brightwood Capital faces lawsuit over continuation fund. The private-credit lender to small and midsize businesses faces a legal challenge over a roughly $253 million continuation-fund deal set up with Banner Ridge Partners involving several Brightwood funds.
New York-based Banner Ridge, a specialist credit investor, sued Brightwood earlier this month alleging that the fund sponsor had reneged on an agreement last year that called for Banner Ridge to acquire secondhand stakes in several Brightwood private-credit funds for as much as $253.5 million.
The deal was set up to let investors in aging Brightwood funds either cash out of their commitments or roll into the new continuation vehicle in which Banner Ridge was to be the anchor investor. The deal also called for a reset in management and incentive fees.
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KKR looks to Japan to boost its growth. Around 40 years ago, KKR pioneered the buyout movement by carving out subsidiaries of U.S. conglomerates. Now the asset manager is finding similar opportunities in Japan.
The New York-based asset manager said it sees the Asia-Pacific region as vital to its goal of doubling its assets under management from $553 billion at the end of December to more than $1 trillion in the next five years. The firm has chosen Japan as its main market in the region, partly because of the many opportunities it sees to buy businesses at bargain prices, KKR executives said Wednesday during the firm’s annual meeting with investors in New York.
The country accounted for 39% of the $47 billion the firm has invested across the Asia-Pacific region since 2005, followed by India and Australia with 17% each, the firm said.
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DANA SMITH; GETTY IMAGES (7), ADOBE STOCK
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Inside Amazon’s push to crack Trader Joe’s—and dominate all. A part of Amazon’s success is a cutthroat culture where employees are incentivized to win to an unusual degree.
In 2006, Amazon founder and then Chief Executive Jeff Bezos attended a retail gala and panel in Manhattan. The event attracted largely the same guest list of clubby retail CEOs each year, such as the leaders of Macy’s, Saks Fifth Avenue and J. Crew. At the time Amazon had just a $19 billion market value. Most CEOs in the room didn’t think the company could upend apparel, where shoppers liked to touch merchandise and try it on.
David Jaffe, the former chair and CEO of Ascena Retail Group, the owner of Lane Bryant, and other brands, recalls spotting Bezos at the bar.
“What are you doing here?” he asked. Bezos’s answer made him raise his eyebrows.
“Your margin is my opportunity,” Jaffe recalls Bezos responding to him.
An Amazon spokesman said Bezos didn’t say that.
While ambitious, the company would make good on that. The guest list of attendees from that year—Linens ’n Things, Filene’s Basement, and Modell’s—now reads like a bankruptcy docket.
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Regulators seize Lincoln Savings & Loan. On April 13, 1989, real-estate company American Continental filed for Chapter 11 bankruptcy. Regulators seized its main subsidiary, Lincoln Savings & Loan Association, after discussions to sell the ailing thrift collapsed.
The collapse cost the U.S. government $2.6 billion—worth a lot more in today's money—making it the most expensive thrift failure in history.
American Continental Chairman Charles Keating would later face charges over the banks demise, which came to symbolize the broader savings-and-loan crisis. The financier served over four years in prison, though some charges were overturned. He died age 90 in 2014.
—WSJ Staff
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