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Tailwater Raises $1.1 Billion | Add Bonus Cuts to Virus Fallout | Congress Weighs Stimulus Package
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Good Thursday morning. This may not seem the time for thinking about it, but if Alan Johnson’s forecast holds true there may be a lot of private-equity professionals looking harder to find the cheer this coming holiday season. He’s talking 30% to 40% cuts in annual bonuses for financial firms, including private equity, mainly because of the coronavirus contagion.
Private-equity firms also have little reason for warming to the coronavirus-driven $2 trillion economic stimulus measure that as of this writing remained on the floor in the U.S. Senate. As our Chris Cumming reports, much of the package aimed at helping businesses may not be available to PE-owned companies. But as our Luis Garcia reports, at least one acquisitive firm sees opportunity in slumping oil prices as virus-related travel restrictions crimp demand.
Mr. Johnson also said the pandemic may finally make Wall Street shed its penchant for 1960s-style in-person, in-the-huddle ways of working. The pandemic could mark an inflection point in the Street’s culture.
We have all this and more below, so please dive in...
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Senate Majority Leader Mitch McConnell (R, Ky.) was all smiles as he left the Senate chamber where lawmakers Wednesday were expected to reach a deal on a roughly $2 trillion stimulus package to offset the economic effects of the coronavirus. PHOTO: ANDREW HARNIK/ASSOCIATED PRESS
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Private-equity firms may find it a challenge to get access to the stimulus funds intended to soften the economic blow of the coronavirus pandemic, WSJ Pro Private Equity’s Chris Cumming reports. The Senate has approved a stimulus package worth about $2 trillion, which the Trump administration has indicated it supports. Many details remain unresolved, however. The full text of the stimulus bill hasn’t been released, and any measure the Republican-led Senate passes also must win support in the House of Representatives, where
Democrats hold sway.
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Private-equity firms and the rest of Wall Street could see a 30% to 40% drop in bonuses as the coronavirus bites into everything from asset values to deal flow, a compensation consultant forecast on Wednesday, WSJ Pro Private Equity’s Ted Bunker reports. “The virus is heading us toward a nasty recession,” said Alan Johnson, managing director of Johnson Associates in New York. His firm predicted banks, brokers and asset managers would slash bonuses for the current year, following a mixed performance in 2019, when private-equity firms held bonuses level or paid increases of as much as 5% compared with 2018.
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Tailwater Capital has raised $1.1 billion for its latest energy-infrastructure fund while a coronavirus-driven price slump could force sales of assets such as pipelines and oil field-gathering systems. The Dallas-based private-equity firm closed its largest investment pool so far, Tailwater Energy Fund IV LP, in mid-February with about $970 million in capital and $130 million in co-investment commitments, Jason Downie, a Tailwater co-founder and managing partner, told WSJ Pro Private Equity’s Luis Garcia. About 100 investors backed the fund.
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-40%
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The proportion by which Wall Street bonuses for this year could drop, thanks mainly to the repercussions of the coronavirus outbreak, according to Johnson Associates, a compensation consulting firm
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VMG Health, which offers valuation and transaction services for the health-care industry, was sold to Northlane Capital Partners. Photo: John Amis, Associated Press
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Quad-C Management said it has sold portfolio company VMG Health to fellow private-equity firm Northlane Capital Partners. VMG Health provides valuation and transaction advisory services for the health-care industry. Quad-C first invested in the company in 2015.
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Insight Partners led a $30 million funding round to provide growth capital for Espressive Inc., investing alongside earlier backers that include General Catalyst Partners and Wing Venture Capital. The Santa Clara, Calif.-based company develops digital systems designed with artificial intelligence technology that help resolve employee questions regarding workplace computers and networks.
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Our add-on deal interactive tool allows you to sort and analyze volumes of add-on deal data compiled by WSJ Pro. View more.
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New Jersey Division of Investment is reviewing a continuation plan by Excellere Partners after the death of its founder, David Kessenich, in January triggered a key person event for its $550 million 2017-vintage-year fund, Excellere Partners III LP. The New Jersey pension manager, which mentioned the review during a March meeting, previously had committed $50 million to the fund.
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IG4 Capital has raised $231.5 million in commitments for its new U.K.-based fund, Private Equity Fund II, to focus on investment opportunities in Latin America, a spokesperson for the firm confirmed. Reuters previously reported about the new fund. In total, IG4 Capital has accumulated about $500 million in assets under management between Private Equity Fund I (which controls Iguá Saneamento SA, one of the largest private water and sanitation companies in Brazil) and the new fund. IG4 has also raised additional co-investment commitments for a recently created IG4 Capital Infrastructure Investments platform in the U.K. that will target infrastructure and logistics assets in the Andean Region
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Carlyle Group has raised 258 billion yen ($2.3 billion) for its fourth Japanese buyout fund, more than doubling the size of its predecessor vehicle, which raised about $1 billion in 2015, Selin Bucak reports for sister publication Private Equity News in London. Carlyle Japan Partners IV will invest in upper-midmarket companies across the consumer, retail and health-care, general industries, and technology, media and telecom sectors. It will also pursue large-cap investments on an opportunistic basis, the Washington-based firm said
Wednesday.
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Carlyle Group named firm veterans Takaomi Tomioka and Hiryoku Otsuka as deputy heads of its Japan buyout advisory team. The pair will work alongside Kazuhiro Yamada, the leader of Carlyle Japan. Mr. Tomioka, who joined Carlyle from GE Equity Japan, a private-equity arm of General Electric Co., will focus on succession-related deals and midcap buyout deals. Mr. Otsuka, who previously worked for Sumitomo Bank and Lazard Ltd., will be responsible for corporate carve-outs and other large-cap buyout deals.
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Midmarket buyout firm Genstar Capital said it has promoted Rob Clark to director and Scott Niehaus to principal. Mr. Clark joined Genstar in 2015 and was promoted to principal in 2018, while Mr. Niehaus joined the firm in 2017.
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Publicly traded Onex Corp. said in a letter to shareholders that it has some 2.8 billion Canadian dollars ($1.96 billion) in cash and near cash available to help it weather through the turmoil caused by the coronavirus pandemic. The firm said that all of the 36 businesses it owns across its portfolio will be affected by the pandemic although no single investment accounted for more than 5% of the firm’s investing capital at year-end. Onex also said it has around C$1 billion invested in credit instruments, C$560 million of which was invested in the equity of collateralized loan obligations, or CLOs. Although the firm noted that the mark-to-market value of those loans is down markedly, it is not
pressured to sell any of them.
“Our CLOs do not have provisions forcing us to maintain mark-to-market coverage ratios, so market volatility does not cause a wind-up of the structure or acceleration of liabilities,” Onex Chief Executive Gerald Schwartz said in the letter. “We are confident that, in the fullness of time, our CLO equity will recover its value.”
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Europe’s banks were only halfway through cleaning up €1.2 trillion ($1.3 trillion) of loans that turned sour in the last crisis when disaster struck in the form of the new coronavirus, Patricia Kowsmann and Margot Patrick report for The Wall Street Journal. For the past six years, as Europe recovered from its sovereign-debt crisis, U.S. private-equity firms and fund managers went on a buying spree for as much as €600 billion in bad loans from capital-strapped banks. Now the market for nonperforming loans, or NPLs, is in disarray as investors brace for recession.
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Steven Rattner, a key adviser to President Barack Obama during the financial crisis and currently the head of Michael Bloomberg’s family office, Willett Advisors LLC, offered his advice regarding the coronavirus crisis response in an interview with The Wall Street Journal Tuesday. It is better to go too quickly and too heavily than to go too slowly and too tentatively, he said. While saving businesses is critical to our economy, we have to recognize the public backlash that occurred to the so-called bailouts in the Great Recession, so this time aid is likely to be more conditional as a political requirement.
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Banks that lend to small to medium-sized businesses are looking to add a baseline to Libor, the benchmark interest rate they make loans against, a move that would ensure the financial institutions a minimum income on the debt securities, Reuters reported. Banks are looking to add so-called Libor floors to their deals involving a revolving credit facility and term loan A, known as a pro-rata tranche, banking sources said. A standard floor for deals arranged by nonbank lenders, also known as private credit funds or direct lenders, in transactions for private equity-backed companies is 1%, two bankers said.
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