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A Covid-19 Capital Call Spike | PE's Oil Price Hedging | Movie-Seat Maker Bows Out
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Good day! For years, general partners have dipped deep into the well of cheap debt to borrow money against their funds in the form of subscription lines of credit. They were initially used to smooth what had always been a lumpy schedule of capital calls, but many firms quickly discovered that using them also boosted returns early in funds' lives. The use of subscription lines exploded in recent years, to the concern of some limited partners. But as long as debt flowed freely and the economy kept chugging along, few folks seemed overly worried that the party would end.
Now that deal-making seems to have come to a halt as the world tries to contain the damage from this terrible pandemic, some private-equity firms are finally coming to collect the bill.
Unfortunately, they’re doing it at the same time. As Preeti Singh writes this morning, one public pension system in California has received capital calls from three firms looking to reduce or retire fund subscription lines in the past two weeks alone. Granted, it may not be a stampede, but it’s not exactly a slow, orderly stroll to the exits, either.
Also in this morning’s news, Luis Garcia outlines how oil price hedges could help some private-equity investors in the energy patch, at least temporarily. And WSJ Pro Bankruptcy’s Becky Yerak has news of a private-equity-backed movie-seat maker that is folding for good.
Now on to today's news...
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Caption: Private-equity firms are retiring or reducing fund subscription lines of credit resulting in an upswing in capital calls for one California public pension. Credit: © Fotostand / Schmitt/DPA via ZUMA Press
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Private-equity firms have come to collect from one California pension system as they look to manage risks associated with the fallout from the coronavirus pandemic, as WSJ Pro Private Equity's Preeti Singh writes. Molly Murphy, chief investment officer at the Orange County Employees Retirement System, said during an investment committee meeting last week that the $17.8 billion pension fund received three capital calls in the last two weeks from general partners looking to reduce or close their fund subscription lines.
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Energy-focused private-equity firms that rely on financial hedges to protect their portfolio companies against a prolonged oil-price slump are running against time, WSJ Pro Private Equity’s Luis Garcia reports. These firms hope oil prices will recover to profitable levels before their current hedges expire because they could find it harder to lock in higher prices once again. Private equity-backed energy companies often use a hedging strategy to lock in prices on future output and avoid the risks stemming from a market collapse.
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Private-equity backed VIP Cinema Holdings Inc., which makes reclining seats for movie theaters, is shutting down for good after economic fallout from the coronavirus pandemic made a proposed restructuring impossible, Becky Yerak reports for WSJ Pro Bankruptcy, citing people familiar with the matter. The private-equity backed business had filed for chapter 11 in U.S. Bankruptcy Court in Wilmington, Del., in February but hoped to emerge with about $150 million less debt under a restructuring proposal backed by Oaktree Capital Management.
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$98.94 Billion
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The combined amount drawn from credit lines by some consumer-facing companies in recent weeks, as they look to weather the coronavirus pandemic, according to data from LCD, a unit of S&P Global Intelligence
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Daniel Ramot co-founded Via Transportation, which operates on-demand vans in cities including Seattle. PHOTO: CATE DINGLEY/BLOOMBERG NEWS
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Exor NV, the holding company of Italy’s Agnelli family, is investing in ride-share company Via Transportation Inc. that would mark its first big foray into the technology sector, Cara Lombardo writes for The Wall Street Journal. Exor said Monday it is investing $200 million in New York-based Via. The investment would give Exor just under a 9% stake in Via and would value Via at $2.25 billion. Via had last been valued at roughly $1 billion in late 2017, according to Pitchbook.
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Morgan Stanley Infrastructure Partners has acquired outsourced water treatment and wastewater treatment provider Seven Seas Water, according to a press release. The company was previously owned by publicly traded AquaVenture Holdings Limited, which was acquired by Culligan on the same day.
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Palm Beach Capital Management has invested in convenience-store supplier Allen Brothers Wholesale Distributors, based in Philadelphia. With the investment, through its third fund, the West Palm Beach, Fla.-based firm created National Convenience Distributors LLC with Allen and co-portfolio companies J. Polep Distribution Services and Harold Levinson Associates as independent operating divisions. Collectively, the group has annual revenues of about $3 billion serving stores mainly in the U.S. Northeast.
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Middle-market focused private-equity firm Calera Capital has acquired maintenance services provider Thayer Power & Communication, investing alongside management. The Pataskala, Ohio-based company serves the utility and telecommunications industries.
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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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Gemspring Capital has secured $750 million for deals in the lower midmarket, the firm said Monday. The sum is a significant step up in size for the Westport, Conn., firm, which closed its first vehicle on $350 million in 2016. All investors in the first fund also committed to the second fund, the firm said.
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CapitalSpring, an investment firm focused exclusively on the restaurant industry, has raised $40 million so far for CapitalSpring Investment Partners VI LP, according to a regulatory filing. The money came from a single investor, the filing indicates. The firm, which has offices in New York, Los Angeles and Nashville, Tenn., offers both equity and debt investments and typically targets investments ranging from $10 million to $100 million in size, according to its website.
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Ares Management said Sumitomo Mitsui Financial Group and Sumitomo Mitsui Banking Corp. have agreed to invest $384 million in the Los Angeles-based private-equity firm in exchange for Class A shares, giving it a 4.9% stake in the publicly traded firm. The Japanese group also agreed to market Ares products to its clients, with a particular focus on private credit. Following the transaction, Ares founders and employees will hold a 61% stake in the firm.
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Blackstone Group Inc.’s shale driller Gavilan Resources LLC is preparing a potential bankruptcy filing over the plunge in commodity prices and an unresolved dispute with Sanchez Energy Corp., Alexander Gladstone and Andrew Scurria report for WSJ Pro Bankruptcy, citing people familiar with the matter.
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A plan by the Securities and Exchange Commission to expand the universe of investors accredited to invest in alternative investments such as private equity, venture capital, and hedge funds could be finalized this year, Leslie P. Norton reports for sister publication Barron’s. In December, the SEC proposed amendments to the definition of "accredited investor" in order "to update and improve" it and "to identify more effectively institutional and individual investors” that don’t need additional protections afforded to most individual investors. The comment period for the SEC action ends on April 24.
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Tegna says two potential buyers have abandoned takeover talks amid the market dislocation spurred by the coronavirus pandemic, Colin Kelleher writes for Dow Jones Newswires. The broadcaster says it received four unsolicited acquisition proposals in recent weeks and that it held substantial talks with two of the bidders and provided them with extensive nonpublic due-diligence information. But those proposals landed before the market chaos sparked by the pandemic, and the bidders have ended talks, Tegna says, adding that the others haven't signed confidentiality agreements or delivered any financing information. Apollo Global Management, Gray Television, budding media mogul Byron Allen, and a team of private-equity firm Najafi Cos. and religious broadcaster Trinity Broadcasting Network are all thought to
have made $20 per share bids for Tegna, which says it's still willing "to consider transactions that create compelling value."
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