The IUF secretariat has now published a A Workers' Guide to Private Equity, a 36 page A5 brochure, aimed at IUF affiliates and trade unions and their members around the world. It is available in English, French, German, Spanish and Swedish. Click here for more details and to order your copies.According to leveraged finance specialists gathered at the November 26 Debt Brief Europe conference in London (keynote theme: "Who will finance future deals?"), up to half of the companies taken private in the past three years face potentially serious problems with continuing to finance their debt.
Continue reading "Leveraged Loan Bankers Say 50% of Companies on the Edge" »
Until very recently public and private employee pension funds were loading up on private equity in a relentless drive for above-market returns.
Continue reading "Investors Fleeing Credit Meltdown Selling Stakes in Buyout Funds" »
US private equity funds fleeing a dismal buyout scene with piles of uninvested cash have received a shot in the arm from regulatory changes enacted on November 28 which could feed their appetite for acquiring banks. Investment funds were previously limited by federal regulations to a 25% stake in banks but were prevented from owning them. Now the US Office of the Comptroller of the Currency (OCC) has skirted this by creating a "shelf charter" which would permit non-bank investors to form a bank holding company to become eligible for bidding on a full ownership stake in failing banks. The funds, after acquiring all the stock, could then run the banks the way they run their portfolio companies - with no shareholders to stand in the way.
While the OCC's head counsel declared that "Not just anybody can come in and get a charter", one investment group - Hilltop Holdings, backed by three private equity funds - has already received the first charter.
The IUF and two Norwegian affiliates, the General Workers' Union Fellesforbundet and the Food and Allied Workers' union NNN, have publicly called on Norway's State Pension Fund to maintain existing restrictions on investing in private equity and hedge funds. The government fund, Norway's oil-funded sovereign wealth fund with some USD 300 billion in assets, does not currently invest in either private equity or hedge funds but maintains an ongoing discussion with regard to new investment classes. The fund is regarded as a standard-setter with regard to ethical investment, having disinvested from Wal-Mart (2006) in response to the company's record of labour and human rights violations, and more recently from mining giant Rio Tinto in response to the company's environmental destruction in Indonesia.
The letter, signed by the three organizations' general secretaries and sent to the Finance Ministry on November 29, outlines the risks to both investors and to the global financial system arising from heavily leveraged investments and stresses the destructive employment impact of private equity buyouts. Recalling the global standard-setting role of the Fund, the letter states: "Investment in private equity and hedge funds would take the State Pension Fund into areas which violate its basic principles, add to global financial instability, impact negatively on working people's lives and livelihoods and undermine the standard-setting role of the Fund. We strongly believe that opening even a limited percentage of the Fund's investments to these "alternative assets" would have a destructive impact globally.
"Any discussion of lifting the existing restrictions on investment in 'alternative assets' - which we understand to be ongoing - calls for extensive, wide-ranging public debate which can take into account the many-sided impact, today and tomorrow, of these investments."
The full text is available here.
Unable to deploy vast amounts of leverage under conditions of credit meltdown, private equity funds have increasingly turned to taking stakes in publicly listed companies. Alongside some spectacular recent forays (and spectacular investment failures) into the financial services sector - e.g. TPG's investment in Washington Mutual, or the J.C. Flowers-led consortium investment in Germany's Hypo Real Estate - Eurazeo (France's largest private equity fund) and Colony Capital continue to increase their coordinated stake in the French-based Accor Group.
While retail concentration gives global supermarkets the power to set prices and squeeze food manufacturers and farmers, the retailers themselves are being squeezed from another direction - private equity funds.
Continue reading "Carrefour's blues: global retailers squeezed by private equity fund activism" »
The European Parliament adopted, by a vote of 562 to 86 on September 23, the report prepared by the Party of European Socialists (PES) on legislative regulation of private equity and hedge funds. Though heavily amended in the final form which was approved by the European Parliament, the report's proposals for legislation address a number of key labour movement concerns. These include: limitations on debt levels in leveraged buyouts; measures to contain asset stripping of portfolio companies by private equity owners; greater transparency and disclosure rules for private equity with far greater scope than the voluntary "Codes of Conduct" which have been promoted as alternatives to regulation; greater capital adequacy requirements for financial instruments and institutions (including private equity and hedge funds), limitations on the easy securitization of leveraged loans ("originate and distribute") which have fuelled both the buyout boom and the financial crisis generally; and ensuring that employees in private equity-owned companies exercise the same rights to information as other EU private-sector employees.
"It is the first time that the European Parliament has ever demanded regulation of private equity and hedge funds," stated PES President Poul Nyrup Rasmussen. "Commissioner Charlie McCreevy has got to respond, and respond positively. With millions of families worried about their savings and pensions it would be very unwise to remind us that until very recently he believed that self-regulation was best. The financial crisis has forced the conservatives in the European Parliament to accept sensible reform, now it is the turn of the European Commission to prove that they no longer believe that the market alone knows best.”
The report is available on the website of the European Parliament here.
The global meltdown in mortgage-"backed" debt threatens to obscure a rapid rise in LBO-related defaults.
Members of BCTGM Local 50 in New York city have been on strike against the Stella D'Oro biscuit company since August 13, posting pickets around the clock in a battle to defend their wages, benefits and dignity against the company's private equity owners.
The strike at Stella d'Oro, a former Kraft subsidiary, exemplifies the destructive process which results when pressure from financial markets to deliver elevated short term gains drives companies to boost dividends and share prices by continuously redefining their "core" business. The result is reductions in productive investment and employment, including the sale of profitable operations. Whole or partial product lines and divisions are then rotated through a succession of owners and investment portfolios. For growing numbers of workers, the process ends with the sale of orphan brands, manufacturing sites and services to a private equity fund.
The European Parliament is set to vote on a report on Tuesday, September 23, calling on the European Commission to introduce legislative proposals for comprehensive financial market reform before the end of the year. The report, spearheaded by former Danish Prime Minister Poul Nyrup Rasmussen, who also heads the Party of European Socialists (the EU-wide grouping of Social Democratic and Labour parties), sets out clear guidelines for closer regulation of private equity, hedge funds and financial markets as a whole in the European Union.
Continue reading "Eurosocialists Push for Comprehensive Regulation of Private Equity, Hedge Funds" »