Erin Griffith

As usual, we have a week’s worth of ratings actions on the debt of LBO-backed companies by ratings agencies Moody’s Investors Service and Standard & Poor’s. This week, in perhaps a sign of more good things to come, we’ve got three upgrades, to companies owned by SCP Private Equity Partners, Diamond Castle Holdings, and Apollo Management. Gotta love those amend & extends. Another note is that this week we learned from Moody’s that most private equity deals target a B1 rating at completion, which indicates a high leverage tolerance and relatively low default rate. So looking at these companies with the lens of B1 being ideal makes it easier to judge how far gone some of the investments may be. Or, or in the case our three upgrades from this week, of how far they’ve come.

Haters: Who hates Wall Street the most? It's a regulator show down. (Deal Journal) Market Price: A new restaurant in Grammercy is allowed the prices of its menu items to fluctuate like a stock market. Meaning, a pint of beer starts at $6 but could be pushed to a high of $8 or a low of $4, depending on popularity, Reuters reported. Sounds like a ridiculously dumb gimmick-why would you want to order the least popular item on the menu, no matter how cheap it was? (Reuters) USAAA? How Does Moody's decide on ratings changes? And how would a downgrade of AMERICA work? (Gaurdian) Fabulous: Fast food chains have basically stuck a middle finger up in the direction of healthy eaters, (along with advocates of diabetes, heart disease, obesity etc.). THL is getting in on the action with its latest acquisition of CKE, which has led the charge against health-ing up the image of fast food places in lieu of keeping it fat. (Businessweek)

Ah, the family office LP. They’re often small, secretive, uninterested in risk, and difficult to penetrate. They’re also the lifeblood of many private equity shops. In a recent survey of 34 family offices, data service Preqin found that family offices are actually not as hostile to private equity as they’re perceived to be. In fact, […]

In its latest private equity report, Debevoise & Plimpton addresses taxes on PIK Toggles, defense investing, and IPO disclosures, among many other topics. Here is the editor's letter; download the entire report below. After a very long winter, the private equity industry is poised for a period of renewal. Deal activity is clearly on the uptick, the financing markets are showing signs of activity, the IPO market is no longer in the doldrums and asset allocations to private equity are no longer just a memory. The challenges facing the private equity industry are too numerous to list. In this issue, we suggest ways in which to tackle many of them.

Irving Place Capital is planning a $245 million dividend recap on Multi Packaging Solutions Inc., a source familiar with the situation said. The New York-based middle market private equity firm formed Multi Packaging in 2004 as a platform to acquire specialty printing and packaging businesses. Since then, the firm rolled up six different businesses serving […]

Give me a Break: Kindle users are staging an online attack against Michael Lewis's new financial crisis book, giving it one-star reviews on Amazon.com merely because its not available on Kindle. Seriously people? The book's merit is completely unrelated to the way it is delivered. Take it to White Whine. (Gawker) Online Dating is Bigger than Porn? If you believe everything you read on the internet, then yes, it is. (Mashable) Fake Trends: Details on two recent successful fundraisings bring hope to the entire market... (EFinancial news) Strong Buy: This trader recommends Blackstone and Evercore stock based on negative stock spreads. (Seeking Alpha) Listicles: Six things not to do when pitching VCs. (Dividends and Preferences)

It's nice to have dry powder when so many buyout firms are struggling to raise funds, but there's a danger that comes with hoarding one's capital. Private equity firms have a five-year investment period. If M&A doesn't pick up, and fast, some ‘05 and ‘06 vintage funds may have to give their money back or ask for fund extensions. A smaller fund means lower fees and, for those that associate success with size, a blow to those delicate private equity egos. Earlier this week Phil Canfield of GTCR and I discussed the coming expiration-driven M&A flood. We agreed that we don't expect many private equity firms to willingly part with their capital, and a blogger called Anal_yst wrote a more extensive blog post arguing the point. What that all means is there's about to be a mad rush of buyout pros desperate to "put money to work," however they can (but I'm not talking about your firm, dear reader, you would never do that, just everyone else).

A new Moody’s default report reveals a troubling paradox: Private equity-sponsored companies are more likely to default, yet they’re also more likely to recover from default. It’s a leveraged catch-22. The argument is that because of private equity’s appetite for leverage and dividends, their portfolio companies are generally at higher risk. No surprise there. Most PE-backed companies receive a B1 corporate family rating after their LBO -- indicating high leverage tolerance and relatively low default rates -- but a number of LBO-backed companies didn’t maintain that B1 rating very deep into the recession. Moody’s data blames half of all corporate defaults in 2009 on private equity. But the report counters that creditors of private equity-backed companies may realize better recoveries than those that lend to strategically owned companies. The idea is that private equity firms are so focused on preserving their equity that they’re more willing to get creative when a portfolio company gets in trouble. That means distressed exchanges and pre-pack bankruptcies.

Wall Street Hates a Level Playing Field: Andrew Ross Sorkin on the Flyonthewall.com ruling. His lead reminds me of George Siguler's comment that his ideal investment is an "unregulated, life-essential monopoly." (Dealbook) Private Equity Comeback: A blogger that goes by Anal_yst responded to our interview yesterday with Phil Canfield of GTCR, particularly on the matter of the pending rush for deals. The PE market is about to look like the SPAC market of 2009. I think Phil and I agreed with the blogger's sentiment and I may have to elaborate on the point more myself more tomorrow. (Stone Street Advisors) Heidi N. Moore: To the FDIC, small is beautiful. (Big Money) And Felix Salmon digs deeper into the story. (Reuters) Doll Deals: In general dolls kind of creep me out, but apparently buyout firm Gefinor is just fine with them! The firm today acquired a division of Middleton Doll through its company Alexander Doll. (Milwaukee Journal Sentinal) ILPA: The PE guidelines are causing an "outbreak of hives." (Deal Journal)

Atlantic Street Capital Management today announced the sale of Fleetgistics, an Orlando-based delivery services company, to Harbour Group, a St. Louis private equity firm. The sale, previously reported by peHUB, earned Atlantic Street a 7.7x return and 156.4% IRR on its initial $10.4 million equity investment. Lazard Middle Market and BB&T Capital markets advised the sell side. The deal marks Atlantic Street's first exit from a $45 million fund backed solely by Morgan Stanley Alternative Investments. According to Buyouts magazine, the firm is planning to raise a $100 million follow-up fund. I spoke with Partner Peter Shabecoff on the thesis behind the roll-up, how a $10 million company became a national leader, and why the sale was "painful and bittersweet. peHUB: So you made 7.7 times your money on a $10 million equity investment. What was the total deal value here? Is it safe to say more than $70 million? Peter Shabecoff: We aren't disclosing the total deal value but its safe to say it the value exceeded $70 million.