Erin Griffith

Willis Stein & Partners' investment in Roundy's, a Midwestern supermarket chain, is about to return more money to its investors. The Chicago-based buyout firm is in the middle of negotiations to amend the terms of the company's debt, extending the maturity on its revolver and term loan from 2010 to 2012, a source familiar with the situation said. It's a move that's become increasingly common among private equity portfolio companies as they realize their capital structures, created in a time of cheap capital, are not sustainable. But in the case of Roundy's, which Willis Stein purchased in 2004, the amendment is not a result of capital constraints. Roundy's has excess capital on its balance sheet, which Willis Stein will absorb in the form of a dividend recap, the source said. The exact size of the recap is still in negotiations, but thanks to the excess cash, Roundy's debt load will not change as a result of the recap.

After a quiet September, private equity-backed bankruptcies came roaring back in October, with five LBO'd companies collapsing into Chapter 11. Two more minority stake deals also went belly-up, bringing our grand total of PE-backed busts to 74. That’s 66 control-stake deals and 8 minority stake deals. The biggest fall failure was KKR’s Capmark Financial, formerly part of GMAC. KKR invested $1.5 billion to buy the company, while taking on Capmark’s $7 billion in debt. It didn’t work out too well. THL Partners’ home ventilation products company, Nortek, also filed for a long-anticipated Chapter 11. The 2004 deal was valued at $1.75 billion, but THL Partners has already earned back 95% of its investment through dividend recaps.

As usual, we have a week’s worth of ratings actions on the debt of LBO-backed companies from ratings agencies Standard & Poor’s Ratings Services and Moody’s Investor Service. This week its bad news again, with two bankruptcies and a debt exchange. Even the upgrade in Vitamin Shoppe's debt isn't great news--the company went public but not at the price it was hoping for. Moody's warned about the company's small size, competitive and fragmented market, and narrow product focus. Company: Capmark Financial Group Inc. Sponsor: Kohlberg Kravis Roberts & Co., Five Mile Capital Partners LLC and Goldman Sachs Capital Partners are sponsors. Ratings Action: S&P lowered its ratings on Capmark Financial Group Inc., including the local currency counterparty credit rating on the company, to 'D' from 'CC'. Highlights: “We had expected the bankruptcy filing since September 2009, when Capmark Financial Group entered into an asset put agreement that gave it the right to sell its North American servicing and mortgage-banking businesses. We expect the firm to sell these, and possibly other, assets, through bankruptcy proceedings.”

Ouch: WSJ Columnist David Weidner agrees with Josh Kosman's book, the Buyout of America, calling you all ‘Barbarians by Any Other Name." Check out this column and video on the topic: (WSJ) Private Equity Goes A-Vulturing: PE firms have spent over $4 billion acquiring bankrupt companies in 2009. (Pitchbook) The Relentless Rise of Power Jeans: The Wall Street Journal explains how Obama and hedge funders are making jeans acceptable in positions of power...Thus, POWER JEANS! Not *Quite* as awesome as Tina Fey's Mom Jeans or Michael Scott's Fun Jeans. (WSJ) If You Want to IPO a Portfolio Company: You need to have skin in the game. (Reuters) New York Venture Capital: Startups Rise from the Wreckage of New York's Financial System (Wired)

Here are some potential target ideas, rumored or official, to jumpstart your deal pipeline. Our sources are various news reports and the Buyouts “Seeking Buyers” list. For prior lists, see below. International Baromedical Services, an Atlanta-based group of four non-hospital based Hyperbaric treatment centers, announced it has engaged Triton Value Partners explore strategic initiatives. Bankrupt Capmark Financial, which may also be seeking buyers for the entire company, engaged advisory firm Urdang to advise it on the sale of two debt investment vehicles. Corel Corp, a consumer software company based in Toronto, is in play, receiving a big from Vector Capital. The firm already holds 68.2 percent of the company's shares. Private equity firms are vying to get on a shortlist of potential buyers for discount retailer Matalan, which could fetch up to 1.5 billion pounds ($2.46 billion), Reuters reported.

After a year of all-equity deals and “creative capital structures,” word is that leverage is back! In a Big Way! But from what I can see, leverage ratios on most middle market sponsor deals remains pretty static, in the 2x to 3x range, which seems very manageable when compared with the 10x leverage we saw […]

GMAC = Insanity: Mean Street believes that the three-time bailout of GMAC is plain insanity. (Deal Journal) The Three Habits:...of highly irritating management gurus (Economist) How To Do Better Due Diligence: "Most PE firms have no idea if the company they are about to acquire knows how to execute." (Dealscape) Big Deals in Europe: KKR, Cinven, TPG and Blackstone are circling discount retailer Matalan. (FT) FYI: Bloomberg will no longer provide your daily ego boost. (Dealbreaker)

Update: I've received more details on this study from NYPPEX and included them below. The Private Equity Council has drawn my attention to a recent report from secondary intermediary NYPPEX, which states that buyout firms have accurately valued their portfolios. While the PEC didn't exactly explain how it found that, NYPPEX was nice enough to break it down for me. See, the study found that buyout funds net asset values as of June 30, 2009 quarterly reports were only 2.57% over-stated, compared with publicly-traded industrial companies. Enterprise value to EBITDA multiples declined from 9.75x to 6.54x or approx -32.92% for publicly traded industrial companies, versus buyout funds' worldwide net asset values, which changed approx -30.35%. NYPPEX tracked industrial companies because it considers those to be good barometers for portfolio company holdings in buyout funds. Also interesting-- NYPPEX expects secondary bids to rise by 25%. Guess all those secondary funds really did miss the bottom... More from the survey below:

With today's news of Blackstone's plans to swap debt for equity in portfolio company Hilton Hotels, I imagined just about all of the top ten largest LBOs have now undergone some sort of debt-fixing deal. To be sure, I checked in on each of them and a few other well-known mega-deals, excluding those already exited like TPG's Alltel and of course, KKR's RJR Nabisco. As it turns out, all but a few have done something to ease their debt situation. From my research, First Data. Kinder Morgan, and Equity Office Properties have not publicly undergone any major debt restructurings. Here's a look at those who have:

Amid CIT’s bankruptcy scares and Carl Icahn drama, not much focus has been placed on the fate of Edgeview Partners, the mid-market boutique consultancy CIT acquired in mid-2007. While Edgeview continues to do business, its founding partners Drew Quartapella and Matt Salisbury left in February. More recently, partner Bill Morrissett also departed. According to the Charlotte Observer, Quartapella and Salisbury offered to buy the firm back, but CIT was unresponsive. The three men are subject to a non-compete period that was set when Edgeview originally sold to CIT. According two sources familiar with the firm, the non-compete expires in the middle of next year. Meanwhile Edgeview’s remaining employees are waiting anxiously for the dust to settle around CIT. M&A advisory business has been slow in a credit crunch, and bringing in new deals with an unstable parent company doesn’t help.