Erin Griffith

Yikes Did Sun Microsystems violate bribery laws? (WSJ) It's Back! High yield debt is at a 2-year high this week. (Thomson Reuters) Illiquid: One investor's struggle with that whole ten-year lock-up period thing. (Seeking Alpha) Here's a Switch: An exec leaves PE for banking. Isn't that supposed to be the other way around? (Deal Journal) Bold Words: But not surprising that a Twitter backlash (a Twit-lash? Bad joke...) would happen soon enough. Dealscape writes that Twitter, like Skype, is overhyped.

In a deal that defies the stilted secondary market, Merrill Lynch yesterday sold €150 million worth of shares in Kreos Capital, a European venture debt fund manager. The buy-side group included Paul Capital, AIG PineStar Capital, HarbourVest Partners, Access Capital Partners and SVB Financial Group. Alongside the spinout of Lehman Brothers’ venture arm (advised by Harbourvest Partners), it is one of the largest secondary transactions to close this year. I spoke with the deal’s sell-side advisor, David Waxman of Azla Advisors, on where the deal stands in the greater secondary market. How does this deal fit in with the general market activity? The gap between buyers and sellers is wide because it’s so tough to value equity at this stage. … There’s a feeling in the secondary community that NAVs don’t yet reflect the full value of the writedowns, and so it’s difficult for them to offer much for the LP interests. There’s even a debate over whether secondary investors should stay away from ’06-’07 vintage private equity funds altogether. In this deal, we started working with Merrill Lynch two years ago. Merrill planned to be the sole sponsor of Kreos for two years and then divest 75% of holding on secondary market.

We won't soon see another deal like KKR's $1.8 billion carve-out of Oriental Brewery. The year's second-largest buyout was made possible by the combination of a motivated seller and an unusual capital structure. According to a source familiar with the situation, KKR's bid was actually the lowest of the three final offers -- from Affinity Equity Partners and MBK Partners -- but KKR won because its was the only offer with committed financing. This was important to Anheuser-InBev because the company is in a bit of a pinch to pay down debt: it has a $7 billion bridge loan due this fall. Anheuser-Inbev was so motivated, in fact, that it set up a $300 million PIK note for the deal, something that wasn't necessarily offered to KKR's competitors.

As usual, we have a week’s worth of ratings agency downgrades, upgrades, revisions and withdrawals on the debt of LBO-backed companies, via Standard & Poor’s and Moody’s Investor Services. It was a light week coming off the big Chrysler filing last week. No worries, two frequent downgraders, Ply Gem and First Data, didn’t disappoint. Company: First Data Corp. Sponsor: KKR Downgrade: Moody’s downgraded the company’s corporate family and probability of default ratings to B1 from b2. Highlights: “We expect slight revenue and EBITDA declines for 2009 with only modest recovery for 2010. As a result, we believe the company will not be able to significantly de-leverage until 2011 at the earliest, at which time the company faces increasing cash interest payments as the company's 10.55% unsecured PIK notes convert to cash pay after September 2011.”

Women CEOs: Ten women who should be big company CEOs. The list includes one PE pro, Jenny Ming of Advent International, who "would be on any headhunter's retail CEO list." (24/7 Wall Street) Here Come The China Vultures: "Encouraged by sinking stateside valuations, a delegation of up to 600 Chinese entrepreneurs will travel to North America in June on a state-organised "bottom fishing" tour, an organiser source said. The visitors, provincial governors and heads of large state-owned and private companies, will be trawling the market for distressed acquisition targets." (Mergermarket) Twittermania: Ok, so Connie already discussed the madness that is Twitterwatching these days. But here are two more to add to your reading list: -All you need to know to Twitter. -Political correspondent Jeff Greenfield apparently said: "I don't masturbate in public, and I don't Twitter." New Hiring Is Robust: "Who is hiring? Hospitals, colleges, discount stores, restaurants and municipal public works departments." (NY Times) Don't Get Excited: KKR's deal for Oriental Brewery is an exception, not the start of the return of big buyouts. (WSJ)

There’s only one true way to settle the age-old “Is private equity a positive force” question, and that is to look at the performance of PE companies after the exit. Assuming the buyout firm made a profit for itself and its investors, the real test lies in a portfolio company’s post-PE lifetime. It's simple. If the company is leaner, more competitive and stronger than it was before private equity intervened, then the LBO detractors have no case. If it is so crippled with debt and stripped to its bare bones that it struggles or fails, then maybe they’re right. There’s not much comprehensive data on this topic, but today, the Wall Street Journal published a slice of evidence that paints private equity pros as the good guys. A story titled “Private Equity IPOs Outperforming Others” cites data that shows, between 2003 and 2008, PE-backed IPOs in Europe have performed better than their non-PE-backed counterparts.

Why is a standard software services business suddenly the most coveted company around? SumTotal Systems last month agreed to sell itself to Accel-KKR, but yesterday received a competing bid from Vista Equity Partners, a firm that's already had past offers dismissed. The whole process seems like a relic of frothy M&A time gone by, and in a way, it is: The battle to win SumTotal started in April of last year. After digging through this behemoth proxy statement, I learned that Vista and Accel-KKR have jumped through no shortage of hoops to bed SumTotal. After more than six months of meetings, Accel-KKR offered to buy the company for $7 per share, then $8 per share, then finally back to $7 per share in the fall of 2008 (just after Lehman Brothers collapsed). Even though SumTotal's M&A Committee recommended the deal, the company's board said no thanks. Simultaneously, Vista Equity had its offer rejected by SumTotal's CEO without any board consideration (pricing wasn't provided in the filing). Once the stock market began to tank

Hoorah! Junk bonds are coming back. (WSJ) Meanwhile the price of leveraged loans are rising. (WSJ) Steve Schwarzman expressed his happiness over this on Blackstone's call this morning. (They still probably aren't back to levels a lot of buyout guys bought them at, though...) Drama Time: "Picking over the carcasses of bankrupt companies is tempting for private equity firms, but the more traditional buyout shops are showing caution bidding on assets entangled in the courts, experts say." (Reuters) Not Scared Of Disney: Doesn't look like Providence Equity is going to take this opportunity to get out while the valuation is sky-high for Hulu, even though Disney has taken a larger stake. (PBN) No Longer The Master Of His Universe: At the Time Magazine's "Influential People" dinner, Steve Schwarzman was relegated from his front row seat to the very last row. Even worse, he was replaced by, as Cityfile said, "The nerdy co-founders of Twitter and a bunch of wonky Obama policy advisers." (NYP)

If you can stand the annoying the “Power Point” CNBC commentators in this video (below), there’s a debate buried somewhere about whether private equity dollars should be allowed to purchase controlling stakes in banks. As it stands, they aren’t, because the Fed doesn’t want a buyout firm lending from its own portfolio company. “If some […]

Bankruptcy has been on the table for American Capital, the troubled BDC, since it went into default in March. Another possible shareholder nightmare has been a reverse stock split. The firm’s CEO Malon Wilkus today tried to quell investor fears about those possibilities on its Q1 earnings call, but judging by the company’s stock performance (it’s down 34.9% as I’m writing this), his best efforts weren’t good enough. In tandem with the company’s dismal earnings news, the firm said it hired Miller Buckfire to advise its restructuring efforts and Citigroup to help it sell European Capital, the Europe arm of its business that American Capital absorbed last year. The European Capital sale may be in pieces if it can garner the best price, Wilkus said.