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.Gobal fund manager Schroders is launching an Agricultural Land Fund, only months after closing its USD 6 billion Alternative Solutions Agriculture Fund due to excessive investor demand.
The collapse and bankruptcy of Buffets, Inc. - the largest chain of buffet-style restaurants in the US which at one time employed over 36,000 workers - provides an object lesson in how private equity owners can get their cash out quickly through dividend recapitalizations, suffocate a business to the point of bankruptcy under accumulated debt… and still turn a profit.
Continue reading "All-you-can-eat Dividend Recaps Sink Major US Restaurant Chain" »
Massive use of high-risk debt, aggressive restructuring, asset stripping, "quick flips" and the systematic exploitation of tax loopholes (many of which their lobbying efforts have inspired) - these are the tools behind the enormous profits raked in by private equity, or leveraged buyout funds. Workers, public revenue and the public interest generally are the big losers in these financial engineering operations. One of the oldest and biggest of the funds is the US-based KKR - Kohlberg, Kravis, Roberts & Company - the "barbarians at the gate" behind the USD 31 billion buyout of RJR Nabisco which effectively destroyed the company and led to the loss of an estimated 40,000 union jobs.
Continue reading "SEIU Targets Buyout Fund KKR for Global Action " »
As part of this year's International Labour Conference, which included the first discussion in 20 years on rural employment issues, the ILO on June 11 convened a “High-Level Panel on the Food Crisis, Production, Investment and Decent Work”. Speaking on the panel, IUF general secretary highlighted the impact of recent investment flows into commodity markets in helping fuel the hyperinflation in the price of basic food staples which has provoked global hunger riots. "While international agencies have suddenly discovered underinvestment, investment in commodity indexes has climbed from US$13-billion in 2003 to $260-billion in March 2008 - and according to some analysts may soon hit a trillion US dollars. Yet the FAO briefing paper for the Rome summit devoted a dismissive two paragraphs to the phenomenon in its 'assessment of recent developments', and nothing in its concluding 'policy options'. Private equity and hedge funds - investors focused on short-term, high-yield gains - have been expanding beyond futures markets and are now pouring billions into acquiring farmland, inputs and infrastructure. The real world has been left behind - and with it production, investment and decent work. The real issue is what kind of investment, what kind of production, and who benefits."
For the full IUF presentation (also available French, German, Japanese, Spanish and Swedish) click here.
Private equity fund Sun Capital Partners on June 24 acquired Sunrise Growers-Frozsun Foods, the largest US producer of frozen strawberries and a leading distributor of fresh strawberries and other produce.
Continue reading "Slash and Burn Sun Capital Extends Reach in Produce, Coffee, Restaurants" »
According to a new report by Standard & Poor's, the "deleveraging" expected in the wake of the credit crunch has not only failed to materialize, but debt levels in private equity buyouts in Europe have actually risen, heightening the risk of default. The head of research at Standard & Poor's, who have released a new study, told the Financial Times on June 5: "In the current market where the availability of debt has declined and business prospects are deteriorating, you would expect deals would get more conservative."
According to the study, however, in private equity buyouts between €250-500 million, leverage has actually substantially risen. In the first quarter of 2008, debt to cash flow multiples rose to 6.8, as against an average of 5.8 for 2007. Purchase prices multiples also increased to 10.4 times EBIDTA compared with an average 8.7 last year. Cash available to companies taken private through leveraged buyouts for paying off their debt has fallen to 2.2 times their debt levels, compared with 2.5 in 2007 and 4 in 2003.
The conclusion? "Record levels of leverage in deals, rising purchase price multiples and the falling ratio of cash that companies have available to cover debt will make it harder for them to repay their loans and put pressure on default rates."
A convenient survey of recent US pe-banked bankruptcies can be found here. Among the pe-owned companies in the IUF sectors in the US which have recently filed for bankruptcy are the restaurant chains Vicorp Restaurants Inc., which will be closing 56 Village Inn and Bakers Square Restaurants, and Buffets Inc., the largest national steak restaurant chain. According to the report, the cookie maker Mrs. Fields Famous Brands is preparing to file for bankruptcy soon.
Deregulation and the systematic exploitation of US regulatory loopholes have facilitated a recent surge in speculative investment in commodity markets, much of it by institutional investors including pension funds. The influx is one of the driving forces behind the hyperinflation of basic food staples.
Buyout fund Lion Capital has followed its August 2007 USD 500 million purchase of Russian juice drinks company Nidan Soki with the acquisition of a majority stake in the Russian Alcohol Group, the country's largest producer of vodka and ready-to-drink (RTD) alcoholic beverages. Russian Alcohol's Green Mark vodka is the largest brand by volume in Russia and one of the top 5 global brands.
Continue reading "Lion Capital Picks Up Russia's Biggest Vodka Maker" »
The Socialist Group in the European Parliament has highlighted the crucial role of financial markets in stimulating the hyperinflation of global food prices and called for urgent action by regulatory authorities. The group tabled three amendments to a motion on EU action to deal with food price inflation.
"The food crisis is closely linked to the financial crisis", said Hannes Swoboda, vice-president of the Group. "It is outrageous that some banks are inviting their clients to speculate on rising food prices. One of our amendments calls for a Europe-wide ban on such speculation. We also want the European Commission to examine the powers of national supervisory bodies to ensure that they can guarantee stable and secure markets and that speculation does not violate the right to food."
More information and a link to the text of the motion are available here.
The SEIU has released a new report on Sovereign Wealth Funds to highlight glaring gaps in the rules for assessing foreign investments in U.S. companies, which continue to depend principally on voluntary disclosure. As the report points out, these regulations were largely designed to address foreign entities taking a direct ownership interest in domestic assets, and therefore faile to address the indirect ownership structures that characterize private equity.
The report is available online at www.behindthebuyouts.org.