(Fortune) -- Steven Rattner, the New York banker-turned-Obama Administration car czar, has been much in the news lately. Riding high in early April thanks to laudatory profiles in the Wall Street Journal and the New York Times, Rattner's name has been in the press this week in connection with a scandal involving a New York State retirement fund.
What's gotten short shrift in all the coverage, though, is the complicated situation that Rattner left behind for his former partners and himself at Quadrangle Group, a New York-based private equity firm that Rattner co-founded.
On this Friday, April 24, Quadrangle's investors are scheduled to vote on whether they want to keep funneling money into a Rattner-free Quadrangle. Rattner's departure from the firm on February 23 came at a precarious moment for Quadrangle thanks to less than stellar returns and some high-profile flops like an investment in Alpha Media, the parent company that brings you Maxim and the recently shuttered music magazine Blender.
A 'key man clause'
The catalyst for the vote is that Rattner's departure triggered what on Wall Street is known as a "key man clause." The way the provision works is that if the key man (in this case Rattner) decides to leave the firm, Quadrangle's investors have the opportunity to block any further investments that can be made with capital they had previously committed. So a "nay" vote effectively terminates the funds' ability to do new deals from scratch (although some capital still could be invested in existing portfolio companies.)
The recent barrage of publicity about Rattner, 56, has the remaining partners of Quadrangle concerned about the vote's outcome. There was a meeting March 31 so that Quadrangle executives could answer investors' questions about the management and performance of the fund and to get "candid input on changes you thought were necessary to reflect the changed circumstances at our firm and the world more generally," is how Quadrangle's leadership phrased their position in a subsequent letter to investors.
Rattner started the firm in March 2000, shortly after he left his position as Deputy CEO of Lazard Frères in New York. He was joined by three of his former Lazard partners: Josh Steiner, a Clinton-era Treasury Department chief-of-staff; Peter Ezersky, Rattner's longtime number two in Lazard's hugely successful media banking group; and David Tanner, a former partner at Warburg Pincus and the only one of the four men with actual experience making private equity investments (including achieving an IRR of 145% in six investments at Lazard Capital Partners), a fact touted by the group to raise money.
With a lot of hard work by the Monument Group, a private equity fundraising firm, and a few phone calls by Rattner to his former Lazard media clients -- such as Comcast CEO Brian Roberts, Craig McCaw, the billionaire telecom investor, and IAC Interactive CEO Barry Diller -- Quadrangle was able to relatively quickly raise a $1 billion first fund (in which I am an investor). As it was on its way to being fully invested in 2004, the Quadrangle team hit the road to raise money for a second fund, which closed with $2 billion in March 2005. (It was Rattner's efforts to raise capital for this fund that have landed him in a recent SEC complaint about a "pay-to-play" scandal in New York State. Rattner is not a defendant in the SEC case that focuses on the kickbacks that a former deputy comptroller and a prominent political advisor allegedly received from investment management firms seeking to manage investment assets held by the New York State Common Retirement Fund.)
Quadrangle offers to take a haircut
For the first fund, Rattner's departure and the tripping of the "Key Man" provision is moot (the fund was fully invested). The key man event is very much operative, though, for the second fund, which still has around $500 million to invest and to call from its investors. In a letter to Quadrangle's investors, Rattner wrote that he hoped they would decide not to block the balance of the money in the second fund from being invested because of his departure. He added, "My family will enthusiastically fulfill its capital commitment to QCP II and looks forward to participating in the continuing investments and portfolio value creation of the firm." The Rattners, as well as the other members of the general partners of Quadrangle, had $55 million invested in the first Quadrangle fund and have another $120 million in capital commitments to the second fund.
On April 17, as an inducement to convince investors to stay the course, Quadrangle's remaining partners decided to take what in Wall Street parlance is known as a "haircut" following their discussions with limited partners. Quadrangle leaders voluntarily agreed to take a reduction of the fund's management fees from 1.75% of the $2 billion -- $35 million a year -- to 1.7% for the remainder of 2009, 1.65% for the first half of 2010 and 1.55% for the second half of 2010. Quadrangle also agreed to decrease to 15% the amount of the fund that could be put in any one fund investment and agreed to escrow 25% of all after-tax carry proceeds.
Read more here
Thursday, April 23, 2009
Wednesday, April 22, 2009
LG Household Rises to Three-Month High on Goldman Sachs Rating
(Bloomberg) -- LG Household & Health Care Ltd., a South Korean maker of cleaning and personal-hygiene products, rose to the highest in more than three months in Seoul trading as Goldman, Sachs & Co. advised investors to buy the stock.
LG Household & Health Care shares gained 4.5 percent to 174,000 won as of 10:43 a.m. on the Korea Exchange, set for the highest close since Jan. 2. The benchmark Kospi stock index rose 0.3 percent.
Goldman Sachs raised its recommendation to “buy” from “neutral” and lifted its 12-month share-price estimate by 11 percent to 200,000 won in a report today. Net income will be 146 billion won ($108 million) in 2009, compared with Goldman Sachs’s earlier estimate of 141 billion won, the brokerage said.
Read more here
LG Household & Health Care shares gained 4.5 percent to 174,000 won as of 10:43 a.m. on the Korea Exchange, set for the highest close since Jan. 2. The benchmark Kospi stock index rose 0.3 percent.
Goldman Sachs raised its recommendation to “buy” from “neutral” and lifted its 12-month share-price estimate by 11 percent to 200,000 won in a report today. Net income will be 146 billion won ($108 million) in 2009, compared with Goldman Sachs’s earlier estimate of 141 billion won, the brokerage said.
Read more here
Monday, April 20, 2009
Putin’s Tariffs Stall Russian Growth for Caterpillar
(Bloomberg) -- Prime Minister Vladimir Putin’s trade measures are starting to keep Deere & Co. combines and Caterpillar Inc. trucks out of Russian wheat fields and coal mines, dimming the companies’ prospects for expansion abroad.
Deere and Caterpillar, reeling from the longest U.S. recession in a quarter century, were the companies most affected by loan restrictions and tariffs of as much as 25 percent that Putin imposed this year, according to a U.S. Chamber of Commerce survey of the top 50 American businesses operating in Russia.
Putin is trying to boost Russian industries with tariffs on everything from drugs to farm equipment as declining oil revenue saps the nation’s economy. The policies are hurting sales by Caterpillar, Deere and Agco Corp. in a market where revenue was forecast to rise as much as sixfold in the next decade.
“The new tariffs kicked these guys in the knees when they were down,” Larry De Maria, a New York-based analyst with Sterne, Agee & Leach Inc., said in a telephone interview. “Russia was supposed to be a $3 billion market in 2008 with potential to grow to $20 billion, possibly in as little as a decade.”
Emerging-market sales likely fell so far this year for Deere and Caterpillar, which reports first-quarter earnings tomorrow, De Maria said. Caterpillar is expected to report profit excluding certain items of 5 cents a share, the average estimate of 20 analysts surveyed by Bloomberg. The company earned $1.45 a share a year earlier.
“We are really going to struggle this year in Russia,” Ken Harding, Caterpillar’s regional execution manager for the Commonwealth of Independent States, said in a telephone interview.
‘Low’ Expectations
Caterpillar’s “expectation is low” that it will sell any of its 60-ton trucks, used for quarry and construction work, in Russia this year after selling eight last year, Harding said.
Starting in January, Peoria, Illinois-based Caterpillar and other foreign makers of off-highway trucks faced duties of 25 percent, an increase from 5 percent last year. BelAZ, a Belarusian equipment producer that dominates the region’s truck industry, isn’t subject to the tariff and will benefit, Harding said.
Caterpillar declined 59 percent on the New York Stock Exchange in the 12 months through April 17. Deere fell 56 percent, and Agco dropped 64 percent.
Deere, the world’s largest maker of agricultural equipment, and Duluth, Georgia-based Agco are being hurt by a program that gives Russian farmers a 20 percent discount on loans from Russia’s Central Bank if they buy domestic machines.
Loan Program
The deal is for loans made through OAO Sberbank, Russia’s largest lender, and Rosselkhozbank, the Russian Agricultural Bank, which both have local offices that farmers rely on for financing, Michael Considine, director of EurAsia issues for the Washington-based Chamber of Commerce, said in an interview.
“If a Russian farmer had the cash to buy a Deere combine, it would cost substantially more because of the tariff increase,” Considine said. “And if you didn’t have the money, you could just forget about it because you’d only be able to get the money to buy something made in Russia.”
Putin undertook the measures after a December visit to Rostov, Russia-based Rostselmash, the country’s leading combine maker.
Putin’s press secretary Dmitry Peskov wasn’t available for comment. Valeriy Khromthenkov, a Russian official in Washington with oversight of agricultural issues, declined to comment. A spokesman for Finance Minister Alexei Kudrin, who also is deputy prime minister, wasn’t available to comment.
Read more here
Deere and Caterpillar, reeling from the longest U.S. recession in a quarter century, were the companies most affected by loan restrictions and tariffs of as much as 25 percent that Putin imposed this year, according to a U.S. Chamber of Commerce survey of the top 50 American businesses operating in Russia.
Putin is trying to boost Russian industries with tariffs on everything from drugs to farm equipment as declining oil revenue saps the nation’s economy. The policies are hurting sales by Caterpillar, Deere and Agco Corp. in a market where revenue was forecast to rise as much as sixfold in the next decade.
“The new tariffs kicked these guys in the knees when they were down,” Larry De Maria, a New York-based analyst with Sterne, Agee & Leach Inc., said in a telephone interview. “Russia was supposed to be a $3 billion market in 2008 with potential to grow to $20 billion, possibly in as little as a decade.”
Emerging-market sales likely fell so far this year for Deere and Caterpillar, which reports first-quarter earnings tomorrow, De Maria said. Caterpillar is expected to report profit excluding certain items of 5 cents a share, the average estimate of 20 analysts surveyed by Bloomberg. The company earned $1.45 a share a year earlier.
“We are really going to struggle this year in Russia,” Ken Harding, Caterpillar’s regional execution manager for the Commonwealth of Independent States, said in a telephone interview.
‘Low’ Expectations
Caterpillar’s “expectation is low” that it will sell any of its 60-ton trucks, used for quarry and construction work, in Russia this year after selling eight last year, Harding said.
Starting in January, Peoria, Illinois-based Caterpillar and other foreign makers of off-highway trucks faced duties of 25 percent, an increase from 5 percent last year. BelAZ, a Belarusian equipment producer that dominates the region’s truck industry, isn’t subject to the tariff and will benefit, Harding said.
Caterpillar declined 59 percent on the New York Stock Exchange in the 12 months through April 17. Deere fell 56 percent, and Agco dropped 64 percent.
Deere, the world’s largest maker of agricultural equipment, and Duluth, Georgia-based Agco are being hurt by a program that gives Russian farmers a 20 percent discount on loans from Russia’s Central Bank if they buy domestic machines.
Loan Program
The deal is for loans made through OAO Sberbank, Russia’s largest lender, and Rosselkhozbank, the Russian Agricultural Bank, which both have local offices that farmers rely on for financing, Michael Considine, director of EurAsia issues for the Washington-based Chamber of Commerce, said in an interview.
“If a Russian farmer had the cash to buy a Deere combine, it would cost substantially more because of the tariff increase,” Considine said. “And if you didn’t have the money, you could just forget about it because you’d only be able to get the money to buy something made in Russia.”
Putin undertook the measures after a December visit to Rostov, Russia-based Rostselmash, the country’s leading combine maker.
Putin’s press secretary Dmitry Peskov wasn’t available for comment. Valeriy Khromthenkov, a Russian official in Washington with oversight of agricultural issues, declined to comment. A spokesman for Finance Minister Alexei Kudrin, who also is deputy prime minister, wasn’t available to comment.
Read more here
Thursday, April 16, 2009
Auto shares climb in Asia but analysts offer cautious outlook
(MarketWatch) -- Automotive shares were among the bigger winners in the Asian markets Friday as traders bet on a continued recovery in global auto sales, but many analysts remained cautious about their outlook for the sector ahead of financial results from major Japanese carmakers.
"There was a marked difference in March auto sales growth in different countries, related to whether or not government support is in place," analysts at Goldman Sachs wrote in a note to clients Friday.
New vehicle sales growth was positive year-on-year in India, China, Germany and France, the analysts said.
In March, new car sales in China hit a record 1.1 million units, rising for the third-straight month and outpacing sales of new vehicles in the U.S.
However, sales "remained down substantially year-on-year in the U.S., Japan, Russia, the U.K. and Spain," the Goldman Sachs analysts said.
In late March, Japanese automakers reported sharp declines in domestic sales and exports for the month of February. See full story on Japan's car sales.
And in Western Europe, auto sales fell 8% on year in March, according to Goldman Sachs, although the decline was smaller than the fall of 17% in February.
"We think the stimulus packages are positive for automakers, lifting sluggish plant operating rates and keeping demand ticking over until an anticipated economic upturn" in the second half of 2009, the analysts said.
Still, they kept their "cautious" coverage view on the auto sector.
"Details of support measures in the U.S. are still unclear, and we are watching to see whether consumers put off purchasing vehicles in the near term," they said.
Read more here
"There was a marked difference in March auto sales growth in different countries, related to whether or not government support is in place," analysts at Goldman Sachs wrote in a note to clients Friday.
New vehicle sales growth was positive year-on-year in India, China, Germany and France, the analysts said.
In March, new car sales in China hit a record 1.1 million units, rising for the third-straight month and outpacing sales of new vehicles in the U.S.
However, sales "remained down substantially year-on-year in the U.S., Japan, Russia, the U.K. and Spain," the Goldman Sachs analysts said.
In late March, Japanese automakers reported sharp declines in domestic sales and exports for the month of February. See full story on Japan's car sales.
And in Western Europe, auto sales fell 8% on year in March, according to Goldman Sachs, although the decline was smaller than the fall of 17% in February.
"We think the stimulus packages are positive for automakers, lifting sluggish plant operating rates and keeping demand ticking over until an anticipated economic upturn" in the second half of 2009, the analysts said.
Still, they kept their "cautious" coverage view on the auto sector.
"Details of support measures in the U.S. are still unclear, and we are watching to see whether consumers put off purchasing vehicles in the near term," they said.
Read more here
Wednesday, April 15, 2009
Dow stages late 100-point rally
(CNNMoney.com) -- Blue chips rallied late Wednesday, supporting the broader market, after a Federal Reserve report on the economy added to hopes that the pace of the slowdown is easing.
An unclear outlook from bellwether Intel late Tuesday kept the tech-fueled Nasdaq from posting similar gains.
The Dow Jones industrial average (INDU) gained 109 points, or 1.4%. The S&P 500 (SPX) index gained 10 points, or 1.3%. The Nasdaq composite (COMP) added 1 point, or 0.1%.
Tech shares dragged on the broad market, while consumer, housing, industrial and commodity shares kept losses in check.
Stocks roiled Monday and fell Tuesday in a choppy start to the week following a five-week run. The advance has been driven by bets that the pace of the recession is slowing. A Federal Reserve report released Wednesday afternoon added to those bets.
The Fed's "Beige Book" periodic reading on the economy showed that overall activity stayed weak or got worse. But five of the 12 districts showed a slowdown in the pace of decline and a few more districts showed certain parts of the economy were stabilizing.
"A lot of recent reports are showing that things might be flattening out and bottoming and the Beige Book seemed to indicate that too," said Stacey Shreft, director of investment strategy at The Mutual Fund Store. "That's good, but it's going to be important that the next set of data that come out reinforce it."
Despite some optimism about the economy, the speed of the stock rally has left Wall Street vulnerable to a bit of a pullback.
In five weeks, the Dow gained 22%, its biggest consecutive five-week run on a percentage basis since 1933, when it gained 31%. The run up followed a rout that left the Dow and S&P 500 at 12-year lows and the Nasdaq at 6-year lows.
This week, stocks have been seesawing.
"I think this is a necessary consolidation at the start of what is supposed to be one of the worst reporting periods in years," said John Forelli, portfolio manager at Independence Investments.
But he said that any consolidation this time is likely to be more modest than the selloffs that followed other big rallies over the last six months.
"Investor sentiment has been improving because there's more confidence about the financial sector," he said. "There could be a 10 or 15% selloff after the rally, but there isn't the sense of panic that would cause a 25% selloff."
Read more at CNNMoney
An unclear outlook from bellwether Intel late Tuesday kept the tech-fueled Nasdaq from posting similar gains.
The Dow Jones industrial average (INDU) gained 109 points, or 1.4%. The S&P 500 (SPX) index gained 10 points, or 1.3%. The Nasdaq composite (COMP) added 1 point, or 0.1%.
Tech shares dragged on the broad market, while consumer, housing, industrial and commodity shares kept losses in check.
Stocks roiled Monday and fell Tuesday in a choppy start to the week following a five-week run. The advance has been driven by bets that the pace of the recession is slowing. A Federal Reserve report released Wednesday afternoon added to those bets.
The Fed's "Beige Book" periodic reading on the economy showed that overall activity stayed weak or got worse. But five of the 12 districts showed a slowdown in the pace of decline and a few more districts showed certain parts of the economy were stabilizing.
"A lot of recent reports are showing that things might be flattening out and bottoming and the Beige Book seemed to indicate that too," said Stacey Shreft, director of investment strategy at The Mutual Fund Store. "That's good, but it's going to be important that the next set of data that come out reinforce it."
Despite some optimism about the economy, the speed of the stock rally has left Wall Street vulnerable to a bit of a pullback.
In five weeks, the Dow gained 22%, its biggest consecutive five-week run on a percentage basis since 1933, when it gained 31%. The run up followed a rout that left the Dow and S&P 500 at 12-year lows and the Nasdaq at 6-year lows.
This week, stocks have been seesawing.
"I think this is a necessary consolidation at the start of what is supposed to be one of the worst reporting periods in years," said John Forelli, portfolio manager at Independence Investments.
But he said that any consolidation this time is likely to be more modest than the selloffs that followed other big rallies over the last six months.
"Investor sentiment has been improving because there's more confidence about the financial sector," he said. "There could be a 10 or 15% selloff after the rally, but there isn't the sense of panic that would cause a 25% selloff."
Read more at CNNMoney
UBS faces $1.8 bln loss and steps up job cuts
(MarketWatch) -- UBS shares fell as much as 9% Wednesday after the struggling Swiss bank said it expects to post a loss of nearly 2 billion Swiss francs ($1.8 billion) for the first three months of 2009 and added that nearly 9,000 more staff will lose their jobs.
The group said it will reduce its workforce to around 67,500 in 2010, from the current 76,200, which will help it slash costs by between 3.5 billion francs and 4 billion francs. Roughly 2,500 of the cuts will be in Switzerland.
In a statement UBS's newly appointed chief executive, Oswald Gruebel, also said that despite positive early signs, clients continued to withdraw their cash in the quarter.
Gruebel, a former head of arch-rival Credit Suisse, was hired in January to try and turn around the bank, but he told shareholders at the annual meeting Wednesday that there will be no quick fix.
Investors weighed the worse-than-expected quarterly loss against the group's deep cost-cutting plans, pushing the stock down around 9% in early trading before it recovered to trade down 3.2%.
Read more at MarketWatch
The group said it will reduce its workforce to around 67,500 in 2010, from the current 76,200, which will help it slash costs by between 3.5 billion francs and 4 billion francs. Roughly 2,500 of the cuts will be in Switzerland.
In a statement UBS's newly appointed chief executive, Oswald Gruebel, also said that despite positive early signs, clients continued to withdraw their cash in the quarter.
Gruebel, a former head of arch-rival Credit Suisse, was hired in January to try and turn around the bank, but he told shareholders at the annual meeting Wednesday that there will be no quick fix.
Investors weighed the worse-than-expected quarterly loss against the group's deep cost-cutting plans, pushing the stock down around 9% in early trading before it recovered to trade down 3.2%.
Read more at MarketWatch
Tuesday, April 14, 2009
S.Africa's Assmang shuts ferromanganese furnace
(Reuters) - South Africa's African Rainbow Minerals (ARM) said on Tuesday that due to the ongoing low levels of carbon steel production subsidiary Assmang had shut down its No. 5 ferromanganese furnace.
The high carbon ferromanganese furnace with a capacity of about 55,000 tonnes per year was shut last Tuesday.
Furnaces 3 and 4 had already been closed, it said.
"These furnaces will be kept out of operation until market conditions warrant start up," ARM said in a statement.
The group's convertor for production of refined alloys, which has not produced since December 2008, would also remain closed and would be restarted as demand increases.
Assmang is jointly owned by ARM and Assore.
Read more at Reuters
The high carbon ferromanganese furnace with a capacity of about 55,000 tonnes per year was shut last Tuesday.
Furnaces 3 and 4 had already been closed, it said.
"These furnaces will be kept out of operation until market conditions warrant start up," ARM said in a statement.
The group's convertor for production of refined alloys, which has not produced since December 2008, would also remain closed and would be restarted as demand increases.
Assmang is jointly owned by ARM and Assore.
Read more at Reuters
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