October 2007 Issue

Recent turmoil in the credit and subprime mortgage markets has negatively affected a number of private equity deals. Less publicized has been the effect of the turmoil on companies. To that end, we revisit amendments to the US Bankruptcy Code and outline what they mean for private equity sponsors and their distressed portfolio companies. 

Tapping the Japanese market for capital requires knowing the unique tax, regulatory and structural preferences of the country’s LPs. 

The US Congress is taking a close look at alternative investment fund fees. Tax experts say offset structures benefiting LPs are probably safe, whereas popular compensation deferral models for private equity and hedge funds may face legislative assault. 

There are no market terms for co-investments – you get what you can negotiate. And in today’s market, the balance of power remains on the side of the GPs. Even getting the opportunity to co-invest can be a struggle for LPs. 

A GP’s fiduciary duty is a supple precept, defined loosely in good times, but prone to be cited in the face of faltering deals. As investment opportunities shift, firms should clarify this duty just in case an unhappy LP cries ‘breach’ in a crowded Delaware courtroom. 

Boston-based Proskauer Rose follows its clients to London, Paris and São Paulo. 

A recipe for a first-time distressed fund operating on the smaller end of the middle market: a strong team, plenty of deal flow and evidence of true operating wherewithal. Having raised a $280 million fund, New York’s Monomoy Capital Partners is finding this formula to be quite popular. 

Most of today’s private equity funds boast an eclectic mix of investors, many with their own unique needs. To accommodate them, side letters are often used – but experts suggest side letters be restricted to two issues: disclosure and investment restrictions. 

 The London firm led by Michael Smith has hired a COO—the former CFO of Royal Bank of Scotland.

The proliferation of new private securities exchanges could help private equity firms become more institutionalized and function as a first step prior to a public listing, industry players say. 

Lone Star has yet to escape the terms of its initial agreement to purchase Accredited Home Lenders, signed before the deterioration of the subprime real estate sector. 

Germany’s coalition government is working on a new law on private equity. A number of drafts have been published, but no one seems to be getting excited. 

The US FASB appoints David Larsen to its valuation resource group tasked to investigate additional guidance for fair value reporting. 

Private fund tax experts were pleasantly surprised last month to see proposed legislation come out of the US Congress designed to encourage fund managers to stay onshore.