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The Wire Jan. 24, 2022
Churchill's Randy Schwimmer on inflation and PE, Big pension shops large PE portfolio Happy Monday!
This is Chris, on the Wire today for MK. What’s the word out there??
I almost never talk about sports on here, but just let me say, that game last night between Kansas City and Buffalo was one of the best I’ve ever seen. I could care less about either team (my Steelers are in a long decline), and still, that was one for the ages … Not to mention the Fall of Brady.
Anyway!
MK has a Q&A today with Randy Schwimmer, co-head of senior lending at Churchill Asset Management, on the outlook for private equity this year with inflation and potential rising interest rates.
Here’s a selection from the interview. Read the full piece here on PE Hub:
How will rising interest rates affect PE-backed loans?
Interest expense is always the first item to be impacted, which in turn compresses interest coverage ratios for borrowers. But a rising rate environment is often prompted or accompanied by higher economic growth. Improved revenues and profitability will then offset any higher borrowing costs. The 2022 outlook for Fed rate hikes, though, only gets you to a 1 percent Fed funds rate – which pales in comparison to June 2007’s 5.25 percent level.
Big portfolio: A theme we’ve been tracking in private equity secondaries is the return of large traditional LP portfolio sales as big institutions take advantage of the rich pricing environment to sell off stakes in funds.
The biggest process, an example of sellers’ ambitions to use secondaries to sort out their portfolios, is one run by CalPERS, which wants to sell up to $6 billion of its private equity portfolio.
Another large process in the market is being run by Dutch pension administrator APG, which is selling a more than 2 billion euros chunk of its holdings. Read more here on the sale.
Deal of the Year: Get your nominations in now for your best exits (either full or majority) that closed in 2021. Awards are given in seven categories: overall deal of the year, large-cap, middle-market, small-cap, international, turnaround and secondaries. Deadline is Friday, Feb. 11. Send to Chris Witkowsky, private equity editor, at cwitkowsky@buyoutsinsider.com. Go here for all the rules and regs!
That’s it for me! Hit me up with tips n’ gossip, feedback or just to chat at cwitkowsky@buyoutsinsider.com or find me on LinkedIn.
Read the full wire commentary on PE Hub ...
Also of note (may require subscriptions) Alternative investment giant Blackstone has launched a sustainable resources platform within its credit division, through which it plans to invest $100 billion over the next decade, it said in a news release. (New Private Markets)
"One of Europe’s largest bicycle manufacturers and owner of the Raleigh brand has agreed [to] a €1.56bn takeover by a consortium led by US private equity group KKR as confidence of a lasting boom in cycling grows." (Financial Times)
"Globalization Partners, a software provider that helps businesses streamline the process of hiring employees internationally, has landed new backing from Vista Equity Partners that values the company at $4.2 billion." (WSJ Pro)
"The industry’s biggest privately held firms raised at least $9bn through debt sales last year to invest in their own buyout funds, finance growth or pay dividends to partners, according to industry executives and records obtained by the Financial Times. They include Warburg Pincus, Bain Capital, General Atlantic and Vista Equity Partners."
"Lonne Jaffe, a managing director at Insight Partners, [talks] about the type of AI companies the New York City-based firm invests in, how it vets those companies and what it sees as the next AI opportunity." (WSJ Pro)
"In a letter, Engine Capital urged Kohl’s to run a sale process following Starboard Value’s bid, as activists remain unsatisfied with the pace of the the department-store chain’s turnaround." (Wall Street Journal)
"Venture capital investment into Latin America has tripled from its previous record to top $15bn last year, as investors piled into start-ups in areas including financial technology, online shopping and property." (Financial Times)
"Private-equity firms tell clients that they will need to hold on to their money for a decade to steer investments to a successful conclusion. In reality, investors usually have to wait far longer—sometimes five or even 10 additional years—to get all their money back." (WSJ Pro)
PE Deals
They said it “The same elements that drove last year’s deal activity momentum – record dry powder, pent-up demand for assets, and a well-defined sector path for growth – remain present for 2022. The hottest industries – tech, software, healthcare, and business services – also have the best credit outcomes across cycles.” — Randy Schwimmer, co-head of senior lending at Churchill Asset Management on the outlook for private equity this year.
Today's letter was prepared by Chris Witkowsky Subscribe now to get full, unlimited access to all PE Hub content, including every PE Hub Wire article. FIND OUT MOREPlease visit Buyouts for the latest insight into LP activity and Venture Capital Journal for comprehensive coverage and analysis of what’s happening in VC.
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