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Yet the Familee can lose $260B in 8 months with NO REGRET! If this is not corruption and treason in the most leegalized way, what is?
Calpers Apollo Bet Sours as Private Equity Doubles Down on Debt
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By Jonathan Keehner and Jason Kelly
April 3 (Bloomberg) -- The California Public Employees’ Retirement System poured $1.71 billion into Apollo Management LP last year, more than twice as much as it gave any other private- equity manager, betting that the firm could exploit the global credit crisis. So far, the bet is coming up snake eyes.
After posting average annual returns of more than 25 percent in the last two decades, Apollo founder Leon Black, 57, is trying to salvage some of the $60 billion worth of companies he has acquired since 2006. Retailer Linens ‘n Things Inc. filed for bankruptcy last year. Casino operator Harrah’s Entertainment Inc. is restructuring debt to stave off default. At least $2 billion of loans Apollo bought last year have lost half their value, according to London-based pricing service Markit.
“Calpers really swung for the fences these last few years chasing returns,” said Jonathan Macey, a professor of corporate finance and securities law at Yale University in New Haven, Connecticut. “Leon Black has made investors a lot of money, but it’s risky to commit so much to one manager. Calpers can’t control how that cash gets called.”
The largest U.S. public pension fund, with $173.8 billion in assets, Calpers provides retirement and health benefits to 1.6 million state government workers. While it says it stands behind the decision to commit more than $3.5 billion to New York-based Apollo since 2006, Calpers has hired a new chief investment officer who managed private-equity holdings at another state pension fund that didn’t invest in Black’s funds.
‘Opportunity to Invest’
“The market dislocation presents an opportunity to invest at some favorable prices,” Calpers chief of public affairs Pat Macht said in an e-mail. “Apollo was best-suited to take advantage of these opportunities, and Calpers determined they had the most experience and track record -- a view shared by those who provide us independent advice.”
The Sacramento-based fund, which lost 27 percent of its value between July 1 and Jan. 31, committed $2.08 billion to Apollo funds originated in 2008, after agreeing to invest $950 million in funds started in 2007 and $650 million in funds from 2006, according to documents posted on Calpers’s Web site. Calpers, one of Apollo’s largest investors, had not previously promised more than $250 million to any single Apollo fund. The $1.71 billion it gave to Apollo last year were so-called capital calls against those pledges.
About 14 percent of Calpers’s assets, or $23.8 billion, are in so-called alternative investments, according to the fund’s Web site. It says its private-equity investments generated $14.2 billion in profits from 1990 to Sept. 30, 2008.
“Calpers is a valued partner and one of Apollo’s oldest relationships dating back to the mid-1990s,” Apollo spokeswoman Anna Cordasco said. She declined to comment further.
Lyondell Debt
Calpers committed $1 billion last year to the Apollo Credit Opportunities Fund, which buys distressed debt. Apollo called $751 million of that last April, according to Calpers disclosures. That same month Apollo was among the private-equity firms that purchased more than $10 billion in loans used to finance leveraged buyouts from banks including Citigroup Inc.
Much of that debt, including $2 billion in loans to now- bankrupt Lyondell Chemical Co., based in Houston, has lost more than half of its value, forcing Apollo to put up more cash to meet a margin call in the second half of last year as bank loan prices plummeted to record lows, according to people familiar with the matter.
“When Apollo made its money in the 1990s, they were the only game in town,” said Steven Kaplan, a professor at the University of Chicago Booth School of Business. “There’s a ton of money going after distressed, and that’s going to make it a lot tougher.”
Harrah’s, Realogy
Distressed securities are mostly loans and low-rated, high- yield bonds having trouble meeting interest and principal payments. Investors can profit if prices rebound or the securities are swapped for equity in a restructuring. Distressed loans usually trade below 90 cents on the dollar and bonds below 70 cents.
Apollo’s own buyouts have also struggled. The private- equity firm agreed last year to pay Salt Lake City chemical- maker Huntsman Corp. $1 billion after terminating a $6.5 billion offer, and it saw Linens n’ Things, a Clifton, New Jersey-based home-furnishings retailer that it bought for $1.3 billion in 2006, file for bankruptcy.
The firm has also announced distressed-debt buybacks for Claire’s Stores, Harrah’s and Realogy Corp., the Parsippany, New Jersey-based owner of residential brokerage agencies Century 21 and Coldwell Banker, to which it offered an equity infusion of up to $150 million to offset mounting losses. The three companies, which had combined losses of more than $7 billion in 2008, all appear on a list of businesses at highest risk of default released by Moody’s Investors Service last month.
Born of Distress
Eight Apollo funds called a total of $1.71 billion from Calpers last year. Washington, D.C.-based Carlyle Group, the world’s second-largest private-equity firm, made $681.3 million of capital calls on the pension fund in 2008. Fort Worth, Texas- based TPG, which also has piled into distressed debt, drew down $272 million, and Blackstone Group LP in New York, manager of the world’s largest buyout fund, called $143 million.
Founded in 1990 by former Drexel Burnham Lambert Inc. executives Black, Joshua Harris and Marc Rowan, Apollo got its start trading in distressed debt. It made $2 billion, along with Credit Lyonnais SA, on high-yield bonds acquired from insolvent Executive Life Insurance Co. for 50 cents on the dollar.
Calpers Apollo Bet Sours as Private Equity Doubles Down on Debt
Share | Email | Print | A A A
By Jonathan Keehner and Jason Kelly
April 3 (Bloomberg) -- The California Public Employees’ Retirement System poured $1.71 billion into Apollo Management LP last year, more than twice as much as it gave any other private- equity manager, betting that the firm could exploit the global credit crisis. So far, the bet is coming up snake eyes.
After posting average annual returns of more than 25 percent in the last two decades, Apollo founder Leon Black, 57, is trying to salvage some of the $60 billion worth of companies he has acquired since 2006. Retailer Linens ‘n Things Inc. filed for bankruptcy last year. Casino operator Harrah’s Entertainment Inc. is restructuring debt to stave off default. At least $2 billion of loans Apollo bought last year have lost half their value, according to London-based pricing service Markit.
“Calpers really swung for the fences these last few years chasing returns,” said Jonathan Macey, a professor of corporate finance and securities law at Yale University in New Haven, Connecticut. “Leon Black has made investors a lot of money, but it’s risky to commit so much to one manager. Calpers can’t control how that cash gets called.”
The largest U.S. public pension fund, with $173.8 billion in assets, Calpers provides retirement and health benefits to 1.6 million state government workers. While it says it stands behind the decision to commit more than $3.5 billion to New York-based Apollo since 2006, Calpers has hired a new chief investment officer who managed private-equity holdings at another state pension fund that didn’t invest in Black’s funds.
‘Opportunity to Invest’
“The market dislocation presents an opportunity to invest at some favorable prices,” Calpers chief of public affairs Pat Macht said in an e-mail. “Apollo was best-suited to take advantage of these opportunities, and Calpers determined they had the most experience and track record -- a view shared by those who provide us independent advice.”
The Sacramento-based fund, which lost 27 percent of its value between July 1 and Jan. 31, committed $2.08 billion to Apollo funds originated in 2008, after agreeing to invest $950 million in funds started in 2007 and $650 million in funds from 2006, according to documents posted on Calpers’s Web site. Calpers, one of Apollo’s largest investors, had not previously promised more than $250 million to any single Apollo fund. The $1.71 billion it gave to Apollo last year were so-called capital calls against those pledges.
About 14 percent of Calpers’s assets, or $23.8 billion, are in so-called alternative investments, according to the fund’s Web site. It says its private-equity investments generated $14.2 billion in profits from 1990 to Sept. 30, 2008.
“Calpers is a valued partner and one of Apollo’s oldest relationships dating back to the mid-1990s,” Apollo spokeswoman Anna Cordasco said. She declined to comment further.
Lyondell Debt
Calpers committed $1 billion last year to the Apollo Credit Opportunities Fund, which buys distressed debt. Apollo called $751 million of that last April, according to Calpers disclosures. That same month Apollo was among the private-equity firms that purchased more than $10 billion in loans used to finance leveraged buyouts from banks including Citigroup Inc.
Much of that debt, including $2 billion in loans to now- bankrupt Lyondell Chemical Co., based in Houston, has lost more than half of its value, forcing Apollo to put up more cash to meet a margin call in the second half of last year as bank loan prices plummeted to record lows, according to people familiar with the matter.
“When Apollo made its money in the 1990s, they were the only game in town,” said Steven Kaplan, a professor at the University of Chicago Booth School of Business. “There’s a ton of money going after distressed, and that’s going to make it a lot tougher.”
Harrah’s, Realogy
Distressed securities are mostly loans and low-rated, high- yield bonds having trouble meeting interest and principal payments. Investors can profit if prices rebound or the securities are swapped for equity in a restructuring. Distressed loans usually trade below 90 cents on the dollar and bonds below 70 cents.
Apollo’s own buyouts have also struggled. The private- equity firm agreed last year to pay Salt Lake City chemical- maker Huntsman Corp. $1 billion after terminating a $6.5 billion offer, and it saw Linens n’ Things, a Clifton, New Jersey-based home-furnishings retailer that it bought for $1.3 billion in 2006, file for bankruptcy.
The firm has also announced distressed-debt buybacks for Claire’s Stores, Harrah’s and Realogy Corp., the Parsippany, New Jersey-based owner of residential brokerage agencies Century 21 and Coldwell Banker, to which it offered an equity infusion of up to $150 million to offset mounting losses. The three companies, which had combined losses of more than $7 billion in 2008, all appear on a list of businesses at highest risk of default released by Moody’s Investors Service last month.
Born of Distress
Eight Apollo funds called a total of $1.71 billion from Calpers last year. Washington, D.C.-based Carlyle Group, the world’s second-largest private-equity firm, made $681.3 million of capital calls on the pension fund in 2008. Fort Worth, Texas- based TPG, which also has piled into distressed debt, drew down $272 million, and Blackstone Group LP in New York, manager of the world’s largest buyout fund, called $143 million.
Founded in 1990 by former Drexel Burnham Lambert Inc. executives Black, Joshua Harris and Marc Rowan, Apollo got its start trading in distressed debt. It made $2 billion, along with Credit Lyonnais SA, on high-yield bonds acquired from insolvent Executive Life Insurance Co. for 50 cents on the dollar.
