TPG Capital, the Texas-based private equity firm, has considered and rejected 140 LBO deals in recent months, according to a letter to investors in its $19 billion buy-out fund, Fund VI.
Reuters reports that the letter, sent in April, said that TPG had not invested in any of the opportunities because the valuations and market dynamics were wrong. The letter went on to say that LBOs had only ever constituted 44% of the firm’s total transactions and that it expects to be able to invest on schedule in the next three to four years.
TPG stated in its letter that LBOs are “an investment structure which is useful at some times during the cycle but not at other times” and that “it makes sense to replace debt with equity, leading to restructurings and recapitalisations,” according to the Financial Times.
The letter argued that the firm’s performance was respectable as it had marked down the value of its investments by 32.5% in 2008 – roughly in line with the fall in stock markets. Among the investments marked down were Midwest Airlines, gaming group Harrah’s Entertainment and Spanish-language media operator Univision.
TPG will hold an interim investor meeting this month in New York to respond to concerns about its performance, the FT reports.
D.C.