当买断公司介入时，请注意

私募股权公司擅长获得他们想要的东西。

他们接管公司，在部分债务资助的交易中，并影响他们的决定，目的是从收购中获得股权的收益。一路上，他们可能会帮助自己从他们控制的公司中股息，有时在购买时不久收回一部分投资 - 并在清楚地结算之前，他们将成功地建立其价值。

Increasingly, they’re having their way with the people lending them money too.

Buyout funds have been demanding aggressive terms over the past several years that may help protect their interest in companies at the expense of lenders funding their deals. Debt investors are accepting fewer covenants based partly on the narrative that they too will benefit from increased flexibility for private equity owners.

“Private equity firms are basically masters of financial engineering,” says Michael DePalma, chief executive officer of PhaseCapital, a New York–based investment firm focused on credit and quantitative macro strategies. “It’s just hard to believe that debt investors are willing to give up so much, particularly when the covenant-lite market has not really been tested.”

Covenant-lite loans, which lack safeguards protecting lenders, have surged since the 2008 financial crisis. A record 89 percent of institutional loans issued last year by private equity-backed borrowers were covenant-lite, a portion that has soared from 6 percent in 2010, according to data from S&P Global Market Intelligence.

“What assumptions are we making that we’re okay with lending money over and over again, and basically saying, ‘You know what, if you have it, pay us back,’” says DePalma, who is avoiding covenant-lite deals for fear of unpleasant surprises.

“The additional yield you get for these things is not significant,” he says. “Are we that yield hungry out there? That must be it.”

据申鸭的说法，由十年的低利率创造的公司债务泡沫使投资者如此匮乏，因此他们通常愿意愿意接受与弱盟的债务协议。

As an investor in private equity funds, Christopher Zook, founder of Houston-based multifamily office CAZ Investments, has seen up close some of the more egregious terms lenders have been willing to accept. “We’ve seen deals where the covenants are absurd,” he says.

For example, CAZ was invited last year to co-invest in a multibillion-dollar take-private deal under which the company could “literally sell off their assets and not pay down any debt — and the lender wouldn’t have any recourse,” according to Zook. “That’s crazy,” he says, declining to name the company that was taken private due to nondisclosure agreements.

然而，对于股权持有人来说，Zook和Caz表示，这是一个很好的协议，其中监督了125亿美元的资产，决定参加收购。

“If they wanted to, tomorrow the company could sell all the assets and pay all the proceeds to me and others,” says Zook. “And the debt holders would be left holding nothing.”

The aggressive terms of the buyout funding show how far Wall Street will go to sell a deal, according to Zook. “Lenders just aren’t being paid enough interest rate to take that kind of risk,” he says. Particularly as it’s their job to be paid back.

Craig Manchuck, a bond fund manager at Osterweis Capital Management, has steered away from funding buyouts with weak lender protections, including Blackstone Group’s $17 billion purchase ofRefinitivlast year. (Blackstone declined to comment for this article.)

在债券契约和信贷协议中潜伏的危险可能不是问题 - 直到公司遇到麻烦。

Manchuck has seen private equity firms ask for financing terms allowing a unit producing the majority of a company’s earnings to be deemed a non-guarantor subsidiary. Should things go wrong and the company file for bankruptcy, the equity holders may continue to see income from the non-guarantor subsidiary, while debt investors have no claim on the assets, he says.

据人群称，过去七年或八年来，买断公司已经积极寻求消除贷款保护，以确保他们的股权股票损害危险的风险。

“They’ve now got all the advantages,” he says. “The bondholders and the lenders on the loan side retain fewer and fewer controls to make sure that things are being done correctly.”

While Zook agrees debt investors may end up hurt from some riskier buyout deals, he says he likes the returns private equity provides his multifamily office. They include gains from dividends funded by debt, a strategy where a buyout firm directs a company it owns to borrow to finance the payout.

“There’s a fine line a private equity firm has to walk between delivering the best returns they can for their limited partners,” Zook says, and “making sure that they’re good stewards of the companies they acquire.”

Arguably, it’s a line they don’t always walk well.

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Consider, if you will, EP Energy Corp.

The Houston-based oil and gas developer is struggling under the debt load that helped fund its $7.2 billion buyout by Apollo Global Management in May 2012. The company is now trading for less than $1 a share and was warned by the New York Stock Exchange in January that itno longer meets its listing standards.

阿波罗,私人股本公司由亿万富翁Leon Black, led an investment group that purchased EP Energy, the exploration and production assets of El Paso Corp., before oil prices began to plunge in mid-2014. The new owners were quick to recoup a portion of their investment before the steep decline, directing the company to issue debt to finance the payout.

The group — which includes private equity firm Riverstone Holdings, Korea National Oil Corp., and Access Industries, the conglomerate controlled by billionaireLen Blavatnik.— extracted a $200 million leveraged dividend in August 2013, before taking EP Energy public in early 2014. The company also issued $350 million ofpay-in-kind notesin December 2012 to fund a distribution to its owners, repaying the debt with proceeds from the initial public offering, regulatory filings show.

Apollo stands out among private equity firms foraggressively taking dividends, according to a Moody’s Investors Service report in October. Buyout firms are considered “particularly aggressive” when the dividends are large or taken within about a year of a buyout, Moody’s said. (Apollo declined to comment on EP Energy and its use of debt-funded dividends.)

Borrowing to fund a faster return on capital doesn’t help build the value of a company. It benefits the private equity owners while adding interest expense that eats into cash flow.

Buyout firms can “supercharge” their internal rates of return by taking dividends before they exit their deals through a sale or a public offering, says Manchuck, who co-manages the $5.5 billion Osterweis Strategic Income Fund. Osterweis has avoided exploration and production companies for more than two years, he says, because they tend to lack free cash flow.

Borrowers in that position can find themselves stuck with an unsustainable debt problem. EP Energy is no exception. The oil and gas developer will burn cash this year to fund production, according to S&P Global Ratings analyst Sarah Sherman.

“Its biggest issue is the capital structure,” Sherman says in a phone interview. It’s difficult for the oil and gas developer to pay down debt, according to S&P, which rates the company CCC+, or seven levels below investment grade.

EP Energy had $365 million of interest expense last year, as total debt rose to $4.4 billion at the end of December, according to its annual report filed with the Securities and Exchange Commission. “That interest burden really makes it difficult for them to dig themselves out of where they are now,” says Sherman.

Absent higher oil prices, the credit rater said in a February report, the company could attempt a distressed-debt exchange for some breathing room as it approaches a debt maturity next year.

EP 2012年能源收购由4.25美元billion of debt and $3.3 billion of equity, aregulatory filingshows. Now operating amid lower commodity prices, its high leverage makes aggressive growth spending hard. This year, EP Energy will see a $130 million shortfall in free cash flow, S&P estimated in the February report, co-authored by Sherman.

Meanwhile, there’s still a lot at stake for the private equity group in control of the company.

据Adocumentthe alternative asset manager filed with the SEC.

After the buyout, Apollo owned about 54 percent of the company, with Riverstone, KNOC, and Access each holding a 15 percent stake, a filing from EP Energy shows. Apollo invested in the company through Fund VII, a $14.7 billion buyout fund that closed in 2008, and Apollo Natural Resources Partners, according to a regulatory filing.

The IPO diluted the Apollo-led group’s ownership to a combined stake of about 85 percent, a regulatory document shows. And while the offering helped relieve the company’s debt burden, it shined a light on the various fees the owners pocketed.

EP Energy used proceeds from the offering to pay down borrowings — including the notes that financed the dividend — plus deliver $83 million in fees to the sponsors, according to the document. The payment was tied to the company’s management fee agreement with the sponsors for consulting and advisory services.

Within two years of the buyout, the Apollo-led group of sponsors received around $200 million in fees, filings show.

Certain investors in the group, including Apollo, pocketed a one-time $71.5 million “transaction fee” paid by EP Energy at the time of its 2012 buyout for related services such as arranging financing. That same year, the sponsors received about $15 million under their management fee agreement with the company. In 2013, they collected $26 million in management and other fees. And the next year, EP Energy paid them a total $90 million in fees, all of which, including those covered with the IPO proceeds, was recorded during the first quarter of 2014, filings show.

Not surprisingly, the company has routinely alerted its investors about the power of its private equity owners.

The oil and gas producer warns in its annual reports that its private equity owners “may have conflicts of interest with us” or the company’s “public investors.” As long as they own the majority of its equity, or control the majority of its board, EP Energy says in the filings that “these investors will continue to be able to strongly influence or effectively control our decisions.”

The oil producer’s website shows that five of the directors on its 13-person board work at Apollo, while employees of Riverstone, KNOC, and Access also fill some seats.

According to EP Energy’s latest annual report, Apollo, Riverstone, Access, KNOC, and other legacy investors own more than 75 percent of the company’s shares. (Riverstone declined to comment.Donald Wagner, a managing director at Access Industries who sits on EP Energy’s board, did not return a phone call seeking comment.)

Giljoon Sinn, a former EP Energy board member who works for KNOC, did not respond to a message seeking comment that was sent March 25 over LinkedIn. However, that same day, Sinn notified the board of hisresignation, which took effect April 1.

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While fees collected by私募股权公司可能似乎是特殊的，其实是与他们拥有的投资者和公司的各种协议来源。

据此，八七七七七十七名阿波罗的可分配收益源于费用 - 比竞争对手替代资产经理Blackstone Group，KKR＆Co.和Caryle Group的更高部分。塔皮书. Fees raked in last year by Blackstone, the world’s largest private equity firm, made up 54 percent of its distributable earnings, PitchBook’s analysis shows.

这些巨型资产管理人员投资私募股权以及其他替代战略。他们从资产中产生的费用可能源于各种来源，包括与其投资组合公司相关的绩效，基金管理或咨询服务。

EP Energy paid no fees to its sponsors in 2018. But its annual report for 2017 shows $5 million in sponsor-related fees were paid to release a leadership team from another Apollo-backed company. EP Energy explained in the filing that in November 2017, it reimbursed that portfolio company about $4 million for money contributed to it by fund investors other than Apollo.

That same month, EP Energy震撼了它的领导力by naming Russell Parker president and chief executive officer. Parker was previously CEO of Phoenix Natural Resources, according to EP Energy’sannual reportfor that year.

Parker said March 15, during EP Energy’s conference call on its 2018 earnings, that the company has adapted to volatile commodity prices seen in the second half of last year and plans to stay disciplined. “We have a great set of assets and a committed group of exceptional employees that helped us deliver on our operating objectives,” he said during the call. “We’re very pleased with what we accomplished during the year.”

石油生产商在过去五年半的一半半年内削减了全职的美国劳动力。

And EP Energy’s efforts to reduce debt through asset sales, open market debt repurchases, and a distressed-debt exchange in January have not been enough to “right-size the company's capital structure,” S&P said in its February report.

Assuming oil prices of $55 a barrel, EP Energy expects it won’t have enough liquidity to repay its $182 million of senior unsecured notes maturing in May 2020 plus meet working capital needs and planned capital expenditures, according to its2018 annual report. Crude was about $59 a barrel on March 25, down from about $75 at the start of October.

EP Energy的Outlook在收购时更加明亮。2012年，该年度从El Paso雕刻出来的杠杆收购，油价跑得高达109美元的桶。在较低的商品价格下，其私募股权投资者已经看到其股权下跌的债务在巨额债务下的价值以来，自拍公众。（EP Energy的发言人没有回复电话和寻求评论的电子邮件。）

Based on a share price of 26 cents on March 29, the oil and gas developer has a market value of about $67 million. That compares with about $4.9 billion at the time of the IPO, which priced at $20 a share.

与此同时，阿波罗领导的投资集团成员在分布中占据了超过10亿美元的分布，监管申请表明他们主要资助债务。EP Energy的备案显示，2012年和2013年的成员将其分发给成员，并在收购后约15个月内指出至少5.37亿美元。

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单程买断公司寻求挽救他们的股权in struggling companies is through distressed-debt exchanges — although this avenue can turn out to be at lenders’ expense.

Distressed exchanges became common during the financial crisis and have remained a prevalent tool for restructuring, particularly among private equity-owned companies that are struggling, according to Moody’s Investors Service.

“成功的时候,他们可以帮助负债过高的公司s reduce debt enough to stay solvent and avoid bankruptcy,” Moody’s said in a March 2018 report on out-of-court restructurings. While they proved helpful in the 2008–2009 default cycle tied to the financial crisis, that cycle was shortened by unprecedented intervention from the Federal Reserve, according to the report.

Naturally, buyout firms want as much runway as possible to preserve their equity in a business.

“You’re hoping that something turns around and that you can save the business,” says Osterweis’s Manchuck. “But by doing so, you may be bleeding value away from the lenders, and their ultimate recoveries could be much more negatively impaired.”

Moody’s studied 30 years of defaults and found that 41 percent of the time “distressed exchanges did not shore up the capital structures of struggling companies enough to stave off another default” from bankruptcy or another round of distressed-debt swaps, according to the report.

It’s certainly in the best interest of private equity firms to seek a distressed-debt exchange over a bankruptcy, according to Moody’s analyst David Keisman. “If you’re in bankruptcy, you’re wiped out, usually,” he says in a phone interview.

Distressed exchanges were “not really a meaningful form of default” before the financial crisis, says Keisman. But after the Fed put trillions of dollars of liquidity into the market, borrowers watched as default rates diminished and said, “‘Why don’t we do a distressed exchange and get us out of this cycle and then worry about it?’” Keisman says.

Borrower-friendly financing terms have also become more prevalent, making it easier, in some cases, for the value in a company to be removed from creditors and placed into the hands of equity holders, according to Derek Gluckman, a Moody’s analyst who specializes in covenants.

“Covenant protections continue to be degraded,” he says. “That’s something we see year over year over year, and I don’t expect that to change until market conditions will no longer permit that.”

Covenant-lite loans, which were introduced to the market before the crisis, can help companies endure a rough couple of quarters without harming lenders, according to Manchuck. The problem arises when covenant-lite debt permits the borrower to keep extending the runway for a potential turnaround while the business continues to deteriorate, he says.

“Where covenant-lite, or the lack of covenants, will really hurt is in the potential recoveries if we go into a default cycle,” says Manchuck. “Going into bankruptcy sooner often preserves that value for the estate.”

In other words, creditors may recover more value from a company that files for bankruptcy protection instead of drawing out — because a lack of covenants permits it — an unsuccessful turnaround attempt in a longdownturn.

Buyout firms first started asking for covenant-lite loans to defend against overzealous, or hostile, debt investors as credit markets evolved, says Manchuck. Banks were holding a shrinking portion of the loans backing their deals, prompting concern that their buyout debt could trade into the hands of a distressed investor, who might force a restructuring at the slightest stumble, he says.

But in the past several years, private equity firms have become more aggressive in asking for terms that favor their position as equity holders. In aiming to build the value of companies they own to produce big returns for their investors, they’re playing for the upside. Lenders don’t share that same upside potential, but they’ve increasingly given up downside protection to help fund their buyouts.

“系统倾斜的是赞助赞助商，”Manchuck说。“谁的错是？我会说这是贷方的错，但贷款人已被盒装成供需方程式。“

Osterweis is able to ignore aggressive deals because it’s “benchmark agnostic,” according to Manchuck. But for high-yield managers seeking to beat a particular benchmark, it can be tough to pass on deals that will be included in it for fear of “locking themselves into underperformance,” he says. Instead, they may overweight or underweight borrowers in a bid to outperform the benchmark, he explains.

“随着越来越多的金钱转向基准战略 - ETF的增长贡献了 - 这使得赞助商更容易处理较弱的结构，”他说。“这些交易中的一些可能会罚款，但如果您拥有其中一些交易，那么您没有保护的潜伏风险。”

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Meanwhile, private equity firms继续到吸引机构投资者亚博赞助欧冠in droves.

在他最近的对话与全球投资者,Zook says “there’s the perception that we’re getting pretty close to the recession.” Investors who contribute to a private equity fund that closes this year are anticipating it will put money to work at much better valuations than the past two or three years, he explains. The valuations will soften in a contracting economy.

“我认为这是促进金钱，继续流向那里的一些非常大的超级资金，”Zook说。“私募股权商业模式本身非常好。”

Private equity produced a 14.8 percent internal rate of return globally for the year through June 2018, according to PitchBook data. The industry produced a 15.1 percent IRR for the five years through June.

As for dividends, Zook says he loves getting back his money quickly from private equity deals as it increases IRRs. But he adds that they should be financed with a reasonable amount of debt and warns that private equity firms have been successfully loosening covenants to give themselves more flexibility for payouts.

Debt-funded dividends shouldn’t take a company’s leverage to “ridiculous” levels that it may struggle to bear in a downturn, he says. And caution is needed with cyclical borrowers like oil producers, he adds, as commodity prices are known to be volatile.

Over time, the prevalence of covenant-lite loans in private equity may prove to be a double-edged sword. The notion that private equity firms will manage to muddle through a downturn and come through “okay on the other end” because of loose covenants has led lenders to feel more comfortable taking on more risk, according to Zook.

“The place that I think there will be some that get hurt are the people making overleveraged loans with very weak covenants,” he says. “They’re the ones that are going to be left holding the bag.”