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Goldman cuts their 2009 S&P 500 forecast; Gensler on Swaps regulation; Wall Street exodus leads to record office space availability; Apollo may rescue Realogy

• Goldman Sachs Cuts 2009 S&P 500 Forecast, Sees ‘Near Term’ Drop
• Swaps Need Regulation After Bank Losses, Gensler Says
• Wall Street Banks Vacate Towers Pushing Empty Space to Record
• Apollo May Invest $150 Million in Realogy After Loss

Back to its distressed investing roots for Apollo

With the buyout market effectively shut down, private equity firms necessarily must look elsewhere for returns.  Apollo's focus will be on its roots: debt investing.  They've apparently had little problem attracting money in this market, having finished raising nearly $15 billion in December; the fund is already around 20-25% invested, mostly in credit.  Apollo CEO spoke at the SuperReturn converence in Berlin.  According to Reuters:

Ouch: Apollo's Leon Black could be chemically impaired in a big way after adverse Huntsman court ruling

Texas justice coming after huge Huntsman victory?:  Delaware Chancery Court Judge Stephen Lamb ruled that Apollo's Hexion Specialty Chemicals has to complete its merger with Huntsman Corp even though Black & Co argued that the combined company would be insolvent and that a decline in Huntsman's business voided the deal.

Worse for Black, after the Delaware court ruling he could be personally on the hook for $2 billion in damages in a separate Texas lawsuit where Huntsman is suing him for fraud if this case isn't somehow settled. According to the NY Post:

Apollo raising £1.1B to chase distressed debt

The chase for distressed debt is getting more and more crowded as Apollo is the latest to raise money.  It's looking for over $2 billion for new fund that will buy troubled loans from European banks. 

Other players involved in the distressed debt market include Blackstone, which raised a separate $1.3bn (£697m) fund to invest in the area, and Carlyle, which raised $1.35bn.
 
  According to recent figures from Private Equity Intelligence, distressed debt funds raised 38pc more capital in the first six months of the year globally, bringing in a total of $33bn.

Apollo seeks £1.1bn for distressed debt - Daily Telegraph

No prepack for Linens 'N Things as it files for chapter 11

Just as we thought they would do: Linens 'N Things abandoned any thoughts of a prepackaged bankruptcy and filed voluntary chapter 11 today.   They'll be closing 120 stores. GE Capital, its secured lender before the filing, is supplying the $700 million of debtor in possession financing.

We hear that Apollo and the bondholder steering committee, of which Apollo is a member --the company was scarfing up tons of bonds before the company filed to protect its equity position in the event of debt for equita y deal -- were at odds.  The committee naturally wanted Apollo to pony up more cash to inject into the company and they weren't so thrilled with that idea.

Complicating the bankruptcy, now that Apollo owns a significant bond position, they're now setting up to clash heads with Linens' other equity sponsors: Silver Point Capital and NRDC Real estate advisors...

Linens files for Chapter 11, to close 120 stores - Reuters

Sounds like Linens 'N Things is getting closer to a bankruptcy filing....

Could this be heading for liquidation?: According to the NY Post, sales have taken a dive at the Leon Black / Apollo LBO, and their cash position is getting worse.  Large vendors are being paid up front to keep shipments going.  That prepack that they were trying to do (of which we were skeptical) is sounding like a no-go....

The Clifton, NJ, home-furnishings chain's comparable sales - or sales at stores open at least a year, a closely watched measure of retail performance - are down 5 percent since the start of the year, according to internal company documents reviewed by The Post.

That's sharply lower than the 1 percent drop Linens 'n Things reported during last year's fourth quarter, and includes a steeper-than-expected first-quarter comparable-sales decline that's closer to 6 percent, documents show. While trends improved slightly in April, sources chalked it up to a calendar quirk that affected the timing of Easter.

Let the bankruptcy games begin: Apollo's disastrous Linens 'N Things a step closer to Chapter 11 after they said they wouldn't be paying the bond coupon due today...

Chapter 11 Watch:  Apollo's ill-conceived Linens 'N Things LBO  is entering a new stage today: It's not paying the coupon that's due on its $650 million Floating Rate Notes.  Ya, they have a 30 day grace period and say they're working on a consensual prepackaged Chapter 11 plan, but you know what happens to retailers at the mere whiff of credit problems: they death spiral into bankruptcy.  How come Leon Black & Co didn't start their discussions months ago on a prepack?  Maybe then they would have had a prayer of getting one done.  Barring a miracle, we don't see that happening.  We await the bankruptcy filing with eager anticipation. Here's the press release.

Not exactly great timing, but Apollo is finally doing their IPO

There's been speculation for months and months --- now Leon Black's Apollo Management is going the IPO route issuing 29.8 million class A shares.  Black, and his co-founders, Josh Harris and Mark Rowan, Drexel alums who founded the firm after Drexel imploded,  naturally stand to bank large. (But probably not as large as Steve Schwarzman et al banked when Blackstone took their firm public at nearly the top of the market.  The shares currently trade privately at around $14 / share on Goldman's private over the counter exchange (GSTrue).  Apollo sold shares in a private transaction to Goldman, JP Morgan and Credit Suisse in a private offering in August at $24/share, so they're under water.  Oops.  It's not clear exactly whose shares will be sold into the offering since the table of "Selling Shareholders" isn't yet filled in.

In its 406-page securities filing, Apollo shrugged off worries about an economic downturn and its inability to do traditional limited buyouts, instead embracing the period as a time of opportunity. "Investors should understand that we may significantly increase the pace of investment when the 'prevailing wisdom' is to sell and may decrease the pace of investment or sell large portions of our funds' portfolios when the 'prevailing wisdom' is to buy," the filing states.

The partners at Apollo make a base cash salary of $100,000 a year, but have a windfall as part of the reorganization of the firm in July in preparation for capital-raising. Although individual compensation is not yet broken out, Apollo's partners will get stock and restricted stock units valued at a total of $986 million. The firm's restricted-stock units have long vesting periods of six years, which is about twice the normal length of such units on Wall Street.

IPO for Apollo Management - Wall Street Journal

Here are some excerpts from the S-1 filing, including shareholdings of the principals:

Citi spikes after hours on the possible sale of $12 billion in loans

Could the debt market really be stabilizing?  Shortly after the market closed, the Financial Times reported that Citigroup was close to a deal to sell $12 billion in loans to Apollo, TPG and Blackstone....