Wall $treet Folly

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....

You've been elfed: Private equity kings Steve Schwarzman, Henry Kravis, Leon Black and Christopher Flowers

We've brought you the OfficeMax dancing elves of Wall Street, of Hedge Funds and now we present to you the dancing elves of Private Equity.  Watch Blackstone's Steve Schwarzman, KKR's Henry Kravis, Apollo's Leon Black and J.C.Flowers & Co's Christopher Flowers....

Prior Post: The Dancing Hedge Fund Elves

Apollo sells 9% stake to Abu Dhabi Investment Authority

Back in July Apollo was said to be in discussions to sell a minority stake to the Abu Dhabi Investment Authority. It's a done deal now according to Apollo head Leon Black:

"We recently sold 9 percent of our   firm to the Abu Dhabi Investment Authority (ADIA)," Black said, speaking   at The Deal's M&A Outlook 2008 conference in New York.

Apollo chief says sold nine percent of firm to Abu Dhabi - Reuters

Today at Northern Rock - 10/8/07 - Apollo and Blackstone also interested in bidding?; Could NR go it alone?.....

Sounds like the list of suitors for Northern Rock is getting longer as Apollo and Blackstone are said to have expressed interest;  However, NR may try to go it alone with the help of a big Citigroup loan;  if that's the case, the board of directors might be keeping their jobs;  NR prices itself out of many mortgage deals by offering sucky terms; If NR is sold junior bondholders could take a hit

Apollo share trading off to a weak start on Goldman's private exchange

Not a total surprise given how suckily Blackstone has traded:  We hear that Leon Black's Apollo Management went ahead with its planned private share issue, and trading is off to a disappointing start.  The shares, changing hands on Goldman Sachs' new GS TruE (GS Tradable Unregistered Equity) electronic exchange, were expected to be sold in the $27 - $30 range, but the shares are trading around $25.50.

Apollo IPO: This time Goldman & JP Morgan aren't getting shut out

Goldman and JP Morgan both came up with the short end of the stick in the Blackstone IPO and KKR's upcoming one.  Citigroup and Morgan Stanley landed the roles as co-lead underwriters in those deals.  This time GS and JPM are getting a piece of the action as co-leads in the upcoming Apollo IPO:

JPMorgan and Goldman Sachs have lined up key roles advising Apollo Management on its expected IPO, the first signs of a comeback by other Wall Street banks after the early dominance of Morgan Stanley and Citigroup in the battle to underwrite private equity floats...