FORTUNE -- The Wall Street Journal is reporting that Texas electricity giant Energy Future Holdings is preparing to file for bankruptcy protection, after failing to successfully restructure its $41.6 billion of debt.
This will clearly be the largest private equity failure of all time. I say "clearly" because Energy Future happens to double as the largest leveraged buyout in history, being acquired for $45 billion in 2007 by Kohlberg Kravis Roberts & Co. (KKR), TPG Capital, and Goldman Sachs (GS). At the time, it was known as TXU.
I've already heard some people say this morning that this bankruptcy would be an indictment of mega-buyouts, particularly those that occurred shortly before the 2008 financial crisis. And perhaps there is a grain of truth in that, in terms of fund portfolio management (i.e., hard to dig positive returns out of an abnormally large hole).
In general, however, Energy Future represents a failure of energy pricing predictions rather than one of financial engineering. The private equity sponsors essentially believed that U.S. natural gas prices would continue to climb -- or at least remain stable -- thus enabling Energy Future's coal-fired power business to increase both its prices and market share. But here is what actually has happened to natural gas prices:
Yes, prices have rebounded a bit so far this year, but that's several dollars short and years late for Energy Future Holdings and its investors (some of whom have effectively hedged Energy Future a bit with unrelated shale investments). No amount of operational improvements, divestitures, or other maneuverings could overcome this core shift.
So when private equity's largest deal is finally buried, the tombstone shouldn't lament some of the industry's more questionable business practices. Instead, it need only highlight a much more fundamental lack of business judgment.
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KKR has dipped its toe into tech growth equity in the past. Is it now ready to jump in the pool?
FORTUNE -- Kohlberg Kravis Roberts & Co. (KKR) is in the preliminary stages of forming a tech-focused growth equity platform, Fortune has learned.
Specific details remain very much in flux, including staff (it would be hiring from the outside), structure (either dedicated fund or, possibly, off balance sheet) and size (most likely $1b-$2b).
KKR has MOREDan Primack - Jan 30, 2014 12:41 PM ET
KKR is overpaying to buy a bond fund that it already controls.
FORTUNE -- Buyout firms appear to be running out of things to buy out. And so they are buying themselves.
Late on Monday KKR & Co. (KKR) announced it was acquiring KKR Financial Holdings (KFN). KFN is technically a separate company, a bond fund manager that is publicly traded, but it's really just a division of the giant private equity MOREStephen Gandel, senior editor - Dec 18, 2013 12:13 PM ET
Home audio company raises a 'liquidity round' for early employees.
FORTUNE -- Sonos, a maker of high-end wireless home audio systems, has raised approximately $25 million in new funding, Fortune has learned. But none of the money is actually going into the company.
Instead, existing investors like Kohlberg Kravis Roberts & Co. (KKR) and Index Ventures are buying up shares from early employees.
This is at least the third time that Sonos investors MOREDan Primack - Nov 6, 2013 11:27 AM ET
What happened when private equity giant KKR got involved with a rural nut processor in Bali.
FORTUNE -- There has been lots of discussion about how private equity firms do (or don't) create new jobs, so today it's worth highlighting an instance in which jobs not only were indisputably created, but the new hires were poor rural villagers. Moreover, the participating private equity firm invested time rather than money.
Here's the story MOREDan Primack - Oct 23, 2013 12:09 PM ET
Public Pension Capital gets a nine-month lifeline.
FORTUNE -- It's tough to raise a new private equity fund. Even if you have decades of experience at Kohlberg Kravis Roberts & Co. (KKR) on your resume.
Last summer we reported that former KKR executives Perry Golkin and Michael Tokarz were quietly raising a new private equity fund that would be marketed almost exclusively to public pension systems. Not surprisingly, it was called Public Pension MOREDan Primack - Sep 5, 2013 12:04 PM ET
Nine years ago, private equity giant KKR did its first ever venture capital deal. It's worked out pretty well.
FORTUNE -- This morning we put Jazz Pharmaceuticals (JAZZ) atop our annual list of the world's fastest-growing public companies, with three-year average revenue and profit growth of 68% and 279%, respectively. So I was curious to see how Jazz had worked out for Kohlberg Kravis Roberts & Co. (KKR), which led a MOREDan Primack - Aug 29, 2013 12:14 PM ET
Former CIA director joins private equity firm.
FORTUNE -- Former CIA director and retired military general David Petraeus has joined private equity firm Kohlberg Kravis Roberts & Co. (KKR) as chairman of a group that will "study macroeconomic trends and government policies to assess their implications on the firm's investments."
He also will advise KKR's investment teams on due diligence, particularly in emerging markets.
The new effort is called KKR Global Institute, and is MOREDan Primack - May 30, 2013 7:02 AM ET
Merging Saks with Neiman Marcus may make sense, but it won't be easy.
FORTUNE -- Kohlberg Kravis Roberts (KKR) reportedly is considering a massive luxury retail consolidation move: Buying both Saks Inc. (which just went on the block) and Neiman Marcus (being sold by a PE group that includes TPG, Warburg Pincus, Leonard Green and Credit Suisse) -- and then merging the two companies together.
To be sure, there are some good MOREDan Primack - May 23, 2013 10:58 AM ET
Big private equity firms are offering diversified products, but one size may not fit all investors.
FORTUNE -- One year ago I recommended that you buy stock in publicly-traded private equity firms, like Apollo Global Management (APO) and The Carlyle Group (CG). My theory was that such issuers were being undervalued by analysts who obsessed over assets under management (i.e., fund management fees), while paying too little attention to underlying portfolio MOREDan Primack - Apr 29, 2013 2:26 PM ET
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