Private Equity Recruiting is Bananas

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M*therf*ckers Have Lost Their G*d-damned Minds

There is so much to unpack in this stupid piece about the annual private equity recruiting frenzy. First, let's stop calling kids who are weeks out of college "talent" merely because they got a job in an investment bank trainee program. They haven't proven that they're talented at anything just yet. Going to an ivy league school, having a trust fund and being a douche isn't dispositive of anything. So, everyone chime the f*ck down please. Second, these folks get paid $200k? And people say there's no wage inflation? Third, the idea that an ibanker trainee is going to be appreciative for the two years of training a bank has given them and, in turn, give later private equity business to said bank is ludicrous. As a practical matter, his/her connection to that bank lasts a mere few weeks prior to them securing the next bigger, better and more Tinderable gig with which they prefer to identify. This seems like an outdated model with bad assumptions baked into it. The only sure thing seems to be that no matter which one of the PE firms these trainees land at, they'll be hiring Kirkland & Ellis LLP as bankruptcy counsel for one of their busted portfolio companies. Fourth, we love this bit about recruiting being earlier than ever "after an agreement to hold back fell apart." Hahahaha. So, private equity firms - KNOWN FOR DEAL-MAKING - couldn't even come to a deal amongst themselves?? This is like mutually assured destruction among KKR, Warburg Pincus, Carlyle Group LP, Apollo Global Management LLC, Bain Capital, Blackstone Group LP, TPG and Golden Gate Capital. Here's a great idea: lets trip over ourselves - and each other - to hire people with literally "no work experience." Those interviews must be PAINFUL AF. And, oh, hey you Managing Director. We love that you're "often forced to cancel business meetings last-minute to interview candidates." We're sure a multi-billion dollar transaction can wait for some piss-ant Harvard bro who inexplicably and unnecessarily writes equations on glass to regale everyone with his rad math skills. So lit. On what basis are these kids REALLY getting hired then? We think its probably pretty obvious. And its questionable how this BS still flies. What does any of this have to do with disruption? Well, when you're competing with venture capital and tech to acquire "talent," desperate times seemingly call for desperate measures. Logic has been disrupted. And it's absurd.

Distressed Investors Are Bullish on China Distress

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"Bankruptcy could become common". Ruh roh. Let the vulturing begin. NowShoreVest Capital Partners is following (firewall) Bain Capital and Oaktree Capital Management into China with a $750mm fund. And they're not alone: JP Morgan's Vice Chairman of Asia Pacific is starting his own distressed fund focusing on non-performing Chinese loans.

Interesting Restructuring News

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  • Busted Tech. Ok, not yet. But soon. Faraday Future has cancelled its plans to build a Vallejo California assembly factory - shortly after scaling back its original Nevada facility. This Techcrunch piece says that "it's unclear where the future will lead for Faraday." Seems pretty clear to us that it will lead to bankruptcy court. And, quietly, a number of (once) high-flying startups are laying people off including, notably, Postmates and Zozi ($60mm VC - Richard Branson and others). Finally, Munchery, often hailed as a top food-delivery startup, required a recap this week to survive.
  • Grocery & Sun Capital Partners. We SWEAR we are not picking on SCP here but c'mon already: now it looks like Marsh Supermarkets is in trouble as the company falls behind on rent and quietly - well, not so quietly anymore - shuts locations. So, let's recap: in the past 6 months, SCP has seen the following portfolio companies file for bankruptcy: Garden Fresh Restaurant Intermediate Holdings LLC, Limited Stores Company LLC, Gordman Stores Inc. Maybe this will be the next?
  • High Yield. Remember a few years ago when Chobani was distressed? Now you can get in on a new offering at a premium to par, it seems. Semi-related, the bidding to lend to Westinghouse in bankruptcy was reportedly pretty intense, with Apollo Investment Corporation duking it out with Goldman Sachs, Highbridge Capital, and Silver Point Finance for the privilege to finance the nuclear power company while it figures out how to restructure its business and address two incomplete installations in Georgia in South Carolina. Yield, baby, yield. 
  • Oil&Gas. That was fast. Like super fast. Seems the new owners of Samson Resources II, LLC don't share a very "long" view of the oil and gas space - despite "having discharged approximately $4 billion of debt and nearly $300 million of annual interest expense from Samson Resources Corporation," aka the previously bankrupt entity that filed in mid-2015. And distressed investors wonder where the term "vulture" comes from. PJT Partners LP was the previous banker for the company but with the Board being what it is, there's no surprise Houlihan Lokey has a piece of the action.
  • Retail. Finish Line added itself to the long line of retailers that reported dogsh*t numbers with earnings down, same store sales down, blah blah blah. Right, and approximately 40 store closures. Naturally. Also, David's Bridal was downgraded this week. The CD&R LLC owned retailer has a $520mm term loan due in 2019 and if millennials continue to flick off conventional marriage, there's no way they'll be able to sell enough gaudy wedding dresses to manage the interest expense. And, uh oh, now there appears to be a glaring hole in the "fast fashion" narrative as H&M missed expectations with declining net profit.
  • Rewind I: 3-D Printing. Not to be a broken record about this, but it is totally real. Last week we noted Adidas' plans for it and this week Under Armour followed suit. The implications for those in the supply chain can't be underestimated.
  • Rewind II: Glass Half Full. Looks like Gordmans Stores won't be a complete liquidation after all: Stage Stores stepped up and, as part of a joint venture with Tiger Capital Group and Great American Group, will acquire roughly 50 stores with an option for a handful of others. The remainder will be liquidated but this presumably means that, for now, a couple of dozen will continue to operate. At least until the inevitable Chapter 22 that occurs after next holiday season. Kidding! (Or are we?)
  • Chart of the Week: