Ron Burkle Will Manage Your Money For Free Until He Manages It Better

[caption id="attachment_100373" align="alignright" width="260"] Let's be reasonable...[/caption] So things aren't great at Yucaipa Cos. It's bounced back a bit since its books showed a 40% loss at the end of 2011, but it was still down 19% at the beginning of this year. And, it seems, investors were insufficiently impressed with the discount he consequently offered.
Author:
Publish date:
Updated on

Let's be reasonable...

So things aren't great at Yucaipa Cos. It's bounced back a bit since its books showed a 40% loss at the end of 2011, but it was still down 19% at the beginning of this year. And, it seems, investors were insufficiently impressed with the discount he consequently offered.

The fee cut wasn’t enough. Last fall, some of the pension investors raised the possibility of ousting Mr. Burkle as the fund’s manager, according to two people with knowledge of the fund. A Yucaipa spokesman said no such threat was made directly to the firm.

In November, representatives from several investors including Calstrs, Calpers and the New York pension fund met with Mr. Burkle at the Manhattan headquarters of Bank of America Merrill Lynch, which serves as a consultant to the California teachers’ pension fund. In the three-hour meeting, the investors conveyed their disappointment in the fund and lack of confidence in its future, according to people with knowledge of the discussions.

So Burkle, who would really very much like to raise a new fund one day, caved, waived his management fee and committed not to invest/lose the $50 million in commitments the fund's got left.

Amid the grumbling, Mr. Burkle offered a broader set of concessions. Along with forgoing his annual management fees of just under 2 percent, Yucaipa would not invest most of the remaining commitments, about $50 million. And the firm would not recover any of its own money in the fund until the investors got their money back.

Pressured, Investment Firm Is Said to Skip Fees [DealBook]

Related

Marc Lasry Is Moving To Paris

[caption id="attachment_100005" align="alignright" width="260"] Slumming it.[/caption] If you haven't heard, Avenue Capital's Marc Lasry will be representing you to our oldest and least-reliable ally. The White House didn't intend for you to hear that for a few weeks yet, and Avenue certainly didn't intend for its clients to hear it. But no convention of courtesy or deference can hold Bill Clinton down.

The Ballsiest Country In The Western Hemisphere

[caption id="attachment_100068" align="alignleft" width="260"] The passing of the torch.[/caption] It's not Venezuela, now that old Hugo is gone. It's not Cuba. And it's definitely not the U.S. Indeed, the ballsiest country on this side of the globe seems to be measuring its cojones against us, in a series of direct throw-downs. And Argentina's are bigger.

Facebook Will Take Free Money From Banks But Don't Expect It To Show Any Gratitude

The Wall Street Journal today discovered that universal banks that lend money to companies for cheap tend to want investment banking business in return for that lending and I guess that's a scandal: As the market for technology IPOs revs up and the biggest banks seek to capitalize on the size of their balance sheets, the practice of selecting underwriters that also provided loans is coming under focus, spurred by Facebook's IPO process. Critics of the practice say the choices aren't accidental and reflect the "you-scratch-my-back-I-scratch-yours" way that Wall Street works. Bankers, for their part, say they aren't allowed to make loans on the condition that they receive other business, but borrowers can use the loans as a factor in choosing underwriters. Some bankers say that lending is just one of the many services they offer companies. At Facebook, the credit line played a role in the batting order for underwriters, said a banker who worked on an underwriting pitch to the company. When I was young and naive and pitching for underwriting business against banks that did lots of lending, I always thought that banks "aren't allowed to make loans on the condition that they receive other business, but borrowers can use the loans as a factor in choosing underwriters" thing was ripe for a scandal. I still sort of think that: I just do not believe that no client coverage banker has ever said "we'll be in your credit facility but only if you promise us underwriting or M&A business." (Some people agree with me!) And, as the Journal notes, that would be a criminal violation of the antitrust laws, which is unspeakably weird but there you go. But if you ask a banker who has been carefully and recently briefed on anti-tying regulations, he will probably tell you something like "we don't demand underwriting business to provide a loan. Companies demand loans to get underwriting business." And, as the Journal says, that's not illegal.