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How the tyres fell off a Blackstone private credit deal

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In today’s newsletter:

  • Blackstone’s private credit problem

  • General Atlantic’s secondaries push

  • Mallinckrodt’s messy bankruptcy

The private credit deal that could cost Blackstone €200mn

Last month, Blackstone boss Stephen Schwarzman issued a glowing endorsement on private credit: double-digit returns could be achieved in some cases “with almost no prospect of loss”.

But things aren’t always so straightforward, as Schwarzman himself knows all too well. The private equity giant has been locking horns with its rival Bain Capital over the collapse of Italian tyremaker Fintyre, in an effort to recoup more than €200mn in potential losses, reports DD’s Will Louch and Robert Smith.

Stephen Schwarzman at an event
Stephen Schwarzman, co-founder and chief executive of Blackstone © Bloomberg

Bain bought Fintyre in March 2017, scooping up groups including Sardinia-based La Genovese Gomme and German business Reifen Krieg in the hopes of making it Europe’s biggest tyre distributor — an acquisition spree fast-tracked by Blackstone’s more than €200mn of debt funding.

Things went well at first, with revenues doubling to more than €900mn by 2019. So it came as a surprise to lenders when the tyre group collapsed less than a year later.

Three years on, Blackstone is still trying to get its money back.

The firm is footing the bill for law firm Pallas Partners to advise on an investigation seeking to establish whether it can bring claims against Fintyre’s directors, who include Bain executives, said people familiar with the matter.

(DD readers may remember Pallas — founded by a group of former Boies Schiller lawyers — as the firm currently representing two groups of Credit Suisse bondholders who were wiped out by UBS’s takeover of the bank in March.)

There was a perception among Blackstone senior management that Bain hadn’t been transparent in the period leading up to the insolvency, some of the people said, sowing tensions between the two firms.

Blackstone’s arrangement to fund the law firm is part of a wider investigation led by a unit of Teneo, the advisory firm, which was appointed by the courts to handle Fintyre’s liquidation.

The fiasco has cast a spotlight on the lesser-discussed risks associated with private credit, as firms including Apollo, KKR and Carlyle pivot away from leveraged buyouts and into lending in the search for more reliable returns.

A potential €200mn loss hasn’t deterred Blackstone’s massive lending push. Last month, the firm merged its credit and insurance arms in the hunt for its next trillion.

General Atlantic changes with the times

General Atlantic is pivoting further away from the types of deals that made its name.

The US firm, a $77bn investor best known for bets on high-growth companies such as TikTok parent ByteDance, has agreed to acquire a minority stake in a newly set up secondaries firm Clipway.

The deal struck on Thursday is the latest sign of a business that is seeking to gain exposure to more in-favour investment strategies, reports DD’s Will Louch and Antoine Gara and the FT’s Harriet Agnew.

After a bumper decade for GA and peers backing fast-growing businesses, investors are turning away from these riskier deals and towards asset classes such as private credit, infrastructure and secondaries. Traditional buyout firms as in CVC and TPG have also diversified their assets in preparation of becoming publicly listed companies, a trajectory many believe GA is on.

The firm has struck deals over the past year which give them a foothold in credit and secondaries. It also set up a dedicated climate investment unit in July 2021.

Earlier this year, GA announced it had acquired Iron Park Capital, a private credit firm set up by Blackstone veteran Tripp Smith. The two firms had initially started working together in 2020 when they formed a joint venture called Atlantic Park.

It also said it was teaming up to finance a new investment group together with a group of heavyweight Middle Eastern investors composed of ADQ, Abu Dhabi Growth Fund and International Holding Company, a listed business linked directly to Abu Dhabi’s ruling family.

Recently, it named its Latin American business head Martín Escobari as head of global growth equity and Gabriel Caillaux, investment head for Europe, the Middle East and Africa, took on an additional role overseeing its climate investments. The changes, GA said, were part of a push to broaden its investment operations.

The firm’s push into secondaries follows larger peers which have all sought to build exposure to an investment strategy that has grown rapidly in recent years. Last year, more than $100bn of deals were completed, nearly double the value signed just five years ago.

Competitors such as Ares have made bolder bets by acquiring whole companies. But by backing Clipway, as it did with Iron Park, GA is partnering with a firm with well-known leaders.

Clipway was founded earlier this year by Vincent Gombault, a former Ardian executive who played an instrumental role in building its secondaries business, before departing the firm in 2020. 

Boosted by GA’s commitment, Clipway has secured about $1bn from backers at a time when investor dollars are hard to come by. 

A bitter pill to swallow for the US bankruptcy system

Fifteen months ago pharma company Mallinckrodt proudly declared it was the first opioid manufacturer to successfully reorganise in Chapter 11 bankruptcy protection. 

It may regrettably also be the second.

On Wednesday, Mallinckrodt received approval from a federal judge on a second bankruptcy — sometimes ironically referred to as a “Chapter 22”. High interest payments and low profits forced the company to restructure for a second time. 

The twist in this case is that its most junior creditor is an opioid trust that was to receive $1.7bn worth of payments through 2028 to satisfy claims of company wrongdoing, as DD’s Sujeet Indap explains.

The trust is now set to only get $700mn while a series of senior lenders and bondholders including Silver Point, Hudson Bay and Arini are set to take over the company at a $3bn enterprise valuation. That’s just over half what the company was worth when it emerged from the original bankruptcy.

Bar chart of $mn showing Distressed debt funds and large asset managers to take over Mallinckrodt

Big companies including Purdue Pharma, Johnson & Johnson and 3M have used the US bankruptcy system as a way to limit their exposure to compensation claims. That trio has run into legal roadblocks in US appeals courts. 

Mallinckrodt has suffered no such difficulties but its travails still demonstrate that business execution matters, too.

Job moves

  • Jefferies Financial Group has hired BarclaysChad Parker as global head of transportation, based in New York, Bloomberg reports.

  • KKR is opening a new office in Gurugram, India, led by Nisha Awasthi, BlackRock’s former head of financial markets advisory in the country.

Smart reads

The game of monopoly The crash and burn of former Google challenger Neeva has become a cautionary antitrust tale and fuel for US regulators’ case against the search giant, Bloomberg reports.

Victoria’s PR nightmare An auditor’s warning on the carpet maker’s troubling subsidiary Hanover Flooring has cast scrutiny on its director Batash Karim and his criminal record, Alphaville reports.

The Yeezy gap Adidas’ messy break-up with Kanye West and his sneaker line highlights the need for more transparency from companies regarding the profitability of specific products, or brands, the FT’s Olaf Storbeck writes.

News round-up

Sam Bankman-Fried painted by US as ‘cartoon villain’, his lawyer says (FT)

Superdry sells south Asian intellectual property in deal with India’s Reliance (FT)

Saudi Arabia pours millions into digital theme park start-up (FT)

Metro Bank in talks about urgent £600mn capital raise (FT)

Premier League: broadcast auction rejig plays to a foreign crowd (Lex)

Bed Bath & Beyond: a quick capital-structure primer for Apes (Alphaville)

Oligarchs are losing out as Putin courts a new class of loyal asset owners (FT Opinion)

Due Diligence is written by Arash Massoudi, Ivan Levingston, William Louch and Robert Smith in London, James Fontanella-Khan, Francesca Friday, Ortenca Aliaj, Sujeet Indap, Eric Platt, Mark Vandevelde and Antoine Gara in New York, Kaye Wiggins in Hong Kong, George Hammond and Tabby Kinder in San Francisco, and Javier Espinoza in Brussels. Please send feedback to

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