PE Week Wire: Tuesday, January 27, 2009

Just a few notes before I hop in the hand-me-down VW, and drive on down to New York City…

*** Standard & Poor’s has released new data confirming what we already knew anecdotally: Leveraged loan defaults are on the rise. Like a rocket:

“For U.S. leveraged loans, the 12-month-trailing default rate (based on the number of loans) increased to a 57-month high of 4.35% in December from 3.32% in September and 0.26% 12 months earlier, according to Standard & Poor’s Leveraged Commentary and Data group. The leveraged loan default rate has increased markedly and is now above its historical average of 3%. The loan distress ratio—defined as the percent of performing loans trading below 80 cents on the dollar—catapulted up to 87.5% at the end of December from 78.9% in September and 13.4% a year ago.”

The report does not estimate 2009 leveraged loan default levels, but does predict that overall default rates will continue to increase. What this basically means is that buyout firms are going to have to begin acting a bit more like venture capitalists – cutting bait with certain portfolio companies deemed to be lost causes.

To get a better sense of how sharp the leveraged loan distress ratio rise has been, take a look at a chart posted here.

*** Matthew Boyer has left The Carlyle Group, where he had been a managing director focused on U.S. buyout transactions in the telecom space (e.g., Dex Media). Not sure if this was part of last month’s layoffs, or is a one-off. A Carlyle spokeswoman did not return request for comment.

*** Jay Hoag, a founding general partner of Technology Crossover Ventures, has quietly resigned from the board of directors of (Nasdaq: TSCM). TCV had invested $55 million into TSCM in November 2007 – buying preferred stock that would convert into common at $14.26 per share. TSCM stock was trading at around $13 at the time, but now sits well below $3 per share. TCV has not named a replacement board member, and Hoag did not return requests for comment.

*** Radically Reinventing Venture Capital: VC firms have added lots of job titles over the years, including venture partners, special limited partners and entrepreneurs-in-residence. But quant analysts?

That’s one of the positions at Correlation Ventures, a San Diego-based firm that currently is raising its debut fund. Details are sketchy at this point – it’s not talking, natch – but it kind of sounds like a venture index effort. In other words, Correlation has developed an algorithm that would be used to passively invest in venture deals being led by other firms (it’s already “signed” some brand-name partners).

Word is the fund-raising target is approximately $150 million, with the GPs to take a 15% carry (compared to the typical 20%). The partners are Trevor Kienzel (ex-Newbury Ventures) and David Coates, while the CFO is Grace Chui-Miller (ex-DCM). Then it’s got a bunch of academics as part-timers or advisors.

Top Three

Carrier IQ Inc., a Mountain View, Calif.-based provider of mobile service intelligence solutions for wireless carriers and equipment vendors, has raised $20 million in Series C funding. Intel Capital, Presidio Ventures and Sumitomo Corp. were joined by return backers firms like Accel Partners, Charles River Ventures and MDV. The company had previously raised around $23 million.

Hochtief, a German construction group, has pulled out of the auction process for London Gatwick airport. This leaves bidders: Global Infrastructure Partners, Ontario Teachers Pension Plan/3i Infrastructure, Citi Infrastructure Investors/Vancouver Airport Services/John Hancock Life Insurance, Babcock & Brown/RREEF and Manchester Airport Group/Borealis.

Charlie Bartz has joined BerchWood Partners, a private equity placement agent, as a partner. He previously spent 11 years with C.P. Eaton Partners.

VC Deals

SchoolNet Inc., a New York-based developer of instructional management software for K12 school districts, has raised $13 million in Series D funding. The Carlyle Group led the round, and was joined by fellow return backers Ascend Ventures, Hamilton Lane and the New York State Common Retirement Fund. The comp! any had previously raised $28 million.

nLight Corp., a Vancouver, Wash.-based maker of high-power semiconductor lasers, has raised $10.7 million in the first close of its fifth funding round. Return backers include Oak Investment Partners, Mohr Davidow Ventures and Menlo Ventures. The company previously raised over $105 million since 2000.

Manifest Digital, a Chicago-based interactive marketing agency, has raised up to $9 million in VC funding from BIA Digital Partners.

Jingle Networks Inc., a Menlo Park, Calif.-based operator of a national consumer telephone directory assistance service, has raised $7.5 million in Series D funding, according to a regulatory filing discovered by VentureWire. The company had previously raised over $74 million, from firms like Goldman Sachs & Co., Hearst Corp., IDG Ventures, Liberty Associated Partners and Comcast Interactive Capital.

BrightView Ltd., an Israel-based developer of production technology for photovoltaic solar-cells, has raised $6 million in Series A funding. Backers include Israel Cleantech Ventures and Hasso Plattner Ventures.

Lucid Imagination, a San Mateo, Calif.-based commercial open-source company focused on the Apache Lucene/Solr search technology, has raised $6 million in Series A funding from Granite Ventures and Walden International.

Rivermine, a Fairfax, Va.-based provider of automated telecom expense management solutions, has raised $5 million in fourth-round funding. Softbank Capital led the round, and was joined by return backers Valhalla Partners, Longworth Venture Partners and Columbia Capital.

Xkoto Inc., a Waltham, Mass.-based provider of data virtualization technology, has raised $3 million in third-round funding. Return backers include GrandBanks Capital and GrowthWorks Canadian Fund. The company has now raised around $13 million in total funding.

Health Integrated, a Tampa, Fla.-based targeted population health management company, has raised an undisclosed amount of funding from existing shareholder Stonehenge Growth Capital.

Workstreamer LLC has raised an undisclosed amount of seed funding from Austin Ventures. The New York-based company develops software that combines social media, streaming information and professional networking to help create and capture real-time work activity between individuals and businesses., an online news site focused on the entertainment and media markets, has launched with an undisclosed amount of VC funding from Maveron. The company was founded Sharon Waxman, former Hollywood correspondent for The New York Times.

Buyout Deals

OpenGate Capital has acquired UK modeling agency Models 1 from Nova Capital, for an undisclosed amount.

Polo Resources Ltd. (AIM: PRL), a UK-based coal mining company, said that it had received an unsolicited buyout offer from Denham Capital Management. It also said that the offer significantly undervalues the company.

PE Exits

Short’s Travel Management has acquired Groople Inc., an Englewood, Colo.-based provider of Web-based group travel services. No financial terms were disclosed. Groople had raised over $23 million in VC funding from firms like ArrowPath Venture Capital, FA Technology Ventures, Flywheel Ventures and Vista Ventures.

PE-Backed M&A

Mag Rack Entertainment has acquired, a video-on-demand television network dedicated to live music performances and documentaries. No financial terms were disclosed. had raised a small amount of VC funding from Clydesdale Ventures.

Maple Leaf Sports & Entertainment Ltd. has agreed to acquire an 80.1% stake in soccer network GolTV Canada from Insight Sports Ltd. for an undisclosed amount. Maple Leaf Sports is majority-owned by Ontario Teachers’ Pension Plan.

SVOX, a Switzerland-based provider of embedded speech solutions, has acquired the Professional Speech Processing group of Siemens AG. No financial terms were disclosed. SVOX had raised VC funding in 2002 and 2003 from Siemens Mobile Acceleration.

Firms & Funds

Renaissance Acquisition Corp., a blank check acquisition company, said that it would liquidate, after running out of time before being able to make an acquisition. Renaissance raised $93.6 million on Jan. 29, 2007, which gave it a deadline of this Thursday.

Nomura Holdings, Japan’s largest brokerage, posted a record $3.8 billion quarterly loss.

Human Resources

First Reserve Corp. has promoted Chris Ortega to director. He joined the firm in 2007 from Greenhill Capital Partners, and focuses on the mining and oil field service sectors.