peHUB Wire: Tuesday, April 7, 2009

I’m pleased to announce that peHUB is (finally) hosting an event with some meaningful content. It’s called The Limited Partner Congress, and will take place on June 9 at Bond Street (one of New York’s top restaurants).

This will not be a typical industry “conference,” with vanilla outlook panels and warmed-over sirloin. Instead, it’s a series of working groups and networking sessions, in which limited partners can discuss the myriad of challenging issues they currently face. The format was inspired by a World Economic Forum event I participated in last year, and is intended to help LPs foster both solutions and a better sense of community.

All off-the-record, with no GPs allowed (save for fund-of-funds managers).

A big caveat is that The LP Congress is an invite-only affair. I sent out an initial batch of invites yesterday via email, and will be sending out more today (each one is personalized, so it takes some time). If you have not received an invite but are interested in attending, please send me an email with your name, job title and place of work. I’m sure there are many worthy LPs who were unintentionally left off the initial list, and we obviously would like to see you there.

*** Last Friday, I told you about how oil and gas exploration company Terralliance was in the midst of implosion, despite $295 million in VC funding and an undisclosed amount of debt funding (which the equity backers were furiously trying to renegotiate). This morning, VentureWire’s Russ Garland moved the story forward, with the following three pieces of information:

• The debt funding amount was $150 million, from hedge fund Passport Capital. Terralliance has been in violation of the loan for months.

• Terralliance claimed that its mapping technology was 93% accurate, but that figure turned out to be massively inflated. As an aside, my understanding is that the numbers were initially correct (a few lucky strikes), but quickly debunked by Terralliance scientists.

• Terralliance began conducting its first-ever audit in December 2007, at the behest of a new potential investor.

That final point about the audit is also what I’ve been hearing, and is why I originally suggested that the investors were “asleep at the wheel.” How do you not audit a company that has received around $450 million in capital, has scooped up oil and gas leases on several different continents and has purchased multiple Russian aircrafts (a whole other story that we’ll discuss at a later date)?

Did they just not want to know how the sausage was being made, or were they just preoccupied? Or were they duped? And, if duped, are they so embarrassed by their lack of attention that they don’t want to file legal charges against the ex-CEO? And, if so, isn’t that a breach of something from an LP perspective? Ok, steam of thought over.

*** Erin has an interesting post on the bankruptcy bonanza at Sun Capital Partners, which has had five portfolio companies file for Chapter 11 so far in 2009 (in addition to the 10 that did so last year). That’s about 14% of the firm’s total portfolio, which is nearing the upper limits of its pre-determined pain threshold.

All of which makes me wonder: How on earth did Sun get named “2009 Private Equity Firm of the Year,” by The M&A Advisor? How bad must you feel to have been a fellow nominee who lost?

*** Tough week for Japanese private equity. First, Unitas Capital (f.k.a. CCMP Capital Asia) closes its Tokyo office, and now Merrill Lynch Global PE has done the same.

*** Game Time: Congrats to Dan Doman, an associate with G-51 Capital Management, who won our Seventh Annual March Madness Extravaganza. This means that Dan will receive: (1) A Premium Membership to peHUB, which includes one year of complimentary access to our editorial archive; (2) A complementary one-year subscription to the Thomson Reuters print publication of his choice: Buyouts, PE Week, Venture Capital Journal or European Venture Capital Journal; and (3) The opportunity to write a lead column for peHUB Wire, which I’m hoping he’ll be able to do for next Friday (when I’m down in a giddy Chapel Hill for the VCIC Finals).

Top Three

Fisker Automotive Inc., an Irvine, Calif.-based electric car maker, said that it has agreed to raise $85 million in new VC funding from Eco-Drive (Capital) Partners and return backer Kleiner Perkins Caufield & Byers. It is unclear if this is the same round as a $68.5 million Series C funding that peHUB had recently reported on, based on a regulatory filing. Other Fisker shareholders include Palo Alto Investors and Al Ghaffara Investment Co. (Quatar).

Knewton, a New York-based online education company, has raised $6 million in Series B funding. Bessemer Venture Partners led the round, and was joined by return backers Accel Partners, First Round Capital, Reid Hoffman and Peter Stern (Datek co-founder and CTO). Knewton is run by Jose Ferreira, a former partner with New Atlantic Ventures. Before that, he was managing director of new markets for Kaplan Inc.

Pine Brook Road Partners has closed its debut fund with $1.4 billion in capital commitments, with around $250 million invested so far. The firm was founded in 2006 by former Warburg Pincus partner Howard Newman, and focuses on the financial services and energy sectors.

VC Deals

OPX Biotechnologies Inc., a Boulder, Colo.-based company focused on improving the viability and cost-effectiveness of biofuels and biorefined chemicals, has raised $17.5 million in Series C funding. Braemar Energy Ventures led the round, and was joined by Altira Group and return backers Mohr Davidow Ventures and X/Seed Capital. peHUB had previously reported on the round, based on a regulatory filing.

Teradici Corp., a Burnaby, B.C.-based fabless semiconductor company focused on solutions for next-generation computer form factors, has raised US$17 million in Series C funding. Telus Ventures led the round, and was joined by return backers Alloy Ventures, Working Opportunity Fund, Skypoint Capital, BDC Venture Capital and Alta Berkeley Venture Partners. The company had previously raised $28 million.

Southwest Windpower Inc., a Flagstaff, Ariz.-based maker of residential-scale wind generators, has raised $10 million in Series C funding. General Electric was joined by return backers NGP Energy Technology Partners, Altira, CTTV Investments and Rockport Capital Partners.

WiSpry Inc., an Irvine, Calif.-based provider of programmable RF semiconductor products for the wireless market, has held a $10 million first close on its Series C funding round. An additional $5 million in expected this summer. Paladin Capital Group led the round, and was joined by MuRata Manufacturing Co. and return backers L Capital Partners, Blueprint Ventures, American River Ventures, In-Q-Tel, Tech Coast Angels and Shepherd Ventures.

Ember Corp., a Boston-based provider of wireless “smart meter” technologies, has raised $8 million. Chevron Technology Ventures and Stata Venture Partners were joined by return backers include Polaris Venture Partners, GrandBanks Capital, RRE Ventures, Vulcan Capital, DFJ ePlanet Ventures, New Atlantic Ventures and WestLB Mellon Asset Management. The company has now raised $89 million in total VC funding.

Pyxis Technology Inc., an Austin, Texas-based provider of auto-routing software for IC developers, has raised $3 million in third-round funding. Return backers include Austin Ventures, CMEA Ventures, Formative Ventures and KT Venture Group.

Socialcast, a San Francisco–based provider of on demand social business communication software, has raised $1.4 million in Series A funding. True Ventures led the round, with venture partner Om Malik joining the company’s board of directors. True invested $1 million, while the remainder came from individual angels.

Buyout Deals

AIG has received around six bids for its asset management unit, according to The Wall Street Journal. The unit manages around $100 billion in PE stakes, with possible suitors including Ashmore Investment Management, Franklin Templeton, Hellman & Friedman, Southgate Alternative Investments and TA Associates. The offers are reported to be worth between $400 million and $800 million.

A federal bankruptcy court judge ordered that the asset auction for Polaroid Corp. be reopened, just days after Patriarch Partners won the initial auction with a $59.1 million bid. The ruling will provide another bite at the apple for runners-up Hilco Consumer Capital and Gordon Brothers.

PIPE Deals

Sunesis Pharmaceuticals Inc. (Nasdaq: SNSS) has agreed to raise $43.5 million via a private placement of convertible preferred stock, common stock and common stock warrants. Investors include Bay City Capital, New Enterprise Associates, Alta Partners, Caxton Advantage Life Sciences Fund, Merlin Nexus, Nextech Venture, OpusPoint Partners, Venrock and Vision Capital Advisors.

PE-Backed Busts

F.T. Silfies Inc., a hauler of dry haul cement in Pennsylvania’s Lehigh Valley, has filed for Chapter 11 bankruptcy protection. It is a portfolio company of Quantum Equity Partners. The company plans to remain in business during the reorganization.

Signature Aluminum Inc., a Greenville, Penn.-based aluminum extrusion supplier, has filed for Chapter 11 bankruptcy protection. It is a portfolio company of H.I.G. Capital.

Firms & Funds

Domain Associates, a healthcare-focused VC firm, is targeting $700 million for its eighth fund, according to VentureWire. It had raised that amount for its seventh fund, back in 2006.

Merrill Lynch Global Private Equity has closed its Tokyo office, due to a lack of private equity deal-flow in the Japanese market.

Human Resources

Stephen Hines has joined SMH Capital as a managing director in the firm’s investment banking group. He previously was head of Lane Berry’s New York office, and is a onetime partner with private equity firm JH Whitney & Co.

Northern Light Venture Capital, a China-focused VC firm, has promoted Elton Jiang to managing director and Lixin Li to venture partner.