peHUB Wire: Tuesday, July 14, 2009

In case you haven’t yet heard, Steve Rattner stepped down yesterday as President Obama’s auto czar. The move came less than five months after he took the job, and well less than five days after General Motors emerged from Chapter 11 bankruptcy protection. Everyone at Treasury is saying the right things, but this just oozed a sense of unexpected hurry. Like Sarah Palin’s resignation announcement, but without the scenic backdrop.

In a statement, Tim Geithner said that Rattner would “transition back to private life.” Just what that private life might entail, however, is a giant question mark.

First, there is virtually no chance that Rattner will return to Quadrangle Group, the private equity and asset management firm that he co-founded. His departure earlier this year doubled as a broken promise to both his partners and his investors (including those from who he was trying to solicit new capital). Specifically, Rattner said that his near-term Washington ambitions ended when Hillary Clinton lost her primary battle, and that he would not serve in an Obama or McCain Administration. He may have believed it at the time, but it ultimately proved false.

So then, why leave Washington now? After all, the auto industry isn’t all peaches and cream now than a court has given GM’s reorg the green light.

There is exactly one answer that passes the smell test, save for some sort of personal crisis (medical, etc.): Rattner is about to get more formally ensnared in the pension kickback scandal, in which he and Quadrangle have already been tangentially implicated.

Remember, Quadrangle has not yet reached a settlement with New York Attorney General Andrew Cuomo, and there also is talk that the local U.S. Attorney’s office and California AG Jerry Brown are itching to wade into the scandalous waters. Not necessarily saying to expect an in! dictment (at least from Cuomo), but perhaps some sort of big civil fin e and a promise not to misbehave again (without actually acknowledging any misbehavior in the first place).

Sources tell a Reuters colleague that that Cuomo’s probe of Rattner has “intensified” in recent weeks, perhaps dovetailing with GM’s baby steps away from imminent disaster. More on this to come, for sure.

*** When writing about KKR’s un-IPO a few weeks back, I suggested that the firm would probably list in New York after priming the pump with a few liquidity events. My metaphorical money was on IPOs for retailer Dollar General and hospital operator HCA (which would only come, of course, after the healthcare policy debate is resolved).

In the meantime, let me add one more KKR portfolio company to the IPO mix: Avago Technologies, which actually filed its S-1 for a $400 million offering last summer. Word is that this one is raring to go.

* It’s unofficial: Q2 venture capital activity ! was higher than Q1 venture capital activity. We’ll have formal numbers next week.

*** Just Thinking Aloud: The hottest/saddest trend in leveraged buyouts right now is debt-for-equity swaps, in which lenders effectively take control of a portfolio company from its PE sponsors. What I’m wondering is who the lenders actually are putting in charge, from a management oversight perspective. Bigger banks might tap their private equity affiliates or other internal resources, but what about smaller banks, insurance companies, etc?

Maybe the simplest answer is outside consultants, but I wouldn’t be surprised to see some of these lenders try to hire mid-level PE folks. Maybe junior partner or principal-level pros who don’t see much upward mobility at their current firm, or who have been laid-off or “managed out.” Exec recruiters I’ve spoken to haven’t seen this yet, but it just seems to make too much sense not to happen soon.

* Quiz Time: What U.S.! -based buyout firm recently offered to cut the size of its Asia-focuse d fund? No hints for this one, given that the option pool is so small…

Top Three

RathGibson Inc., a Lincolnshire, Ill.-based maker of industrial tubing and pipes, has filed for Chapter 11 bankruptcy protection. DLJ Merchant Banking bought the company in 2007 from Castle Harlan for $440 million.

Former Republican Congressman Michael Huffington has filed a lawsuit against Carlyle Group alleging the private-equity firm misrepresented the safety of Carlyle Capital Corp, the publicly traded mortgage-securities fund that collapsed last spring.

Digital Sky Technologies said it will pay $14.77 a share for Facebook common stock, boosting its stake to as much as 3.5 percent and valuing the social network at about $6.5 billion.

VC Deals

Kovio Inc., a Milpitas, Calif.-based developer of semiconductor products using thin-film technologies, has raised $20 million in Series E funding. Return backers include Bessemer Venture Partners, DAG Ventures, Flagship Ventures, Harris & Harris Group, Jerusalem Venture Partners, Kleiner Perkins Caufield & Byers, Mitsui Ventures, Northgate Capital, Panasonic Venture Group, Pangaea Ventures, Pinnacle Ventures and Yasuda Enterprise Development. The company previously raised around $44 million since 2001.

Just-Eat, a UK-based operator of a website for ordering meals online, has raised £10.5 million in first-round funding. Index Ventures led the round, and was j! oined by Vertex Investment Management.

Amimon Inc., an Israel-based provider of wireless HD semiconductor solutions, has raised $10 million in Series D funding. Stata Venture Partners led the round, and was joined by return backers Argonaut Private Equity, Cedar Fund, Evergreen Venture Partners, Walden Israel and Motorola Ventures.

Outspark, a San Francisco-based operator of a “virtual playground” for online gamers, has raised $8.3 million in Series C funding. Syncom Venture Partners led the round, and was joined by SBI Investment, Mille Plateaux and return ba! ckers Altos Ventures, DCM and Tencent. The company previously raised o ver $11 million.

Aptana Inc., a San Mateo, Calif.-based provider of open-source web development software, has raised $7.8 million in new Series B funding. Rembrandt Venture Partners led the round, and was joined by return backer Accel Partners. Aptana previously raised $4 million.

Vindicia, a Redwood City, Calif.-based provider of on-demand payment manages services, has raised $7.5 million in Series D funding. Onset Ventures led the round, and was joined by return backers Bertelsmann Digital Media Investments, DCM and Leader Ventures. The company has now raised over $21 million in total VC funding.

Nexage, a Fremont, Calif.-based provider of mobile advertising solutions, has raised $4 million in Series A funding from the BlackBerry Partners Fund and GrandBanks Capital.

Buyouts Deals

Catterton Partners and Highland Consumer Fund have acquired cosmeceutical brand StriVectin and related assets from affiliates of Klein-Backer. No financial terms were disclosed.

GenNx360 Capital Partners has acquired Trimaster Manufacturing Inc. from Edgestone Capital Partners for an undisclosed amount. Trimaster is an Ontario-based maker of components and sub-assemblies for complex machines.

Four Seasons Health Care’s junior lenders came under pressure to sign up to a debt restructuring deal after the company’s senior creditors agreed to the proposals. The lenders, holding so-called payment in kind (PIK) notes, are now the biggest obstacle to a successful debt ! restructuring, Four Seasons said on Monday.

Silverfleet Capital’s buyout of German sausage casing manufacturer Kalle Nalo is progressing on its 130 million euro ($181 million) financing, Reuters reported. Seven or eight banks are looking at the financing and will seek final credit approval on the deal when due diligence has been completed.

S! tarwood Capital Group is bidding on assets of Corus Bankshares Inc, a Chicago-based lender hit hard by losses on condominium loans, the Wall Street Journal reported.

PE-Backed M&A

Aurora Capital Group and Moelis Capital Partners have co-sponsored a merger between wound-care distribution companies RecoverCare LLC and MedaSTAT USA LLC. No financial terms were disclosed for what the companies are describing as a “merger of equal! s.”

Contech Construction Products Inc., a West Chester, Ohio-based portfolio company of Apax Partners, has bought the Como, Miss.-based corrugated metal pipe assets of Hanson Pipe & Precast. No financial terms were disclosed.

FleetPride, an independent aftermarket distributor of heavy-duty truck and trailer parts, has acquired Fleet Supply of Tallahassee Inc. No financial terms were disclosed. FleetPride is owned by Investcorp, Banc of America! Capital Investors and company management.

Sport&Health Clubs, a McLean, Va.-based operator of health clubs in the Washington D.C. area, has raised $25 million in mezzanine financing from PNC Mezzanine Capital and CMS Mezzanine Fund.

PE Exits

F-Secure Corp. has acquired Steek SA, a French provider of online storage platforms to telecom operators. No financial terms were disclosed. Steek had raised VC funding from firms like AGF Private Equity and Innovacom.

Firms & Funds

Baldterton Capital plans to hold a $485 million final close on its fifth fund within the next few weeks, according to VentureWire. The firm launched as the European affiliate of Silicon Valley VC firm Benchmark Capital, but spun off as an independent entity in 2007.

Royal Bank of Scotland will merge its various Asia-Pacific investment banking teams into a single group.