The New York based KPS Capital Partners specialises in turnaround situations both in America and Europe and has a history of doing so for the past 17 years.
It has a fund of 1.7 billion dollars in private equity to buy distressed companies for constructive investing in special situations.
KPS has a good track record of success, staying with companies for a number of years before eventually selling them on to third parties.
Occasionally, they bring in new management with fresh finance in order to move a company forward. Cost reductions are part of their strategy also, depending on the circumstances. They often go into businesses that have a history of trading losses and where they are faced with a difficult financial situation, where due to a lack of capital.
They also have experience in dealing with complex financial situations where there are banks and bond holders involved. They also employ various restructuring methods in order to achieve a resolution. This skill will be particularly necessary in the Waterford Wedgwood case to bring about a resolution.
It may mean that some of the banks could have to write down some of their loans.
KPS sometimes targets businesses where the firm may be out of favour and not able to raise enough capital and they turn the situation around with their own money. This could be a business suffering revenue losses as in the case of Waterford Wedgwood which is in a bad stage of the business cycle.
Oregon Paper Mill
One firm KPS worked with was a paper mill in Oregon. The bought into a business that was part of Smurfit-Stone in 2000 and part owned by the Irish firm Smufit.
This was eventually sold to an employee share ownership a few years later in 2006. There they worked with a company where the workers were members of the US steel union and the paper workers union.
Another was Americast, a union member firm in the engineering sector. Again, it was sold a few years later. That firm had been part of a group in Chapter 11 bankruptcy and was bought from the creditors. It was sold in 2006 and with 4 plants there were 1,000 employees involved.
Blue Ridge paper in Carolina is another turn around situation, where some experts said the firm should close but which was rescued and sold in 2007 with the help of the steelworkers union.
A UK company, Cookson, sold Speedwire Technologies to KPS. This company was making computer circuit boards and other service products for the packaging industry and this firm was later sold to the top American Illinois Tool Works in 2006.
KPS Capital came in at top marks in a survey done by the American Trade Union organisation AFL/CIO, which is the equivalent to the Irish Congress of Trade Unions for being one of the best private equity firms.
The study related to their commitment to employment and being worker friendly as investors. This may create some ease among Waterford Wedgwood employees who now must live with the situation where there is a receiver now involved.
St. Louis press report
A report in the St. Louis Post and Dispatch newspaper stated last year that KPS bought a firm in Ohio called Olin Corporation. There were 1800 employees and KPS were praised by labour unions for quickly negotiating contracts and getting worker input. Olin was later changed to Global Brass and Copper.
David Silvers a general counsel of the AFL/CIO union said KPS believed in building up companies rather than ripping them apart and tried to do things in collaboration with the workforce.
Olin had high cost issues and there were two plant closures to cut back capacity in the auto and electronic industries. Productivity had to be increased as the plan was to eventually sell on the firm after efficiencies were achieved.
Another firm, Genesis Worldwide, from Pennsylvania was a maker of metal and coil processing and was near bankruptcy when KPS came along and where pensions were frozen and liquidation was being faced back in 2001. In 2007, the firm was sold and became an industry leader where employee pensions were secured.
According to the KPS website, the company believes in collaborative working relationships and it gets employee involvement through modern management, according to quotes from union representatives from firms. While most of KPS Capital’s activity is in the USA, they have had dealings in Germany and the UK.
In Germany they worked with Ebro Electronics which was later sold to American firm Nova Electronics. I Britain, the company also worked with Curtis Fine Papers. In other words, the the picture is a little brighter now than a week ago, when the receiver was appointed.
However, to date, KPS has not bought Waterford – Wedgwood but has signed a letter of intent. The hopes will be that a sale will take place and remove uncertainty over the future of Waterford Crystal.