U.S. toxic asset plan not for private equity: Canning

CHICAGO Tue Mar 24, 2009 12:03pm EDT

CHICAGO (Reuters) - Private equity funds will likely not be big players in a partnership with the U.S. government to buy toxic bank assets, but the approach offers other investors a good opportunity to make money, a top private equity investor said on Tuesday.

"I don't think it's private equity firms that are going to be the primary target," John Canning Jr, chairman of Chicago's Madison Dearborn Partners, said in a speech to business executives.

He said Madison Dearborn is not interested in the plan, in which the U.S. government will offer financing for private investors to help cleanse banks of up to $1 trillion in toxic assets. Canning nonetheless called the Obama administration's plan a good idea.

"But distressed bond funds and hedge funds and others who can target a return on a fixed pool of assets should do quite well," he added.

"If it's structured correctly, it could really be a very attractive opportunity for private investors, but it also could actually have the government get its money back," Canning said.

The heavy criticism by lawmakers of the compensation at giant insurer American International Group (AIG.N), which was bailed out by the U.S. government, is the reason he would prefer to avoid public-private partnership.

"I don't need the government's help in structuring my compensation," Canning said. "I get all the help I need from my partners."

Madison Dearborn has about $5 billion of uncalled capital and has looked at all kinds of investments, including hedge funds, real estate and distressed debt, but decided to focus where it always has on buyouts and minority investments in growing companies, Canning said.

About 40 percent of the money Madison Dearborn invests historically has gone to minority investments in growing companies, and Canning expects that ratio to double for the next couple years as the private equity firm focuses on smaller deals with higher returns.

(Reporting by Ben Klayman, editing by Matthew Lewis)

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