PARIS (Reuters) - Terra Firma Capital Partners still has 1.1 billion euros ($1.5 billion) to invest that it is finding hard -- although not impossible -- to put to work, its founder Guy Hands said in an interview on Wednesday.
Hands, who is perhaps best known for the collapsed buyout of music group EMI, also spoke enthusiastically about potential European bargains that he said could become available starting in 2013.
For now, though, Hands, looking to spend the remainder of a fund that started with 5.4 billion euros, is focused on making a go of it in what he described as “the wilderness years” for the buyouts industry - in which banks are reluctant to lend and there are few appetizing assets available.
“If you went back 12 months ago it was really really difficult to find stuff, extremely difficult,” he told Reuters. “Today, it’s just difficult.”
He confirmed his interest in the Garden Center Group, being sold by Lloyds Banking Group (LLOY.L). Bankers expect the UK retailer to fetch 250 million to 275 million pounds, and it has attracted big buyout firms including Terra Firma and Apax, in part because of its large real estate portfolio.
“There was a survey that was done in the UK which says that the average Brit prefers to shop than have sex,” he said, adding that demographics would favor them too since older shoppers tended to prefer them.
“So we see gardens centers as part of the British psyche and something that is pretty essential to the UK,” he said. “They are very capital intensive - they have a lot of assets in them and we think that there are ways to make them more attractive.”
Terra Firma’s eagerness for deals is such that it is willing to consider all cash deals with no bank lending whatsoever - an anathema for an industry that has long relied on borrowing to goose its returns.
“It has gone much further than I expected,” he said. “I know I said I thought that banks would stop lending but I meant they would reduce their lending. I did not actually mean they would stop.”
Hands would also not be drawn on fundraising plans for his next fund, which reports have said would raise 3 billion euros, substantially less than his previous fund.
Earlier, in a speech at the annual Superinvestor conference in Paris, he said Europe’s troubles would generate a plethora of tempting bargains starting in 2013 but private equity firms would have trouble raising enough funds to take advantage.
Private equity firms would be further squeezed by the need to spend cash to refinance older deals as banks tighten the lending spigot.
Hands declined all comment on EMI, which Citigroup (C.N), the sole lender on the buyout, last week sold in pieces to French telecoms and entertainment group Vivendi (VIV.PA) and to a consortium led by Japan’s Sony (SNE.N). ($1 = 0.739 Euros)
Additional reporting by Simon Meads; Editing by Gary Hill