“Surprising! Discover how Private Equity continues to keep the party going in China!”

One thing to start: A group of 255 of the leading private equity players in the UK earned £2.7 billion in carry interest in just one year, the kind of gains that caught the eye of politicians threatening to raise taxes on the industry.

And a note: If you were unable to access the link to our FT Big Read on Centerview Partners in yesterday’s DD, you can read it Here.

In today’s newsletter:

• China remains supportive of private equity

• The Issa brothers shuffle their debt again

• Junk debt makes a comeback

Private equity’s enduring love affair with China

When the Chinese government bought a $3 billion stake in the US private equity giant Black stone in 2007, the head of the private equity titan Stephen Schwarzmann he hailed the deal as a “paradigm shift in global capital flows”.

Beijing squandered UK trophies from Heathrow airport to a National Grid unit. Former British Prime Minister David Cameron Also tried to start a $1 billion private equity fund anchored by the sustained state China Investment Corporation.

But then, not long after a bearish China Donald Trump took the White House in 2017, the music stopped. For everyone except Schwarzman and his private equity colleagues, that is.

The masters of the universe they went on to receive billions of dollars of Chinese state money, DD’s Will Louch and Kaye Wiggins and the FT’s Yuan Yang report, even as geopolitical tensions cut short the fun elsewhere.

The list of companies that have received investment from Chinese state funds is a who’s who of the industry, according to insiders and an FT analysis of regulatory filings.

Many have enjoyed the influx of Chinese capital coupled with limited reporting requirements, leaving politicians and regulators largely in the dark.

“It’s essentially a black box, in terms of the origins of money,” he says Lily McElweea Chinese expert from Washington Center for Strategic and International Studies.

The acquisition industry claims, with some credibility, that its investors are passive. Most are structured not to give foreign investors board seats or voting rights, arguing that it is a risk-free way to attract foreign capital.

But the matter is starting to get the attention of regulators and politicians, who have started demanding more information on where the money is coming from.

“Increasingly for big business, PE funds have to tell US and UK regulators who is behind them through national security documents,” he said McDermott Will & Emery‘S Peter Lu.

Companies now face a difficult choice as they navigate one of the toughest fundraising markets in history: cut exposure to Chinese investors to appease regulators or lean on the country as other sources dry up.

The Issa brothers’ latest debt settlement

It takes a skilled salesman to back it up Asda‘S £2.3 billion purchase From EG groupNon’s Irish and UK operations were primarily aimed at reducing its subsidiary’s $9 billion debt.

Lord Stuart Rosewho presides over both the UK supermarket chain and the heavily overleveraged petrol station empire, has certainly tried.

“The primary driver of this deal has been building a business, which is a different business, a multi-channel champion,” he said. “Now, if as a result of that you also have the opportunity to deleverage the other side, what’s wrong with that?”

Asda says the deal would add around £195m in after-lease earnings and around £100m in synergies over the next three years. But for most investors, despite Rose’s insistence to the contrary, reducing EG’s debt is the real selling point.

The transaction has all the hallmarks of another financial engineering feat by the billionaire Issa brothers, Mohsin AND zuberwho are co-owners of both groups with their private equity partners in TDR capital.

To finance the deal, Asda is borrowing £770m from the acquiring group Apollo and raise £1.1bn of property-related transactions, mainly through the sale and leasing of some of its stores, while Issas and TDR will disburse around £450m in additional capital.

That might seem like a small check to write in the context of all the new financial liabilities being loaded into Asda, but by the usual standards of the two brothers and the British private equity firm, it’s definitely a big one.

Remember, this is the group that raised just £200m between them to pull off the UK’s biggest leveraged buyout in a decade when they initially bought Asda, DD’s Rob Smith and Kaye Wiggins revealed earlier this year.

What it’s saying is that the latest move is the exact opposite of what they were initially trying to do when they acquired Asda in the first place.

A plan to sell Asda’s petrol pumps to EG failed in 2021 after fuel suppliers refused to maintain the same conditions. The turnaround suggests that the Issas are willing to reshuffle their resources in the best way to deal with their large debt load.

Junk debt makes a comeback

Wall Street is slowly reactivating its junk debt machine.

Banks included JPMorgan Chase AND Goldman Sachs they’ve started grant multi-billion dollar loans to finance leveraged buyouts, as they feel comfortable with a market that just last year badly hurt the industry.

Apollo, Elliott management, Black stone AND Capital Truth they’ve all received backing in recent months to fund acquisitions, a welcome sight as they attempt to use hundreds of billions of dollars of dry powder.

Bankers say that despite the turmoil that hit the banking sector this spring, underwriting is once again becoming a more attractive option.

“Silicon Valley Bank and Credit Suisse hit just when we were getting an offer, slowing us down,” Chris Blumcorporate finance manager at BNP Paribashe told DD’s Eric Platt. “[But] you’re starting to see the syndicated option come back.

This month, a group of banks led by Goldman agreed to lend Elliott and some of the group’s partners $3.7 billion in support of the acquisition of the healthcare company Sineo. Apollo’s acquisition of Archonicannounced this month, it will also be financed by banks including JPMorgan before the loan is sold to other investors.

It’s a small win for leveraged financial offices on Wall Street, where the mood has been somber for most of the year. Not only had the slow pace of deals curtailed their business (leading to job cuts and lackluster bonuses), but the Federal reserveThe rapid pace of interest rate hikes also pushed the value of loans that banks had not yet sold deep.

The other good news for those taking on risky corporate loans: An $8.2 billion deal that banks risked losing money on, financing the takeover of a TV station operator Tegna — has been stopped now that the acquisition has been completed. It’s money they can invest elsewhere.

The work moves

• Dina Powell McCormickthe global head of Goldman’s sovereign business, is leaving to become vice president and global head of client services at BDT and MSD partnersGoldman’s veteran-run investment and advisory firm Byron Trot AND Gregg Lemkau.

• Unilever head of the finance office Graeme Pitkethly he will retire next year after more than two decades at the consumer goods giant.

• Nestle took over the London Stock Exchange Group head of finance Anna Manz as CFO, in replacement Francois-Xavier Roger.

• Hiscox insurance he named Morgan Stanley International chair Jonathan Bloom as president-nominee, replacing Robert Childswho will retire in July.

Smart readings

The Chinese electric motor Tech billionaire Bai Houshan has cornered the market for a key ingredient for electric vehicle batteries and supercharging China’s EV dominance in the process, reports the FT.

VIP access The financial mechanics of the music industry are changing. For the super-rich, that means it’s easier than ever to book a megastar for birthdays, bar mitzvahs and more — for a pricewrites the New Yorker.

Nobody is sure The Credit Suisse saga suggests being liquid and well capitalized it won’t save a bank at risk from his poor choices, writes the FT’s Robin Harding.

News review

Goldman Sachs weighs new job cuts as business drought persists (FT)

Temasek cuts employee pay behind failed $275 million bet on FTX (FT)

Philip Morris on track to become an ESG stock, says CEO (FT)

Purdue Pharma helped protect Sackler’s owners from opioid lawsuits (FT)

Goldman Sachs’ Chinese dealmaker stops tapping US investors (FT)

M&A alternatives: Keeping pace with Blackstones will invite scrutiny (The former)