Welcome to Scribd, the world's digital library. Read, publish, and share books and documents. See more
Download
Standard view
Full view
of .
Look up keyword
Like this
3Activity
0 of .
Results for:
No results containing your search query
P. 1
Corsair Capital - 2012.04.24

Corsair Capital - 2012.04.24

Ratings: (0)|Views: 2,726 |Likes:

More info:

Published by: Wall Street Wanderlust on Apr 27, 2012
Copyright:Attribution Non-commercial

Availability:

Read on Scribd mobile: iPhone, iPad and Android.
download as PDF, TXT or read online from Scribd
See more
See less

04/27/2012

pdf

text

original

 
!"#$%&#'!%(&)%*'+%,%-./.,)0'11!''2''345'+%6&$",'78.,9.0':
);
'<*""#''2'''=.>'?"#@0'=?'A55AB''2'''CACD3E:DECF5'
This letter is not a research report or recommendation to buy or sell the securities mentioned herein. The examples herein are illustrations of ways in which Corsair and its affiliates have examined or may examine opportunities. Corsair and its affiliates may, at any time, buy or sell any of the securities mentioned in this letter and may change its long or short position at any time without providing any notification of such changes. It should not be assumed that any trading activities pursued in the future will be profitable and may in fact result in losses.
April 24, 2012Dear Limited Partner:For the first quarter ended March 31, 2012, Corsair Capital was up an estimated 7.4% net, after allfees and expenses. Since inception in January 1991, Corsair 

compounded net annualreturn is 14.6%.Equity markets continued their positive momentum generated at the end of 2011. Emboldened by asecond round of Long Term Refinancing Operations

by the European Central Bank,investors maintained a
 
 

mode during the first quarter. The LTRO lessened the short-termcredit crunch facing many European banks, allowing them to avoid being forced to sell manyassets at current market prices (i.e., at a loss). Additionally, these banks, then bought their 

 sovereign bonds, alleviating both rising interest costs and the refinancing risks facing manysouthern European countries.Of course, the LTRO is no

lunch.
It comes at the cost of both leveraging the ECB with weak collateral and ever-increasing sovereign default risk for European banks. All the more so after Greece completed an historic
 
200 billion

debt restructuring in earlyMarch;

to the extent that any investor normally accepts a package of new securitiesworth 25 cents on the dollar. Nevertheless, for the moment, investors can remove Greece fromtheir list of things to worry about.Instead, as the second quarter begins, investors have turned their attention to Spain.

newleaders recently proposed a 2012 budget with expenditure cuts of 
 
27 billion in order to narrow itsforecasted deficit to 5.3% of GDP versus last

8.5%. This leaves Spain with little or 

 margin for 

as their Finance Minister Luis de Guindos recently stated. Mr. de Guindos also
Unless otherwise noted, performance figures included herein (which include the reinvestment of dividends, capital gains and other earnings) are for Corsair Capital Partners, L.P. The figures for the fund are based on an investment made as of the inception of the fund, are ca 

fees and expenses, are based on unaudited data, and may be subject to adjustment. Additionally, the figures for the fund are calculated using the highest management fee per annum rate generally offered by the fund at the time 
 
a 1.00% rate through May 2002, a 1.25% rate from May 2002 through 2009,
 
e been substantially similar to Corsair Capital, the actual returns of such other funds have varied. Also, results for individual investors within a particular fund managed by Corsair 
 
he timing of capital contributions and redemptions/withdrawals. For additional important disclosures regarding this letter, please see the last page of this letter.
Corsair Capital (net)S&P 500Russell 20001Q12 return7.4%12.6%12.4%Annualized since inception (1991)14.6%9.3%10.6%Total return since inception (1991)1699%561%743%
 
!"#$%&#'!%(&)%*'+%,%-./.,)0'11!''2''345'+%6&$",'78.,9.0':
);
'<*""#''2'''=.>'?"#@0'=?'A55AB''2'''CACD3E:DECF5'
This letter is not a research report or recommendation to buy or sell the securities mentioned herein. The examples herein are illustrations of ways in which Corsair and its affiliates have examined or may examine opportunities. Corsair and its affiliates may, at any time, buy or sell any of the securities mentioned in this letter and may change its long or short position at any time without providing any notification of such changes. It should not be assumed that any trading activities pursued in the future will be profitable and may in fact result in losses.
added that his country possibly faces a

-lose

where financial markets require Spainto slash their budget deficit (in order to keep interest rates low), but these same spending cutsmight worsen the decline in an economy already suffering from 20% unemployment.Unfortunately, almost all developed nations currently face this quandary of how to cut their budgetdeficits while stimulating growth in their economies. Increasing taxes and cutting governmentspending help reduce government deficits, but are neither easy to implement nor helpful to theeconomy. Thus, we have instead seen a policy of quantitative easing by Central Banks around theglobe in an effort to keep interest rates low. As Federal Reserve Governor Janet Yellen put it,

 consider a highly accommodative policy stance to be appropriate in present circumstances.
 Investors will all have to keep their fingers crossed that the Federal Reserve and its internationalcounterparts will likewise know when to turn off the monetary spigots before too much inflation isunleashed.Portfolio UpdateWe were pleased to participate in the

strong rally during the quarter. Some of the biggestcontributors to our performance are detailed below: Neo Material Technologies

a company we described in depth in the appendix to our Q42010 letter (and also mentioned in last

letter), was the biggest contributor this quarter after Molycorp

announced its intention to purchase the company for $8.05 in cash and.122 shares of MCP common stock (for a total purchase price of approximately $11.45/share).While we are pleased to see our thesis of value at NEM borne out, we believe that MCP is getting a bargain. MCP estimates $100 million of low-hanging synergies on top of the $1.00+/share of core NEM earnings, $1.00/share in net NEM cash and the potential of the Pitinga mining operation. We believe MCP desperately needs
 
rare earth processing capabilities/customer relationshipsand anticipate the merger will receive appropriate approvals in order to close. However, with amodest break-up fee, we also would not be surprised if another bidder emerges. The stock endedthe quarter at $11.22.

 

stock continued to perform very well in the first quarter. Though thecompany reported a weak Q4 as expected, the market anticipates record-low gas prices willcontinue to suppress ethane prices, one of 

main input costs, thereby supporting highethylene margins. If current ethane prices are sustainable, the industry could enter a
 
-

 where LYB would show earnings previously not thought possible. The company also took advantage of the current strong credit markets and refinanced $3 billion of debt, benefitting by bothextending maturities and lowering interest payments. LYB ended the quarter at $43.65.
 
!"#$%&#'!%(&)%*'+%,%-./.,)0'11!''2''345'+%6&$",'78.,9.0':
);
'<*""#''2'''=.>'?"#@0'=?'A55AB''2'''CACD3E:DECF5'
This letter is not a research report or recommendation to buy or sell the securities mentioned herein. The examples herein are illustrations of ways in which Corsair and its affiliates have examined or may examine opportunities. Corsair and its affiliates may, at any time, buy or sell any of the securities mentioned in this letter and may change its long or short position at any time without providing any notification of such changes. It should not be assumed that any trading activities pursued in the future will be profitable and may in fact result in losses.
Republic Airways

got off to a strong start in 2012 after reporting Q4 earnings of $0.34/share that easily beat consensus estimates of $0.09/share. By early February, RJET traded ashigh as $6.33 after entering the year at $3.50. The impressive Q4 results underscored both theconsistent earnings strength at Republic and the successful restructuring of its Frontier subsidiarydespite $35 million of increased jet fuel costs in the quarter. Management now has plans to achieveUltra Low Cost Carrier ("ULCC") status for Frontier by cutting costs further which should result ina higher valuation multiple. RJET continues to operate Frontier as a separate entity and hasappointed an independent management team in preparation for the expected sale/divestiture. We believe Republic excluding Frontier will generate cash earnings of $1.25/share in 2012 with upsidethe following year. The stock ended the quarter at $4.94.Shaw Industries

 
  
highlighted in the appendix to our Q3 2011 letter) performed well thisquarter after 1) two of its main customers received the final requisite Nuclear RegulatoryCommission licensing to construct two new nuclear power plants and 2) the

increasedenvironmental standards drove power plant maintenance contract wins. The company also reporteda strong fiscal Q2 and the upcoming divestiture of the Energy and Chemicals division in the nextfew months should create additional shareholder value. We estimate that SHAW could earn$3.00/share in FY 2013, which would increase its net cash position to over $17.00/share. SHAWended the quarter at $31.71.TNS, Inc.

another of our core holdings (and described in the appendix to our Q2 2011letter), took advantage of the low-interest rate environment by refinancing its credit facility and pushing out maturities; we estimate the company will save $0.20/share in lower interest costs. Thecompany also announced strong 2011 earnings of $2.28/share - above guidance and consensus -and introduced bullish 2012 guidance of $2.39-$2.55/share which includes a loss of $0.16-$0.20/share from its Cequint subsidiary. The company estimates 2012 organic growth of 4%-6%,driving 7%-14% adjusted EPS growth even as it continues to invest in new products. TNS endedthe quarter at $21.73.Organizational UpdateWe are pleased to announce that as of March 31, 2012 Corsair Capital Management, LLC is nowofficially registered with the Securities and Exchange Commission as a registered investmentadvisor. As most of you are aware, we have been preparing for registration for quite some time andexpect little change to our daily routines. We look forward to continuing to work with our outsideauditors, attorneys, administrators and compliance consultants to provide both ourselves and our  partners with best-of-breed investment management practices.

You're Reading a Free Preview

Download
/*********** DO NOT ALTER ANYTHING BELOW THIS LINE ! ************/ var s_code=s.t();if(s_code)document.write(s_code)//-->