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Old 07-26-2010, 03:19 PM   #1 (permalink)
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New Details Emerge On FEG's Partnership With PUJI Capital

New details have emerged on the partnership deal between K-1 and Dream parent company FEG and Chinese investment bank PUJI Capital. Specifically, new information has come to light regarding the nature of the deal and the extent of PUJI’s future role as a partner to FEG..{Point #1}: As for the present relationship between K-1 and PUJI Capital, it can be said there are no similarities between this situation and the previous purchase of Pride by Lorenzo Fertitta. In the case of the Pride deal, the entire company was sold off and its assets liquidated. Once a company has been sold, the new owner is free to do as they will. It is just as with the freedom to continue to promote events; it is simply the owner’s right to decide what to do in such an event.

{Point #2}: On the other hand, as for the current situation with FEG, the setting is quite different. In short, FEG is soliciting investment funding from an international investment institution as a means to facilitate growth. Therefore, K-1 and Dream shall continue to hold events. The major premise here is to promote growth and increase profitability. In this sense, it is necessary that FEG management is improved in order to more effectively attract investment capital.

{Point #3}: In order for this fundraising tactic to be viable, it is necessary that FEG transfers a share of its assets which are tied to K-1 and Dream to the investors in return for funds. The form of these assets will be as Special Purpose Vehicles (SPV) (a type of securitized asset). As such, the investor invests their funds against SPVs. However, the SPV holder does not in fact hold a tangible stake in the company; further, the relationship between the capital investor and the issuer of the SPVs (e.g. FEG) is frequently managed by a third-party firm.

{Point #4}: In addition to PUJI’s roll as an investor against FEG SPVs, it is possible that PUJI may also invest directly into FEG enterprises (this point is currently uncertain). It is also plausible that PUJI may have influence on the way in which the profits which result from PUJI capital injections are to be used (this point also cannot presently be confirmed). It should be reiterated however that given PUJI’s status as a global investment bank, this is not a case in which FEG enterprises are being purchased with Chinese capital.

{Point #5}: As for the question of why PUJI does not invest directly, but rather is utilizing SPVs, it is basically a question of the spreading out of risk. According to this investment model as it pertains to FEG, even if, for example, a potential outside investor was uncomfortable with the viability of FEG as a whole, it would still be possible for them to, for instance, invest only in K-1 events. In addition, even if FEG were to have issues of some sort in regards to their promotion, the level of risk on the part of outside investors would remain relatively small.

{Point #6}: As for the outside investor, the number of events and the quality of the matches is not so relevant. Instead, at issue is the growth of the promotion and the size of the profits. (In other words, the investor is concerned with macromanegment operations as opposed to the micromanagement of FEG enterprises.) Therefore, the investor will not become involved in matchmaking. If however there was a blunder with regards to the enterprises themselves, FEG may be faced with the withdrawal of investor capital. Such does not seem likely to present a serious problem under the current partnership, as PUJI seems to be a strong and devoted partner and an ally of K-1; not hostile by any means.

Source: http://sadironman.seesaa.net/article/156859418.html
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