January 27, 2013 9:06 pm

Hands decries Cameron’s ‘dangerous gamble’

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Guy Hands has become a europhile. Nothing like living in Guernsey by the sea – far from the “tribe” of the City of London – to wake up to the realities of the wider world, he says.

The founder of private equity firm Terra Firma even sees the point for more taxes – not for private equity executives though, but for house owners.

Mr Hands, who left the UK almost four years ago leaving wife, children and labradors behind to reduce his tax bill, says his move away from the “chatter of the London dining rooms” has given him his “clear thinking” back and a broader perspective.

He is quick to snap at David Cameron’s decision to hold a referendum on the UK’s European Union membership. It’s a “dangerous political gamble”, Mr Hands says in an interview in Guernsey.

“So much of our trade is with Europe, the reasons why the Americans are based in London or the Chinese are trying to set up offices in London, it is because we are part of Europe,” he says in a meeting room overlooking the quiet harbour of St Peter Port.

“This argument that somehow we can be part of other trading blocks, with China and India, forget it! If we want to knock the GDP down 20 per cent so the UK can start again with 4m-5m unemployed, that’s a great idea.”

Getting closer to Brittany has not turned him into a backer of France, though. The UK needs to be part of Europe to fight alongside German chancellor Angela Merkel against France’s “federalist socialism”, he says. “The last thing Merkel needs right now is a whingeing UK.”

Two years after losing his investors’ £1.75bn investment in British music label EMI – and £200m of his personal wealth – to US lender Citigroup in one of the most contentious leveraged buyouts of the credit bubble, Guy Hands is not whingeing any longer. He wants to move on.

“The time for apologising is over,” he says. “A lot of people wanted me to fall over and just die. I wasn’t going to, it’s not my personality,” Mr Hands says, in a calm yet slightly trembling voice. “I have the advantage of having lost enough personal money that no one can say he took his money and ran. I fought like a tiger for my investors and I will get my investors their money back.”

This may not be enough to convince those investors to bet again on the financier, whose latest €5.4bn buyout fund raised in 2007 expired last year.

Mr Hands declines to comment on fundraising but investors say he is preparing to market a €3bn fund targeting green energy infrastructure this year, as he seeks to bounce back on successes including Infinis, the UK wind and biogas-power generators. It is less than the €3bn-€5bn initially flagged after China Development Bank decided not to commit to the fund.

Mr Hands, 53, also keeps sounding out his backers for another LBO fund of more than €2bn, which could be marketed as soon as next year if asset values recover, say people with knowledge of the plan.

Terra Firma’s latest fund, which was marked down by 70 per cent two years ago, was losing 47 per cent as of September, according to Oregon’s retirement pension plan, an investor. The firm has indicated that the loss has since narrowed to 30 per cent.

Some of Mr Hands’ earliest backers say his chances of raising a significant fund are still slim. “It’s delusional,” a US-based investor said. “Investors want distributions and he won’t be able to return cash from his latest fund.” “It will be a struggle,” another said, pointing at a crowded market for fundraising and the instability in the team. “Managers with a good track record get funded but, if you’ve got issues, you have a hard time,” said the UK-based investor.

Some of Mr Hands’ largest rivals are suffering from investors’ reluctance to commit fresh money to new funds as firms struggle to exit expensive investments made during the boom years.

Mr Hands is determined to prove sceptics wrong. His staff is being stabilised with a £20m bonus pool. He says his investors should back him again because he has learnt from his mistakes. Terra Firma’s next fund will include a concentration limit and will not allow cross-fund investments.

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