These Special Situations include:
Corporate Divestitures and Carve-Outs
KPS targets “orphan” businesses of larger corporations that would benefit from new ownership, including divestitures, spin-offs or carve-outs. We invest our capital based on our ability to effect material improvement in an orphan’s profitability through the implementation of a new business strategy, cost reduction and capital investment. We have successfully created new companies to purchase the assets of orphan businesses in successful divestiture transactions.
Central to KPS’ investment strategy is a belief that superior investment returns are achieved by catalyzing the turnaround of underperforming or distressed businesses. We often pursue businesses facing the threat of closure, liquidation, or with a history of operating losses. When we encounter a good business experiencing temporary or transitional operating problems, we invest our capital based on our ability to implement a turnaround plan and strategy based on identifiable and reasonably achievable objectives at the closing of a transaction. We prefer to invest in turnaround plans predicated on cost reduction, capital investment and capital availability. We generally do not invest in turnaround plans where success is solely predicated on revenue growth or the ability to complete subsequent acquisitions.
Businesses Operating in Bankruptcy
KPS targets good businesses that are operating in Chapter 11 bankruptcy. We are experts in sponsoring and funding plans of reorganization for a debtors-in-possession or creating new companies to purchase operating assets out of bankruptcy pursuant to Section 363 sales. We have extensive experience in structuring complex transactions involving banks, bondholders, other creditor constituencies and stockholders. We have successfully raised significant capital to provide exit financing to banks and other creditor groups in connection with our bankruptcy activities.
KPS targets businesses with good operations but burdened with insufficient liquidity, excessive debt, operating in default of obligations to creditors, or lacking capital for investment, modernization or growth. We actively seek to invest capital in such opportunities but only in connection with a comprehensive plan to eliminate, reduce or restructure a company’s liabilities.
KPS targets good businesses that cannot otherwise obtain capital because the industry in which they operate is out-of-favor with the capital markets. The capital markets sometimes close to companies operating in industries that are low-growth, cyclical, contracting, or burdened with over-capacity. Because our investment strategy is generally not predicated on achieving investment returns through revenue growth, we have been successful in sponsoring buyout transactions in industries with these characteristics.