WASSERELLA'S NEW GENEROSITY
WASSERSTEIN, PERELLA & Co., faced with a near-revolt by angry investors in its poorly performing, $1 billion leveraged-buyout fund (BW--Oct. 10), has decided to alter the fund's terms. The highly unusual concessions, announced to investors in a Nov. 10 letter, could eventually save the investors tens of millions of dollars.
Wasserstein executives say they were simply trying to earn goodwill from investors and update terms of the 1988 fund to prevailing LBO-industry practice. But sources close to the situation contend that Wasserstein made the changes to stave off a lawsuit by one of the fund's leading investors, Fisher Brothers, a New York real estate firm. A spokesman for Fisher Brothers declined to comment for this article.
Wasserstein took two main steps. It lowered its management fee to 1% from 1.5%. And it agreed to modify the way that it calculates its share of the fund's profits. Wasserstein will escrow half of its take from each deal until the fund ends, then recalculate its split based on the fund's lifetime performance. That protects investors from losses on deals toward the fund's end, which could be as late as the year 2001. The shift has raised eyebrows in the leveraged-buyout world. "There are general partners who would go to their graves" before they would make such a change, comments one competing LBO sponsor.EDITED BY PETER COY & JULIE TILSNER By Mark Maremont