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Examining Wayzata Investment Partners’ business deals

The private equity firm comes by its secretive nature naturally.

Examining Wayzata Investment Partners' business deals
MinnPost photo by Corey Anderson

Wayzata comes by its secretive nature naturally; managing partner Patrick Halloran and other principals come from America’s largest private company, Cargill, Inc. As the world’s gigantic commodities trader, Cargill’s food buyers developed skill in assessing risk; by the ‘90s, they applied that keen eye to broader financial markets.

Though it’s sometimes reported that Wayzata “spun off” from Cargill, the truth is that principals simply left. Says Carlson School of Management Prof. Jerry Caruso, “They were on their own and raised independent money. They were not ‘spun off.’”

From $1.2 billion under management in 2004, the private equity firm now controls $7.32 billion as of a November 2011 Securities and Exchange Commission filing – growth one local financier told me was “extraordinary.”

Typically, Caruso says, private equity managers get 20 percent of the profits when a holding is sold, plus a 2 percent fee on assets under management. They are longer-term investors than hedge funds, and more actively manage their holdings.

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Distressed-debt firms such as Wayzata don’t talk because the essence of the business is to identify bargains before someone else does. Still, Wayzata must disclose a few of its holdings, and SEC reports confirm their largely short-term nature. Wayzata had kept just two assets between fall 2009 and spring 2012: Delta Airlines and communications tech firm Windstream Corp. (which last year acquired Wayzata holding PAETEC Holding Corp.).

The Delta stake came via Northwest Airlines; Wayzata bought some of the local flier’s distressed debt before 2008 merger.

Investments that have dropped off the public list: energy firms Linn Energy, Energy XXI (Bermuda), Dynegy, Global Geophysical and Saratoga Resources, as well as tech manufacturer Viasystems and paperboard manufacturer Smurfit-Stone Container. In mid-July, Wayzata sold glassmaker Anchor Hocking for an estimated $880 million.

As of spring 2012, Wayzata maintained holdings in glassmaker Owens Corning, restaurateur Marie Callender, gambling company Majestic  Holdco and Texas and Montana power plants. Partners sit on many other corporate boards.

Registered in Minnesota and Massachusetts, Wayzata reported 41 non-clerical employees, 27 of whom perform advisory functions including research to nine clients, all pooled investment vehicles such as state employer funds.

Vice presidents include Jospeh Deignan, John Foley, John McEvoy, Blake Carlson and CFO Mary Burns. The partners also controlled limited liability corporations listed as “members”: Halloran’s Map Holdings, Deignan’s Cheesemaker Partners, Foley’s AJZ Windmill, McEvoy Family Holdings and Carlson’s BCWL Holdings, along with other family trusts.

In its SEC filing, Wayzata stated no adviser has been rung up for a felony or securities-related misdeeds, though McEvoy – who once worked for financier George Soros and Lehman Brothers – is tied up in a Danish maritime court dispute that has lingered since 2005. According to Wayzata, the dispute has “nothing to do with Wayzata Investment Partners or its affiliates.”

However, the U.S. Treasury Dept. is attempting to get $5.2 million in stimulus funds back from Wayzata’s Montana power plant. A plan to make the plant wood-burning earned stimulus bucks, but after the check cleared, management changed its mind, the Wall Street Journal reported two weeks ago.  The company, Thompson River Power LLC, which filed for Chapter 7 liquidation July 3, disputes the claim.

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