this article from URL has been sent to you by khare URL texas pacific in addition to its multibillion dollar portfolio detailed below actually does invest in promising new companies not just turnarounds it s just that knownow is waaay to small of a part of their NUMBER NUMBERb portfolio so far rohit khare URL texas pacific goes where others fear to spend august NUMBER NUMBER by riva d atlas and edward wong it was one of the first calls david n siegel placed when he became chief executive of the beleaguered us airways last march seeking advice on how to hammer out a leaner and meaner business plan keep his planes flying and renegotiate costly contracts with the unions he flipped through his files and found the number for the texas pacific group an investment firm headed by david bonderman a former civil rights lawyer with a reputation for fixing problem companies mr siegel once a top executive at continental airlines had watched texas pacific s partners turn an investment of NUMBER million in the airline made three years after it filed for bankruptcy in NUMBER into a profit of more than NUMBER million and they had made nearly as much on their stake in america west which filed for bankruptcy in NUMBER that search for advice turned into an offer why not let texas pacific have a role in us airways revival asked richard schifter the texas pacific executive whom mr siegel reached in june mr siegel called mr schifter again and days before us airways announced its plans to file for bankruptcy two weeks ago but after it had negotiated about NUMBER million in concessions with its unions texas pacific based in fort worth and san francisco agreed to kick in NUMBER million as part of a NUMBER million loan to keep the company operating during bankruptcy it also agreed to buy NUMBER million of stock or NUMBER percent of the company and take NUMBER of NUMBER seats on the board if us airways emerges from bankruptcy unless another investor surfaces with a better offer one of the reasons we were interested is few other folks were said james coulter a partner at texas pacific in an interview after the bankruptcy filing there aren t many people around with the stomach or the knowledge to delve into the airline industry texas pacific which manages NUMBER billion thrives by buying businesses no one else wants mr coulter and mr bonderman made their names during the recession of the early NUMBER s with investments in continental and america west the firm s hallmark is to take an active hand in shaping companies sometimes ousting poor managers and tapping its extensive network of contacts for talented replacements now the partners are again looking for trouble in the last year alone texas pacific has announced or completed six acquisitions most in unloved industries like semiconductors reinsurance and airlines just last month it announced plans to buy burger king which has been losing market share for NUMBER NUMBER billion it is also bidding for bankgesellschaft berlin a large and troubled bank the most creative and potentially lucrative of these deals could be texas pacific s acquisition last november of memc electronic materials a semiconductor company for NUMBER yes just NUMBER in cash it will also guarantee a NUMBER million bank loan in the last few years most firms that specialize in leveraged buyouts the use of junk bonds bank loans and other borrowings to buy or take big stakes in companies have been largely inactive falling stock prices have made managements reluctant to sell cheaply companies that are for sale have tangled finances or face a cash squeeze texas pacific is different this is a terrific environment for them said stephen schwarzman chief executive of the blackstone group which also specializes in buyouts mark attanasio a managing director at trust company of the west which has invested with texas pacific said most other buyout firms want to buy companies that are growing you don t see many guys wanting to take on operational fixes like most other buyout firms texas pacific tries to keep its inner workings private its partners rarely grant interviews and its web site is perpetually under construction mr bonderman mr coulter and william price the third founding partner declined to be interviewed for this article mr bonderman NUMBER is known for his rumpled shirts and bright patterned socks he likes argyle socks and they tend to fall down around his ankles said henry miller an investment banker who advises troubled companies early in his career when he was a washington lawyer mr bonderman argued a case in court wearing a brown velvet suit when a texas pacific deal is being negotiated he is known for obsessively staying in touch even when he is trekking in places like pakistan nepal and most recently bhutan whenever i see a long unfamiliar phone number pop up on my caller i d i know it s david calling said one investment banker who often works with mr bonderman mr bonderman made his reputation in the NUMBER s as the chief investment officer for robert bass the texas oilman mr bonderman enriched mr bass a second time by making early bets in industries like cable television and taking stakes in troubled companies like american savings loan which had been seized by the government over nearly a decade mr bonderman s picks earned an average annual return of NUMBER percent for mr bass in NUMBER mr bonderman struck out on his own with mr coulter a former lehman brothers banker who had also worked for mr bass they teamed up later that year with mr price a veteran of ge capital capital and bain company a consulting firm to form texas pacific the three men have complementary skills investment bankers and other deal makers said mr bonderman is the master strategist and mr coulter is good at structuring deals and the detailed management of the firm s purchases mr price often recruits managers and advises on operational issues david is very much the optimist very much the deal maker said greg brenneman a former president of continental jim is very much a counterbalance to david he will sit back and ask the tough questions he will approach investments a little bit more skeptically than david does by the end of the NUMBER s texas pacific was well established in deal making it easily raised NUMBER NUMBER billion from pension funds and other investors in early NUMBER to celebrate their war chest the firm s partners rented san francisco s city hall and hired the b NUMBER s to play at a party but as the stock market began to tumble texas pacific hesitated for a NUMBER month stretch the partners made no deals they checked out some of the biggest corporate blowups including adelphia xerox and global crossing but stayed away finding the prices and the quality of the businesses untenable instead texas pacific began to hastily exit some existing investments taking more than NUMBER billion in profits during that stretch they started to cash out early in the cycle said mario giannini chief executive of hamilton lane a money management firm some of whose clients are texas pacific investors the good times of the late NUMBER s were not ideal for texas pacific it struggled to find downtrodden companies that needed its help but texas pacific did manage to spot a few diamonds in the rough it revived oxford health plans the health maintenance organization that nearly collapsed in the mid NUMBER s almost doubling its money after bringing in new managers and upgrading computer systems in NUMBER it made a NUMBER million investment in ducati motor the italian motorcycle maker whose profits have since more than quadrupled but texas pacific also stumbled usually when it bought at the top of the market texas pacific s NUMBER million investment in the j crew group the clothing retailer for which it paid a steep price of NUMBER times cash flow in NUMBER has been a disappointment so has its NUMBER purchase of bally the shoe maker which has suffered from lower demand for luxury goods texas pacific also lost more than NUMBER million on zilog a semiconductor company and favorite brands a candy maker both of which filed for bankruptcy some of these investments have taken a toll on the firm s performance texas pacific is still selling off holdings in two investment funds it raised over the last decade the first fund a NUMBER million portfolio raised in NUMBER and including investments made through march NUMBER should return more than NUMBER percent according to one texas pacific investor but its second fund NUMBER NUMBER billion raised in NUMBER could return less than half that this investor estimated since the firm had less time to take profits on these investments before the stock market sank but because texas pacific has not sold many of its holdings in the second fund profits on these investments could rebound it is hoping for example that with new management in place j crew will turn around as the economy rebounds in any case one competitor said their returns look pretty good when you consider that some other funds won t return any capital to investors but with the weak economy throwing many companies into trouble texas pacific seems poised to repeat its earlier success the investor said they should do exceptionally well he said texas pacific has a distinct style if not formula it relies on talented self sufficient managers to restructure troubled companies preferring to remain hands off except for surveillance from the boardroom when necessary it replaces managers less than a year after continental emerged from bankruptcy for example mr bonderman watched with frustration as his old friend robert r ferguson the chief executive led it to the edge of another trip to bankruptcy court continental s board where mr bonderman was chairman then brought in gordon m bethune an executive at boeing and in october NUMBER he replaced mr ferguson as chief executive mr bethune quickly did a top to bottom overhaul of the company and is now considered a great turnaround artist of the industry the biggest conflict i ve ever seen was with bob ferguson said clark onstad a former general counsel for the federal aviation administration in describing the thinking of mr bonderman whom he has known since the NUMBER braniff bankruptcy he chose bethune over his longtime friend ferguson because he thought bethune would do a better job at america west texas pacific initiated an even more extensive management overhaul this time the charge was led by mr coulter and mr schifter both directors w douglas parker the current chief executive flew to mr coulter s home in san francisco to interview for the job of chief financial officer they talked for hours and mr parker said the two men quickly realized they had somewhat kindred spirits the board replaced most senior managers at america west except william franke the chief executive who stepped down last september his restructuring plan had made the airline profitable a year and a half before it emerged from bankruptcy in august NUMBER texas pacific owns just NUMBER percent of america west worth about NUMBER NUMBER million but those are controlling shares and the group holds more than NUMBER percent of the votes these are not passive investors nor am i said donald l sturm a denver businessman who serves on continental s board with mr bonderman and mr price you re active your money is at stake your reputation is at stake after overseeing managers who worked successfully with unions at continental and america west texas pacific has a good reputation with labor that was one reason us airways was interested in a texas pacific investment said chris chiames a spokesman for the airline mr siegel wanted an investor who would be as labor friendly as possible mr chiames said but us airways can still entertain other bids this fall and marvin davis the billionaire investor from los angeles has expressed interest texas pacific s investment in burger king made with goldman sachs and bain capital was announced after two years of discussions among texas pacific s partners and the chain s franchisees even before the company which had been owned by diageo the liquor company was put up for sale said julian josephson chairman of the national franchisee association which represents most burger king franchisees we liked what they had to say about the human component of the businesses they buy mr josephson said many other owners he added are dismissive of labor at burger king texas pacific will also be working with an executive it knows burger king s chief executive is john dasburg the former chief executive of northwest airlines who met mr bonderman and his partners when northwest bought out their stake in continental in NUMBER unlike most buyout firms texas pacific remains enamored with the technology industry despite the failure of so many start ups the last two years it has focused on the semiconductor industry which like the airline industry is highly cyclical so far though results have been mixed the firm s NUMBER acquisition of the paradyne corporation which makes equipment for high speed internet connections has been a huge success texas pacific split it in two and took both parts public in the late NUMBER s selling most of its stakes for NUMBER times its investment but a much larger investment its NUMBER million acquisition of zilog the chip maker in NUMBER was made just before the economic crisis in asia caused chip prices to plummet zilog filed for bankruptcy last year texas pacific is still hoping for a turnaround at a third company on semiconductor which it acquired for NUMBER NUMBER billion three years ago it invested NUMBER million more last year its latest gamble on the industry the NUMBER deal for memc may prove the most lucrative the cost of mailing the payment to e on based in d sseldorf germany was actually more than the acquisition one executive close to the deal said texas pacific and its partners in the deal trust company of the west and leonard green partners agreed to guarantee a NUMBER million revolving line of credit texas pacific also assumed NUMBER million worth of debt most of which it swapped for more stock in the company they did a good job of timing the acquisition said nabeel gareeb the company s chief executive who noted that in the last quarter memc reported its first profit since the fourth quarter of NUMBER but texas pacific s interest in airlines is clearly sizable besides its involvement in continental america west and us airways the company plans to buy gate gourmet the catering business of the bankrupt swissair group two years ago texas pacific started a web based discount ticket service called hotwire it put up most of the NUMBER million in seed money then persuaded six airlines to invest with it said karl peterson the chief executive hotwire instead of asking consumers to bid on tickets as priceline does shows the cheapest ticket on its web site but does not reveal the exact flight and travel time until after the sale the contraction of the new economy has undoubtedly hurt hotwire which is privately owned mr peterson said that the company was still unprofitable but that texas pacific remains committed to it last spring mr peterson met mr bonderman in aspen to talk about hotwire and to go snowboarding mr bonderman seemed perfectly willing to accompany hotwire down the steep internet chute but he does have his limits on risk mr peterson discovered before going down the mountain mr bonderman strapped on a helmet URL how to advertise for information on advertising in e mail newsletters or other creative advertising opportunities with the new york times on the web please contact onlinesales URL or visit our online media kit at URL for general information about URL write to help URL copyright NUMBER the new york times company URL 