Libya Has $70 Billion to Invest—and No TakersBy and
Several years ago, Libya was primed to dole out some of the billions the oil state held in cash during its time as an international pariah. When the country made its way back into the West's good graces, private equity managers shined their wingtips, straightened their ties, and headed for Tripoli, eager for a slice of the estimated $70 billion controlled by the Libyan Investment Authority.
"It was the spot that everyone was soliciting as both investor and investee, thinking this was the foothold for Northern Africa and the closest oil producer to Italy and France," says Thomas J. Barrack Jr., chairman of Santa Monica (Calif.) private equity firm Colony Capital. "They were rising from decades of isolation and economic sanctions and needed everything."
One of Libyan leader Muammar Qaddafi's sons, Saif Al-Islam, came to the U.S. in 2008, attending a lunch hosted by Blackstone Group (BX) Chairman Stephen A. Schwarzman at the billionaire's Park Avenue apartment. Donald Marron, who once ran Paine Webber and is now chairman of private equity firm Lightyear Capital, also had the younger Qaddafi for lunch. It was all aboveboard, complete with U.S. diplomatic security. Neither Blackstone nor Lightyear would comment.
Those managers and others who didn't land a Libyan account likely are breathing sighs of relief that nothing came of those meetings. Barrack tried to pull off a deal with the Libyan Investment Authority in 2007, when ownership of Libya's oil refiner, Tamoil, was transferred to the fund. Colony sought to buy Tamoil's refineries outside of Libya in Germany, Italy, Switzerland, and elsewhere, as well as more than 3,000 of its Tamoil filling stations across Europe. Colony dropped its $6.1 billion bid in March 2008, citing lack of information about the assets and other financial data. Colony has no Libyan ambitions now. "Libya is too confusing, and it's too dangerous," says Barrack. "There is no transparency, no leadership, no infrastructure, and no clear signal from the West as to what is the strategy or end game." Calls to the Libyan Investment Authority were not picked up.
Other financial industry veterans forged links with the Libyans before the recent fighting started. Former Bear Stearns executive Frederic Marino started an $800 million hedge fund with seed capital from Qaddafi's government. Three calls to Marino were unreturned.
London-based FM Capital Partners, founded in 2009 with financing from a smaller Libyan sovereign wealth fund, was preparing to raise money from other outside investors this year for the first time, according to two people briefed on the plans who declined to be identified because the firm is private. Those plans may have to be postponed because other governments have frozen Qaddafi's assets.
Libyan money is a "huge hindrance" to soliciting new investors, says Don Steinbrugge, managing partner of Agecroft Partners, a Virginia consultant to hedge funds and investors. "Once there is a transition to a more stable government, their asset base should be a positive in helping them build the business," he adds.
The bottom line: Hedge funds and private equity firms will have to wait for the war's end before they resume their pursuit of Libya's billions.