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Christian Dior Couture's chairman and CEO went big and bold in 2022 with stores, shows, exhibitions and more.

A giant portrait of Christian Dior by artist Dongyoo Kim, composed of multiple Marilyn Monroes, lords over the office of Pietro Beccari, the fashion house’s dynamic chairman and chief executive officer.

Beccari takes the founder’s entrepreneurial spirit and daring to heart, and then some, which has sent Dior on a growth trajectory that has become the envy of the industry.

“If you don’t take risks, you have no reward,” he said with a grin. “I often say to my teams, ‘If you have everything under control, you’re not going fast enough.'”

By all accounts, 2022 was a huge year for the French fashion house, and Beccari’s mantra seemed to be “Go big or go home” in rolling out dreamy destination fashion shows, gobsmacking pop-up shops and department-store takeovers, mega exhibitions and a Paris flagship store that broke the luxury mold: It incorporates a museum, a restaurant, pastry café, leafy courtyards, a 26-foot-tall rose sculpture by Isa Genzken and a hotel suite that offers a special few the run of 30 Avenue Montaigne all night long.

In an interview, WWD’s Newsmaker of the Year described a management philosophy that might surprise you: one that embraces chaos, values inconsistency and yet leaves nothing to chance.

To be sure, Beccari embodies the opposite of resting on one’s laurels, deeming Dior a “sacred” and “eternal” brand deserving of the best talents, projects and success.

“At the base, I’m completely unsatisfied,” he said, getting up from the sofa to fetch the small red book by advertising tycoon David Ogilvy that’s forever propped up against his desktop computer. The title reads: “The Eternal Pursuit of Unhappiness: Being Very Good Is No Good, You Have to Be Very, Very, Very, Very, Very Good.”

“It’s a bit the philosophy that probably helps to keep me on the edge. This is the secret to boldly going forward and forgetting all the past. I think I learned this from sport,” the former professional soccer player explained. “You know, if you win a championship, you have to forget about it and concentrate on the next championship.

“On the other side, it’s also a way for me not to live a very relaxed life, because I’m always on the quest of something. So I’m satisfied. Yes, I am. But I’m more worried about what I will do next, to be honest,” he continued. “I’m super glad to have a team that believes in me and backs me and is super proud of what we achieved together. Because I didn’t do it alone. I did it with an incredible team.”

Beccari and company kicked off the year by finally reopening Dior’s historic Paris flagship after a complex renovation that amalgamated several buildings to create an immersive brand complex spanning nearly 108,000 square feet. The gambit shuttered Dior’s most productive store in the world for several years; displaced about 400 employees, including Maria Grazia Chiuri, artistic director of women’s collections, and the entire couture atelier.

By all accounts, the complex seems to be a roaring success, welcoming about 5,000 people every day, the executive said. La Galerie de Dior, billed as the biggest permanent exhibition space dedicated to fashion in the hands of a private house, is booked solid two months in advance.

Although the museum has a separate entrance, many visitors make a beeline for the boutique afterward.

Beccari said he didn’t anticipate that museumgoers would be the same clients as the store.

“And we realized, to our surprise, that on Tuesdays when the museum is closed, like all museums and galleries in Paris, our business goes down,” he said. “I think people are going to see the history of Dior, they get inspired with what they see, and visit the store in order to go home with a piece of the legend.”

The executive said the majority of the visitors are local but the gallery and store also welcome tourists from Italy, Spain, Germany, the U.S. and Southeast Asia. “It became a landmark to visit,” he said with a chuckle.

The private suite has proved popular with celebrities and business bigwigs: “They stay maybe two nights, they go shopping at night, they invite friends,” Beccari said. “It’s pretty amazing.”

Concepts from La Galerie Dior are already infiltrating other top Dior stores: the “colorama” display of miniature dresses and 3D-printed accessories that hugs the circular staircase and gets everyone filming is now present at SKP’s VIP suite in Beijing and at Harrods in London, and its “cabinets de curiosités,” a corridor lined with extraordinary couture accessories, is also being introduced in some locations.

“So basically we use that appendix of Montaigne to enhance the feeling and the richness of flagships,” he said.

Over a stellar career at Dior parent LVMH Moët Hennessy Louis Vuitton that has seen him also leading Fendi to greater heights, Beccari has earned a reputation as a driven, audacious and exacting executive who doesn’t do anything by halves.

“I believe in boldness and presence,” he said, noting it’s a posture he maintained throughout the pandemic, continuing to invest in headline projects when many brands stayed silent. “I think we have to preserve this leadership of share of voice. It’s important to be heard and to be seen by clients. A brand like Dior has many facets, therefore it’s important to present the multiplicity of values that makes a luxury brand.…A luxury brand has depth, it has meaning.”

Beccari is an unabashed fan of innovation and grand gestures.

“I always tell my team, ‘Don’t come to me with a boring idea, ideas which are conventional’ because I most likely reject ideas which are banal,” he said.

The philosophy of daring was espoused by the founder.

“We try to live by his legacy. He has been, first of all, a dreamer, because he wanted to fulfill his dream to become a couturier, and he did that just after the war,” Beccari said. “And he was an innovator from Day One, changing the silhouette with the famous New Look that revolutionized fashion at the time and forever. He was bold and a risk taker, also as an entrepreneur.”

While consistency is often cited as a strong value in luxury, Beccari begs to differ.

“In everything we do there is the respect of the tradition, which is very strong at Dior, but the willingness to go beyond that,” he said. “I believe you have to be able to change direction, to be unpredictable.…Sometimes contrasts are more important in order to light up the flame of desirability. The tradition is there to be tickled, to be stretched, to be somewhat mistreated and to look modern and in the now.

“I always tell my people to embrace chaos and to put chaos into their business because if they always think the same, we become predictable and we become boring. You have to have the courage and the willingness to change,” he said.

As an example, he cited the 2020 collaboration with Nike on limited-edition Air Jordan 1 OG Dior sneakers. Roughly 5 million people — about the population of Ireland or New Zealand — registered for a chance to buy the 8,000 pairs available for purchase.

Another was the 2019 cruise show in Marrakech, Morocco, a first for a European luxury brand in Africa and one that involved a host of guest designers and artisans from the continent.

Dior has long had a reputation for spectacular fashion shows and the house continues to raise the bar, with Kim Jones staging itinerant runway events for pre-fall men’s collections, unique in the industry, and Chiuri also taking her pre-fall shows on the road at the time of delivery — a version of see now, buy now and a showcase for artisanship abroad. Last June, Dior presented high jewelry in Taormina, Sicily, with models wearing 40 special couture dresses made for the occasion.

“I am glad to have three superstar designers,” said Beccari, referring to Jones, in charge of the men’s universe; Chiuri, all women’s categories, including couture, and Victoire de Castellane, who in 2023 will mark 25 years as creative head of Dior Joaillerie.

“I think in the industry, the sum of these three talent is difficult to match,” he asserted. “They are major creative talents, they’re also strong characters with strong wills and personalities. I have a strong personality, too, and therefore we discuss a lot. We don’t always agree, we have our constructive discussions.”

As the leader of a top French couture house, Beccari said he “concentrates on the quality of the people and try to get the best out to them. I adapt my style of management based on with whom I am speaking.

“I’m someone sharing vision. I’m transparent and fast-paced and transparent. I give answers quickly and I demand answers quickly,” he said. “I try to create a culture where everybody feels like part of something.”

Beccari also praised his boss, LVMH chairman and CEO Bernard Arnault, for having a long-term vision in building his luxury brands and a penchant for bold moves, like the 30 Avenue Montaigne project, which required nerves of steel (not to mention deep pockets given the cost).

“He gave me the freedom and the trust to go for it and to take the risk,” Beccari said. “Sometimes you have to believe with your stomach more than with your head.…You have to navigate with your instinct.”

Beccari made it clear that the spectacular show destinations are the brainchild of his creative directors.

“They have to feel an inspiration,” he explained. “They come in and we discuss together where is the show and then they explain why. And then we try to put at their disposal all the means to do something important, something impactful. Because the shows are important not because of the 1,500 people attending, but for the 120 million, 150 million people watching at home.”

A native of Parma, Italy, Beccari started his career in international marketing at consumer products giant Reckitt Benckiser in Milan. He went on to work for Parmalat in New York for a couple of years before joining Henkel in Germany, where he worked for 10 years.

In 2006, he arrived at LVMH’s flagship brand Louis Vuitton as director of strategy and marketing coordination. From 2009 he held the role of Vuitton’s executive vice president of communications and marketing with worldwide responsibilities. He dramatically developed both the accessories and ready-to-wear businesses, working with the then-artistic director Marc Jacobs, and rose in the ranks to become executive vice president.

In 2012, Beccari became CEO of Fendi in Rome, where he helped propel the Roman house beyond the billion-euro revenue mark by dropping its ubiquitous logo bags in favor of more upscale products. He also developed lifestyle destinations like Palazzo Fendi in Rome, composed of a boutique hotel and Zuma restaurant, and took the bold step of making the Palazzo della Civiltà Italiana, aka “the Square Colosseum,” into the house’s new corporate headquarters.

He was moved to the management helm of Dior in 2017 and continued his streak of bold moves.

In the interview, he revealed that he’s received several offers to go back and work in fast-moving consumer goods in very high positions in recent years.

But he rebuffed them, saying he’s smitten with the luxury sector.

“I discovered a world that I love more and more because it gives you the chance to meet incredible people having a huge impact on society and on creativity: artists, creative directors, architects,” he enthused. “You’re involved in in things that people care about, that touches the emotions of people. And luxury is all about emotions. You create a desire. The artisan creates a product with emotion and this emotion is felt back by the clients.

“We create dreams. That’s what Mr. Dior did in founding the company in 1947,” he said. “The desirability of today is the sales of tomorrow.…I wouldn’t put limits to the growth of this sacred brand.”

Package, which includes $44.9 billion for Ukraine and NATO allies, must be passed by Congress this week

WASHINGTON—Lawmakers unveiled Tuesday a wide-ranging, $1.65 trillion spending bill for fiscal 2023 with sharp increases in military and domestic funding, kicking off a sprint to pass the measure before Christmas in the last act of the Democratic-controlled Congress.

The bill, the product of months of behind-the-scenes haggling, also carries an additional $44.9 billion in aid to help Ukraine and North Atlantic Treaty Organization allies, $40.6 billion for disasters such as drought and hurricanes, as well as funds earmarked for projects in lawmakers’ home districts. It includes changes to the 1887 Electoral Count Act that would make it harder to block the certification of a presidential election, widens a ban on TikTok on government devices, and extends a Dec. 27 deadline for Boeing Co. to secure federal safety approvals for two new versions of the 737 MAX airplane.

The bill includes $858 billion in military spending, $45 billion more than President Biden had requested and up about 10% from $782 billion the prior year. Senate negotiators said it also includes $772.5 billion in nondefense discretionary spending, up almost 6% from $730 billion from the prior year. The overall discretionary price tag works out to about $1.65 trillion, compared with $1.5 trillion the prior fiscal year.

Congress must pass the spending package through both chambers before the expiration of an interim funding bill that runs through Dec. 23. Because of the delays built into the Senate’s process, quick enactment will depend on whether all 100 senators can agree to forgo debate time and proceed to a final vote. The Senate is expected to vote first, followed by the House, where leaders have told lawmakers to expect a vote late Wednesday at the earliest.

The bill will require support of at least 10 Republicans in the evenly divided Senate, where 60 votes are required for most legislation to advance. In a first procedural step Tuesday evening, the Senate voted 70-25 to proceed to the bill.

Many House Republicans have urged their Senate colleagues to reject the package and push talks into next year, when the GOP will control the House. But Republican senators have largely coalesced behind the plan, and even opponents indicated that they would not try to slow things down.

“Under no circumstances are we going to go over the shutdown deadline” in the Senate, said Sen. Mike Lee (R., Utah). He was among a small group of Senate Republicans who grumbled over the length of the bill and the short time they had been given to review it—though they said they wouldn’t try to delay its passage, beyond requesting amendment votes.

“After a lot of hard work, this package represents an aggressive and essential investment in American families, American workers, and in our national defense,” said Senate Majority Leader Chuck Schumer (D., N.Y.).

The Biden administration said it supports the legislation and urged quick passage.

Senate Republicans said that the increases in military spending represented GOP victories, claiming that the deal broke a yearslong bargain to ensure parity between increases in defense and nondefense spending. That is because inflation as measured by the consumer-price index is up 7.1% from a year earlier, and while the defense-spending increase exceeded that level, the nondefense discretionary spending increase fell short of the inflation rate.

“A big real-dollar increase for the defense baseline, and a big real-dollar cut for the nondefense, nonveterans baseline,” said Senate Minority Leader Mitch McConnell (R., Ky.) “This is an impressive outcome for the Republican negotiators, and more importantly, it is the outcome that our country needs.”

House Republican leaders have urged their rank-and-file members to oppose the package, arguing that negotiations should be pushed into next year, when GOP control of the chamber will give it more leverage. House Minority Leader Kevin McCarthy (R., Calif.) is leading the opposition as he seeks to cajole members to support his bid to be elected House speaker next year. But the bill can pass the House with only Democratic votes, and GOP Senate leaders have insisted on finishing the legislation this Congress.

The bill incorporates the Senate’s version of the Electoral Count Reform Act, bipartisan legislation that overhauls an 1887 law governing how Congress counts and ratifies presidential elector votes. The bill was written in response to efforts by former President Donald Trump and his supporters to try to overturn the 2020 election results. It would make clear that Congress’s role in ratifying states’ Electoral College votes is ministerial only, and that the vice president’s role is limited to counting the votes publicly.

It would dramatically raise the threshold to sustain an objection to a state’s electors from one House member and one senator to one-fifth of both chambers, and establish a fast-tracked judicial review of disputes related to states’ elector certificates, including a three-judge panel with a direct appeal to the Supreme Court.

A bipartisan bill that would expand incentives for retirement savings also made it into the package. Lawmakers have been working for months to reconcile House and Senate versions. The legislation would raise the starting age for required minimum distributions from tax-deferred accounts, encourage enrollment in retirement plans and expand savings incentives for low-income households. It also includes new limits on aggressive tax deals known as syndicated conservation easements.

Land & Buildings has a roughly 3% stake in the theme-park operator, presentation says

An activist shareholder has accumulated a stake in Six Flags Entertainment Corp. SIX 0.58% and is pushing the theme-park operator to sell or spin off its real estate to help reverse a decline in the shares.

Land & Buildings Investment Management LLC has a position of roughly 3% in Six Flags, according to a presentation the firm plans to make to other investors that was seen by The Wall Street Journal.

The firm’s founder and chief investment officer, Jonathan Litt, has been in touch with Six Flags management, including Chief Executive Selim Bassoul, to discuss splitting the business into separate operating and property companies, according to the presentation. The company’s real estate could be sold to partners and leased back to Six Flags, Mr. Litt argues.

Six Flags runs 27 theme and water parks across North America, including in Valencia, Calif., Queensbury, N.Y., and Mexico City, according to its website.

Mr. Litt believes that Six Flags’s real estate alone is likely worth more than its current market capitalization, of roughly $1.7 billion, and that several real-estate and private-equity firms could be interested in gobbling up land for leisure assets like theme parks.

Six Flags, under prior leadership, had explored monetizing its real estate through creating a real-estate investment trust structure several years ago but decided against it at the time.

Mr. Litt has had success in the past pushing companies to do a so-called opco-propco split.

In 2015, he urged MGM Resorts International to split into a separate real-estate investment trust and hotel-management company. The Las Vegas casino giant eventually created real-estate investment trust MGM Growth Properties LLC for some of its properties. Earlier this year, MGM Growth Properties was sold to real-estate firm VICI Properties Inc.

Land & Buildings isn’t the only activist at Six Flags, or the biggest. H Partners Management LLC, the company’s largest shareholder, has a seat on the board and last month amended its cooperation agreement with Six Flags to increase its ownership of the theme-park operator’s common stock to 19.9%.

Mr. Bassoul was appointed chief executive in November 2021, as Six Flags was regaining its footing after the Covid-19 pandemic temporarily closed its attractions in 2020 and traffic to its properties plummeted.

His initiatives—raising prices and scaling back free perks—were aimed at attracting consumers willing to shell out more for a day of roller coasters and waterslides, even if that means losing longtime attendees who rely on cheap passes.

The company’s results have suffered and the shares are down more than 50% this year.

Six Flags reported revenue in the three months ended Oct. 2 of $505 million, a 21% drop from the prior year.

The company said the falloff was primarily driven by lower attendance that was largely the result of hiked ticket prices and less discounting.

Total attendance was about eight million people, a 33% decline from a year earlier, the company said.

“These improvements require time to implement and continue to be a work in progress, and some parks have been more successful than others,” Mr. Bassoul said on a November earnings call.

Mr. Litt is supportive of Mr. Bassoul’s turnaround strategy.

Land & Buildings, founded in 2008 and based in Stamford, Conn., has taken on a number of real-estate-focused companies over the years, including Saks Fifth Avenue parent Hudson’s Bay Co., casino real-estate owner Gaming and Leisure Properties Inc. and, more recently, the real-estate investment trust Apartment Investment & Management Co. , or Aimco.

Earlier this month, Land & Buildings had one of its two director nominees elected at Aimco, in the first proxy contest to go to a vote since new rules requiring the use of a so-called universal proxy card were enacted.

The teams’ current owner, Robert Sarver, put them on the market earlier this year after being suspended by the NBA for violating workplace standards

A group led by mortgage-lending billionaire Mat Ishbia has agreed to buy a majority stake in the National Basketball Association’s Phoenix Suns and the Women’s National Basketball Association’s Phoenix Mercury, in a deal that values the teams at $4 billion amid a rapidly rising market in sports team valuations.

Ishbia would buy control of the teams from Robert Sarver, who put the teams on the market after being suspended by the NBA for violating workplace standards. The deal will be subject to the approval of the league’s board of governors in a 75% majority vote.

“Mat is the right leader to build on franchise legacies of winning and community support and shepherd the Suns and Mercury into the next era,” said Sarver in a statement.

The agreement, first reported by ESPN, would mark the latest big jump in the valuations of sports franchises, which have been rising steeply recently. A group led by Los Angeles Dodgers part-owner Todd Boehly earlier this year agreed to acquire Chelsea, in the English Premier League, for over $3 billion. In June, a group led by Walmart heir Rob Walton agreed to buy the National Football League’s Denver Broncos for $4.65 billion.

Ishbia played basketball as a walk-on at Michigan State University and won a championship with the Spartans at the 2000 NCAA tournament. His winning bid for the teams comes less than two weeks after a report that venture capitalists Jack Selby, the managing director of investment firm Thiel Capital, and Jason Pressman, the managing director of Shasta Ventures, had submitted a $3 billion bid.

“Both teams have an incredibly dynamic fan base and I have loved experiencing the energy of the Valley over the last few months,” Ishbia said. “Basketball is at the core of my life, from my high school days as a player to the honor of playing for Coach Izzo and winning a national title at Michigan State University.”

The fate of the Suns and Mercury has been a subject of speculation since September, when Sarver announced that he would begin searching for buyers for the teams. Earlier that month, the NBA had suspended Sarver for one year, and fined him $10 million, for having “violated common workplace standards.” An independent investigation found that Sarver had used a racial slur on at least five occasions “when recounting the statements of others,” had treated female employees unequally and had engaged in “inappropriate physical conduct toward male employees.”

On the court, the Suns and Mercury have enjoyed recent success. In 2021, both teams reached the Finals, and the Mercury won the 2014 WNBA title. Their rosters include some of the sport’s A-list stars: All-Star NBA guards Devin Booker and Chris Paul, future WNBA Hall-of-Famer Diana Taurasi. Last week, Brittney Griner announced her intention to return to action for the Mercury this upcoming season, following her detention in Russia.

United Wholesale Mortgage is a nonbank mortgage company founded by Ishbia’s father, which has grown rapidly in recent years by issuing mortgages through an army of brokers. The company, where Ishbia became CEO in 2013, went public in early 2021 through a special-purpose-acquisition company, a deal that valued the company at $16 billion. Shares have fallen by roughly two thirds since then.

Ishbia will be joined by his brother Justin, a founding partner of the private-equity firm Shore Capital who will serve as the teams’ alternate governor.

In the summer of 2021, Ishbia required that United Wholesale Mortgage’s employees return to their desks five days a week, a move that predated the national push to return to in-office work. About 500 employees quit as a result of the policy, Ishbia said last year.

Ishbia is no stranger to spending his mortgage fortune in the sports world. In February 2021, he donated $32 million to the Michigan State athletic department. In so doing, he engaged in a public feud with fellow alumnus and mortgage magnate Dan Gilbert, the founder of Rocket Cos., whose own contributions resulted in the men’s basketball team being labeled as “MSU Spartans Presented by Rocket Mortgage.” That rivalry may soon enter new territory; Gilbert owns the NBA’s Cleveland Cavaliers, who won the 2016 NBA title.

Earvin “Magic” Johnson, a five-time NBA champion point guard in the 1980s with the Los Angeles Lakers, wrote on Twitter that he had spoken with Ishbia. “I had a great call with fellow Spartan Mat Ishbia congratulating him on his purchase of the Phoenix Suns. He’s going to do great things not only for the Suns organization, but for the entire league,” Mr. Johnson wrote. “All of the other 29 NBA teams better watch out because Mat’s a winner!”

Energy support payments and higher debt interest pushes borrowing to £22bn last month

UK public sector borrowing more than doubled in November following government measures to shield households and businesses from soaring energy prices and higher debt interest payments.

Public sector net borrowing hit £22bn last month, £13.9bn more than in the same month last year and the highest November borrowing since monthly records began in 1993, according to data published by the Office for National Statistics on Wednesday.

The figure was also higher than the £13bn forecast by economists polled by Reuters. Borrowing had been on a downward trend for more than a year until the autumn, having benefited from the reopening of the economy and the end of government Covid-19 support, but it is rising again.

The Energy Price Guarantee for households and the Energy Bill Support Scheme for businesses both took effect in October and weighed on public finances.

Like the UK, most countries in Europe have adopted fiscal measures to help consumers and businesses deal with the surge in energy costs that followed Russia’s invasion of Ukraine in February.

As a result, UK public sector total expenditure was £98.9bn, £13.5bn more than in the same month last year. Central government debt interest payable was £7.3bn in November, £2.4bn more than in the same month last year and the highest November figure since monthly records began in April 1997.

Last month, the Office for Budget Responsibility, the UK’s fiscal watchdog forecast that public sector borrowing would soar to £177bn in the fiscal year ending in March, up from £99bn forecast in March 2022 when the impact of the higher energy prices was not yet taken into account.

Chancellor Jeremy Hunt said: “We have a clear plan to help halve inflation next year, but that requires some tough decisions to put our public finances back on a sustainable footing.” 

What was once a simple story of buy, fix, sell is more complicated, after years of cheap money and keen investment

Once upon a time, private equity was — relatively — simple. Buy a company, oversee a turnround tricky to do in the public markets, and then sell at a profit.

Even the cynical version of the above isn’t terribly complicated: buy a company, load up with debt, cut costs, shut off investment, hope for a fair wind on valuations and sell before the rot sets in.

Now that story of buy, fix, sell is more complicated, after years of cheap money and booming interest in private asset classes stoked experiments in structures and in financing. Even as inhospitable markets force buyout groups, or general partners (GP), to write bigger equity cheques to get deals done, the different slices of their own funding continue to proliferate.

“The irony is that it is called private equity when you look at the multiple layers of debt now in the system,” said Eamon Devlin, a former lawyer now at Saïd Business School. “And many of these are new finance products since the [global financial crisis].”

Leave aside the debt that can be loaded on to the investments themselves, or operating company debt. Above that sits a growing number of financing facilities, or “solutions” as everyone in the sector insists on calling them.

These can be pretty functional. Subscription lines are essentially credit facilities at the fund level, which enable buyout groups to do deals more quickly than relying on calling up investors’ capital. Happily for GPs, this also delays when client, or limited partner (LP), money enters the fund, artificially boosting returns. But the facilities are short term and at least pretend to solve an actual problem.

At the other extreme, there are collateralised fund obligations, a product that everyone in private equity swears is rare — probably because the echo of the slicing and dicing of debt that preceded the 2008 crash is too embarrassingly obvious. These package together stakes in different private equity funds, before issuing bonds to investors. “It’s financial engineering,” said one buyout chief. “It doesn’t seem sustainable at all.”

Elsewhere, private equity has had to look harder for its “solutions” as lending from banks dried up and the ability to sell or list existing investments evaporated. An increasingly popular option this year has been preferred equity, an old product that has found renewed demand.

This feels like a bit of an end-of-cycle hail mary: a slug of covenant-lite, more expensive financing issued through a special-purpose vehicle at the fund level. According to advisers, this can take the place of a so-called NAV financing, portfolio-level debt that has become scarcer as banks have pulled back from the market. Or it can also substitute for a continuation deal, where assets left in a fund approaching its end or a particular investment are in effect sold into a new vehicle of the same buyout group

Private equity’s sell-to-yourself trend, itself a function of dwindling exit options, has prompted mutterings about pyramid schemes. Preferred equity, largely provided by specialist investors like 17 Capital or Whitehorse, is another way of getting liquidity to LPs who want out. But it doesn’t require agreeing valuation for the underlying assets, as the new investors get downside protection. Convenient, given that private market valuations have defied gravity as listed stocks have sunk.

When it comes to the rights of those new investors relative to original LPs, whether the latter need to give their approval, whether preferred even counts within the fund’s stated leverage limits, or how much money raised can go straight out as returns, it is all subject to negotiation. However, fund documentation was often written and signed before such structures were even contemplated. The onus, say advisers, is on the GP to do the right thing by its original investors but “we will see much more robust language around this” in new agreements, said one.

Everyone maintains that such “solutions” have their place. What isn’t clear is to what extent they are being used to stave off the inevitable, or to take money off the table in poorly performing funds. Either way, heavyweights are betting that the fallout will involve faster consolidation in a sector that has mushroomed to 18,000 funds, up 60 per cent in the past five years. “A lot of the industry is finance and financing,” said one boss. “We’ll see how that ends.”

FTX clients to vie for priority payouts in US bankruptcy case

Lawyers will argue defunct exchange’s users should be treated as asset owners rather than creditors

A group of FTX customers will try to secure quicker repayment for people who have money trapped with the defunct exchange by convincing a US court that clients’ cryptoassets remain their own property.

Lawyers representing a group of FTX clients who had a total of $1.6bn stuck on the exchange when it collapsed last month say they plan to argue that those funds are held by FTX as “custody” assets, meaning they should be paid back swiftly rather than rolled into the sprawling bankruptcy proceedings for Sam Bankman-Fried’s crypto empire.

The status of customer deposits has emerged as a key legal question in the spate of bankruptcies of cryptocurrency firms this year, including the collapse of lenders Celsius Network and Voyager Digital. Clients face being lumped into the category of “general unsecured creditors”, which means they would probably have a long wait to recover money and might receive as little as pennies for each dollar they are owed.

FTX faces as many as 1mn creditors in Chapter 11 bankruptcy proceedings in Delaware, including customers, suppliers and lenders, who will have to vie with each other for priority to receive repayment out of the company’s remaining assets. The action by FTX clients is intended to avoid customers being last in line for repayment.

“If the assets belong to the customer, there is no line. It’s just their assets,” said Erin Broderick, counsel to law firm Eversheds Sutherland, which is representing the group of FTX clients.

FTX, founded by Bankman-Fried, froze customer withdrawals in November after a wave of clients rushed for the exits. Broderick argues that the collapsed exchange’s terms of service support clients having “ownership rights” over the funds left in their accounts. She said the firm planned to make a request to the court early in the new year at the latest to recognise the customers’ status.

FTX did not respond to a request for comment.

Earlier this month, a judge overseeing the US bankruptcy of collapsed crypto lender Celsius ordered that a small number of clients should be paid back assets that were never mingled with other cash at the company. The judge in the case is still weighing the difficult question of how to treat other customers’ funds.

Celsius has asked the court to treat client funds that were held in custody as being owned by the customers, while viewing assets pledged to receive high interest payments in the lender’s “earn” programme as the property of the company.

Lender BlockFi on Monday asked a US court to allow it to reopen client withdraws of some cryptoassets, which would allow “clients to access digital assets that are owned by them and were held in their Wallet Accounts on BlockFi’s platform,” the company said in a filing.

The road to recovery for FTX customers is further complicated by allegations that up to $10bn of the roughly $16bn that the exchange held was loaned or transferred to Alameda Research, a private trading firm also owned by Bankman-Fried.

The 30-year-old former billionaire has denied intentional wrongdoing. He was arrested in the Bahamas last week after US federal prosecutors charged him with fraud.

Eversheds Sutherland will argue that if some client assets are no longer available to be paid back, customers should still receive priority compared to other groups of creditors.

“We think it is pretty clear that in the terms of service that the customers hold title to their assets,” said Sarah Paul, a partner and co-global head of corporate crime and investigations at the law firm. “I view it as one of the first issues that has to be addressed.”

Manufacturers struggle to keep pace with post-pandemic demand as dozens of countries report low supply of drugs

A surge in bacterial infections after countries lifted pandemic restrictions has led to shortages of antibiotic drugs such as penicillin and amoxicillin, highlighting the precarious state of global supply chains.

Of the 35 countries whose data is collected by the WHO, 80 per cent have an acute shortage of penicillin-related antibiotics, said Lisa Hedman, WHO group lead for supply and access to medicines. The UK introduced “serious shortage protocols” last week allowing pharmacists to prescribe alternative formulations of antibiotics after a rise of infections such as Group A streptococcus.

During the pandemic, lower demand for antibiotics, combined with severe strain on supply chains, led drugmakers to draw down production. But as many countries experience their first winter with no restrictions in two years, supply pressures and regulatory requirements are making it hard for companies to scale up and ease the shortages, said health experts.

The shortages have also occurred because “countries didn’t anticipate respiratory infections were going to hit us [so hard] in the first year without masks”, Hedman said.

Where have shortages been reported?

Shortages of amoxicillin have been reported in the US and Canada, while in the EU 25 out of 27 member states have reported scarce supplies of some antibiotics to the European Medicines Agency.

The impact in poorer or smaller countries is less well known but they can be disproportionately affected, especially if their currencies have depreciated and they need to procure drugs on the open market, said Hedman.

Although the volumes may be small compared with use in developed countries, they are far from inconsequential. Dušan Jasovský, pharmacist at aid group Médecins Sans Frontières, said an estimated 5.7mn people die annually because of lacking access to antimicrobials, which include antibiotic, antifungal and antiviral medicines.

The fear of pushing prices higher acts as a “disincentive” to report shortages publicly and to the WHO, added Hedman.

Some US and European pharmacists have also reported shortages of common pain relief medicines such as paracetamol, as a winter wave of flu, respiratory syncytial virus (RSV) and Covid-19 cases fuels demand. Ilaria Passarani, secretary-general of the Pharmaceutical Group of the European Union, said drugs to treat infections such as tuberculosis and skin infections have also been affected.

What’s causing the shortfall?

Shortages of drugs, ranging from cancer medicines to anaesthetics, were common at the height of Covid-19, highlighting the pressure on supply chains. The Ukraine war has further disrupted the supply of antibiotic ingredients, while rising energy costs have reduced margins for antibiotics manufacturers.

Adrian van den Hoven, director-general of the generic drugmakers association Medicines for Europe, said that after two years of lockdowns it would have been hard for antibiotics makers to accurately predict the spike in demand this winter for treatments such as liquid antibiotic solutions for children.

“You can predict a higher infectious season but you cannot predict the very high rate in children,” he said.

MSF’s Jasovský said depleted stocks of antibiotics were “minor symptoms” of a wider “systemic challenge” affecting the whole chain from wholesalers, final dose formulators and original manufacturers.

Most of the world’s active pharmaceutical ingredients now come from India and China rather than Europe, he said. And there is “little transparency” regarding these materials because production processes worldwide are regarded as proprietary information only visible to regulators. That “makes it difficult to perform a true risk assessment to determine areas of greatest vulnerability”, he said.

The antibiotic supply chain can take between four and six months from production to distribution. But Rajiv Shah, executive director of UK-based wholesaler Sigma Pharmaceuticals, said additional regulatory checks meant that it took longer for drugmakers to reboot lines that were mothballed when production was scaled back during the pandemic.

Can the shortages be fixed?

Sandoz, one of the largest generic antibiotics makers, said it had increased production of drugs by a double-digit percentage in 2022, hiring 140 new people since September. Next year, it planned to do the same, opening a factory in Austria.

But the Novartis-owned company is being squeezed by rising costs, which are harder to pass on in European markets that cap drugs prices, adding that its Asian competitors have access to cheaper fuel sources for the energy-intensive process. Costs have also soared for other essential ingredients such as sugar for fermentation — an important part of the manufacturing process.

“You can’t just throw a few extra cakes into the oven,” said the WHO’s Hedman. “When you make an antibiotic you have to shut down and revalidate your equipment before you make another one . . . [shortages] can take months to correct.”

The PGEU’s Passarani said solutions include forcing drugmakers seeking European authorisation to market their drugs in all member states and creating a redistribution mechanism during a crisis.

Jasovský, the MSF pharmacist, said pooling mechanisms between countries, companies and multilateral organisations should be introduced and more should be done to diversify manufacturing capacities and improve transparency, data sharing and forecasting.

Do shortages risk increasing antimicrobial resistance?

Doctors often prescribe “narrow-acting” antibiotics, which are used against a select group of bacterial infections, to treat bugs that resist treatment — a growing phenomenon known as antimicrobial resistance. The practice lowers the likelihood of infections becoming resistant to antibiotics.

But the unavailability of some antibiotics means that doctors and pharmacists are being allowed to prescribe and dispense other classes of antibiotics with a broader range of actions, which are usually reserved for infections that are not cured by first-line antibiotics.

Lorenzo Moja, a scientist working on the WHO’s essential medicines list, said it was typical for doctors to overprescribe antibiotics for mild infections in colder months, so the shortages are “leading to additional problems in terms of resistance”.

This risks what Moja calls prescription “inertia”, where some doctors find it difficult to return to prescribing specific antibiotics once the shortages ease, which threatens the proliferation of more intractable bugs.