Saturday, August 29, 2015

Malaysians Smell PEU

BBC reported:

Tens of thousands of Malaysians are protesting in the capital Kuala Lumpur and elsewhere, calling for Prime Minister Najib Razak to step down over a financial scandal. 

Protesters are angered by a $700m (£455m) payment made to his bank account from unnamed foreign donors. 

It was discovered last month during a probe into alleged mismanagement at the debt-laden state fund 1Malaysia Development Berhad (1MDB).
The article illuminated 1MDB:

What is 1MDB? 
• The 1Malaysia Development Berhad state investment fund was established under Prime Minister Najib Razak in 2009 to transform Malaysia into a high-income economy. 
• Critics say the fund overpaid for many of its investments and spent millions on fees to investment bank Goldman Sachs 
 • It began attracting attention at the end of 2014 when it started missing payments to creditors. It later emerged that the fund was mired in $11bn (£7bn) of debt. 
• Mr Najib has been accused of taking $700m from the fund - a charge which he has denied. 
 • Malaysia anti-corruption commission said it had verified that the money was a donation from unnamed foreign donors.

Malaysia's sovereign wealth fund started after the 2008 financial crisis. With the help of Goldman Sachs it took on $11 billion in debt.  The elected official who established the fund received $700 million from foreign donors yet to be identified. 

No wonder masses hit the streets of Kuala Lumpur.  They're protesting the greed and leverage boys, which includes private equity underwriters, imitators like 1MDB and their sponsored politicians. 

Carlyle Buys Analytics Provider Novetta

Mergers+Acquisitions reported:

The Carlyle Group LP (Nasdaq: CG) has agreed to buy cybersecurity data firm Novetta from Arlington Capital Partners.

Arlington formed Novetta in 2012 when it merged portfolio companies White Oak Technologies and FGM Inc. Novetta provides cybersecurity data analytics for government agencies include the Department of Defense and the Department of Homeland Security.
Carlyle has long loved Uncle Sam's Treasury and is skilled at reading the tea leaves of government spending. 

Carlyle Managing Director Julius Genachowski serves on President Obama's two intelligence boards, so he is in a unique position to see government intelligence needs and advise Carlyle's triumvirate to invest accordingly.  His bio on Carlyle's website stated:

Mr. Genachowski has long advised President Obama on technology issues
Julius could've made President Obama's intelligence tea.  That would be an investment sweet spot for a private equity underwriter (PEU).

Carlyle is making the investment out of the firm’s $13 billion Carlyle Partners VI fund. The firm made another software deal earlier this year when it announced plans to buy Symantec Corp.’s Veritas data storage business for $8 billion.
Uncle Sam must need kajillions of storage for its aim to monitor every citizen 24/7 and a Carlyle affiliate will do so for grand returns. 

The question is who Novetta will work for, the general public or the protection of American branded global greed and power class?  Novetta's first test could be finding out who really initiated Hunter Biden's Ashley Madison account.  

Friday, August 28, 2015

Biden Hunting on Ashley Madison?

Hunter Biden blamed Russian agents for setting up a fake Ashley Madison account in his name.  How the Russians did this from Biden's office at Georgetown University is unclear.  Biden's people have no comment.

Has anyone run the credit card number used to set up the account?  That might clear up who set up Hunter Biden's Ashley Madison account. 

Tuesday, August 25, 2015

Cobalt Energy Sells Contentious Angolan Offshore Oil Field

Carlyle Group affiliate Cobalt International Energy sold its equity interest in an Angolan offshore oil field to partner Sonangol.  Bloomberg's piece did not mention Cobalt's 2010 deal had two shady partners, which kicked off a SEC investigation.  Cobalt offered flimsy excuses for what was likely bribery.  Last year they defended the company by saying the two illicit groups are no longer partners in the deal.  Cobalt's SEC filing did not indicate what remuneration Angolan government officials received from transferring their 30% and 10% interests in the block. 

On August 26, 2014, we received documentation confirming that Nazaki Oil and Gaz ("Nazaki") and Alper Oil Limitada ("Alper") are no longer members of the contractor group of Blocks 9 and 21 offshore Angola. Pursuant to a series of Executive Decrees passed by the Republic of Angola, the working interests previously held by Nazaki and Alper in Blocks 9 and 21 have been transferred to and are now held by Sonangol P&P. As a result, we no longer have any relationship with Nazaki or Alper. The contractor groups for Blocks 9 and 21 offshore Angola now consist only of Sonangol P&P (60% working interest) and the Company (40% working interest). Our obligation to carry and pay for Alper's 10% working interest terminated immediately with the transfer of Alper's interest to Sonangol P&P pursuant to the terms of our 2010 agreements with Alper. 
The Carlyle Group's recent SEC filing shows a 35 million share stake in Cobalt International Energy.  The illicit partnership is gone as is Cobalt's equity interest in Angolan offshore oil fields.  Will Obama's SEC consider this cleaned up?  Highly likely.  

Wednesday, August 19, 2015

Pensions Exiting Claren Road

Texas and California pension funds have or will redeem their investment in The Carlyle Group's Claren Road hedge fund, according to Pensions&Investments.  North Carolina and Illinois pensions are closely monitoring the situation for possible withdrawals.

SeekingAlpha reported "Carlyle will write off up to $175M of the remaining $216M value of Claren Road still on its books.  The fund's managers are hearing from exiting investors and are in the process of deciding on a future path, including maybe shutting the doors."  Claren Road may be one crowded exit

Monday, August 17, 2015

Carlyle Hedge Fund Claren Road Could Roll Up

FT reported:

The Carlyle Group is considering shutting its $4bn credit hedge fund Claren Road after investors asked to pull almost half of their money out.

Last September the fund was managing $8.5bn, its peak level, underscoring how quickly outside investors — and the influential consulting firms who advise them — can turn against an underperforming fund.
Investors submitted redemption requests totaling $1.97bn, or 48 per cent of the fund’s assets of $4.1bn at the end of July.

The fund will be down to $2.1bn at the end of September, when it has to honour the latest redemptions, and investors will have another chance to call for their money back in November.
Investors may want to remember Carlyle's BlueWave Partners hedge fund which failed six months before the financial crisis.  Then again, they may not.

Update 8-19-15:  Leverage is a two edged sword.   KKR found it cuts to the bone when bets go the wrong way.

Monday, August 10, 2015

KKR's PEU Bankruptcy: Samson Resources

Bloomberg reported KKR, Crestview Partner and NGP Energy will likely turn over Samson Resources to a different set of private equity underwriters, debt holders SilverPoint Capital and Cerebus, beating out a third group of PEU's Blackstone, Oaktree, GSO Capital and Centerbridge Partners. 

KKR led a group that bought Tulsa, Oklahoma-based Samson in a 2011 leveraged buyout valued at close to $7.9 billion including fees and reimbursed capital expenses. The sponsors, which included Crestview Partners and NGP Energy Capital Management, invested $4.1 billion of equity in the deal, according to company filings.

Where's The Carlyle Group, given co-founder David Rubenstein's repeatedly beating the drum on energy investing?   I thought they might have a stake in Samson via Carlyle's deal with NGP, but that culminated after KKR and company bought out Samson. Carlyle's deal with NGP was announced at the end of 2012.

“They are a spectacular fit with us,” Youngkin said of NGP. “They’re primarily North American-focused and they’re investing right into the teeth of the big exploration and production developments over the last five to eight years -- shale, tight oil, all the big trends.” 
Surely they put some money to work before fall 2014 when oil prices plunged.  It will be interesting to see how that works out, given Carlyle's bath on Vermillion, an energy commodities hedge fund that fell from over $2 billion to $50 million.

Back to Samson's current PEU owners facing a complete loss of equity:  This is how Samson explained their 75% owners in its $2.25 billion debt prospectus in 2012:

Samson Aggregator L.P. is a limited partnership in which investment funds associated with Kohlberg Kravis Roberts & Co. L.P., including KKR Samson Investors L.P., and other co-investors, including Crestview Partners II, L.P. and Natural Gas Partners IX, L.P., own the limited partner interests. Samson Aggregator GP LLC is the general partner of Samson Aggregator L.P. KKR Samson Investors GP LLC is the general partner of KKR Samson Investors L.P. KKR Samson Investors L.P. is a limited partnership in which Samson Co-Invest I LP, Samson Co-Invest II LP, Samson Co-Invest III LP, KKR 2006 Fund (Samson) L.P., 8 North America Investor L.P., KKR Financial Holdings III, LLC, KKR Fund Holdings L.P., KKR Management Holdings L.P., KKR Partners III, L.P., KKR SA Investors Co-Invest Fund L.P., Lion Rock Energy Investor L.P. and OPERF Co-Investment LLC own the limited partner interests. Samson Co-Invest GP LLC is the general partner of each of Samson Co-Invest I LP, Samson Co-Invest II LP and Samson Co-Invest III LP. KKR Fund Holdings L.P. is the sole member of Samson Co-Invest GP LLC. KKR 2006 Fund (Samson) L.P. is the sole member of KKR Samson Investors GP LLC. KKR Associates 2006 L.P. is the general partner of KKR 2006 Fund (Samson) L.P. KKR 2006 GP LLC is the general partner of KKR Associates 2006 L.P. KKR Fund Holdings L.P. is the designated member of KKR 2006 GP LLC. KKR Fund Holdings GP Limited is a general partner of KKR Fund Holdings L.P. KKR Group Holdings L.P. is a general partner of KKR Fund Holdings L.P. and the sole shareholder of KKR Fund Holdings GP Limited. KKR Group Limited is the sole general partner of KKR Group Holdings L.P. KKR & Co. L.P. is the sole shareholder of KKR Group Limited. KKR Management LLC is the sole general partner of KKR & Co. L.P. Henry R. Kravis and George R. Roberts are the designated members of KKR Management LLC. In addition, Messrs. Kravis and Roberts have been designated as managers of KKR 2006 GP LLC by KKR Fund Holdings L.P. In such capacities, each of the aforementioned entities and individuals may be deemed to have voting and dispositive power with respect to the shares held by Samson Aggregator L.P. but each such entity and individual disclaims beneficial ownership of the shares held by Samson Aggregator L.P. The address of each of the entities listed in this footnote is c/o Kohlberg Kravis Roberts & Co. L.P., 9 West 57th Street, New York, New York 10019. 

This group planned to delever Samson in line with debt covenants.

The modified debt to Adjusted EBITDA covenant requires a ratio of no more than 5.75x for the remainder of 2012 and 2013, 5.5x for 2014, 5.0x for 2015 and 4.5x for 2016. 

Obviously that did not happen. Samson will go from the hands of PEU equity holders to PEU debt holders. 

Update 8-16-15:  WSJ reported "Meanwhile, the 44-year-old, formerly family-owned company, which had nearly enough cash on-hand to pay off its $695 million in debt before the buyout, was left with $3.6 billion in debt on its books after the deal."