Tuesday, October 8, 2019

Denka Executives Dishonor Cancer Victims

The Guardian reported:

Residents of Reserve, Louisiana aimed to present evidence to Denka that its plant’s toxic emissions are responsible for high rates of cancer in their town.

Lydia Gerard and Robert Taylor never came close to losing their composure, even when it became clear that that their 7,000-mile journey from the southern United States to Japan was about to come to nought.

Denied even the courtesy of a brief meeting – in a country fabled for its levels of civility – with representatives of a Japanese company they blame for spewing a toxic chemical into the air above their home town, they listened patiently as uniformed guards repeatedly told them to turn around and leave – immediately.
Denka executives dishonored their visitors from Cancer Town, USA, as they pursue medical ventures.

Denka's President prioritized private equity underwriting (PEU) over basic courtesy.

That's not sound social development.  It's the way of the word-twisting greed and leverage boys. 

Saturday, October 5, 2019

Soft Pedaling Deluxe Entertainment Bankruptcy

Forbes reported in 2005:

Through his main investment vehicle, MacAndrews & Forbes Holdings and its subsidiary DX III Holdings, Perelman has bought Deluxe Film, one of the world's largest replicators of film for the global movie industry, for some $745 million. 
Under MacAndrews and Forbes Deluxe's debt grew to almost $1.3 billion.  Moody's downgraded Deluxe's debt in August and estimated leverage to be around 12x.  

On October 3rd Deluxe entered Chapter 11 bankruptcy.  Deluxe's press release omitted the word bankruptcy altogether. 

All parties involved determined that the best way to implement the debt-for-equity exchange is through a controlled, efficient Court-supervised process, and today the Company took steps to start that process. "We have been working to put Deluxe in a strong financial position, and these steps are the best and most efficient way to finalize and implement the comprehensive financial restructuring,"
MacAndrews and Forbes did not include Deluxe's bankruptcy news on their website.

Frances Townsend is Executive Vice President, Worldwide Government, Legal and Business Affairs for MacAndrews and Forbes.  She omitted the hospital with the highest death toll after Hurricane Katrina.  Carlyle Group affiliate LifeCare Hospitals had 26 deaths after Katrina made landfall. 

Whitewashing remains alive and well and the PEU boys are particularly adept at it. 

Thursday, October 3, 2019

Politicians Red and Blue Cater to PEU

Bloomberg had two stories on federal laws that helped private equity underwriters (PEU).  The first dealt their latest massive lobbying push to preserve PEU preferred taxation, the billionaire tax break known as carried interest.

As Republicans set out to overhaul the federal tax code in 2017, the private equity world leveraged its influence. The mission: protect the wildly lucrative tax break that’s helped mint more billionaires than almost any other industry.

An industry that’s reshaped the American economy now appears to be heading into an even bigger war to preserve the generous tax breaks and loose oversight that helped it amass more than $4 trillion in assets and launch a new Gilded Age.
A different article on imploding unicorns mentioned:

....deregulation efforts in the investing industry in the 1990s, particularly the National Securities Markets Improvement Act of 1996. That law made it easier for startups to raise funds by reducing some disclosure requirements. It also increased the number of investors allowed in a fund before it was required to register under the Investment Company Act. The result, according to the authors, is that the spigots of private equity and venture capital were opened wide.

President Bill Clinton sold the government background check division to the PEU boys.  The Carlyle Group ended up owning the company twice.  USIS changed to Altegrity but ended up bankrupt, like many over-leveraged companies batted back and forth under various PEU ownership.

Clinton's team also brought deregulation through the repeal of Glass-Steagal.  This enabled financial shenanigans that put many retirees savings in jeopardy.  Guess who wants to help workers grow their retiree nest egss?  The same PEU boys that successfully got the Obama and Trump White Houses to ignore their campaign pledges to take away carried interest and tax PEU profits as income.  Their has to be a final bagholder and who better than America's elderly.

Politicians Red and Blue love PEU.   Clinton, Bush, Obama and Trump have all served the greed and leverage boys.  All have been and will be rewarded for a PEU job well done.  

Update 10-3-19:  Someone else figured out the PEU way:  "the billionaire class has already proven with its actions that it cannot exist without actively working to manipulate governments in a way that undeniably subverts democracy and the will of the people."  Another researcher noted the bipartisan Wall Street White House.

Wednesday, October 2, 2019

Carlyle to Shakedown Active Seniors?

The Carlyle Group sees dollar signs around America's aging population.  From California trailer parks to North Alabama medical office buildings, active senior housing to Atlanta luxury apartments Carlyle wants rent/lease money.

Senior Housing News reported:

Seasoned players in the active adult market — including private equity giant The Carlyle Group — say that it is a product where average lengths of stay are more than two times the average of independent living, and at profit margins that outperform senior housing. 
Active seniors would be wise to consider Carlyle's ownership of nursing home giant ManorCare.  It ended in bankruptcy after Carlyle bled ManorCare with management fees, dividends and asset sell offs. 

NY Post reported on ManorCare's demise:

The stumble could sully Carlyle’s reputation, it may escape the investment with a profit thanks to a dividend in the wake of the real estate sale-lease back deal, sources said.
Active seniors might wish to understand Carlyle's handling of tenants in a California trailer park.

The Real Deal reported last month:

Carlyle, one of the country’s largest private equity firms, made a splash in 2015 when it bought a manufactured home community in Silicon Valley for $152 million.

Tenants in the area soon complained of exorbitant rent hikes and a deterioration in management responsiveness — sparking new calls for statewide rent control in California. The D.C.-based investment group recently flipped the complex, selling it to Chicago-based Hometown America for $237.4 million this August, according to California property records.
How does one charge massively more in rent and reduce management responsiveness?  It's the private equity underwriter (PEU) way.  

Addendum:  PEUReport did many pieces on Carlyle-Manorcare over the years.

Wednesday, September 25, 2019

PPACA Report Card: An Accelerated Cost Curve

WSJ reported:

The average total cost of employer-provided health coverage passed $20,000 for a family plan this year, according to a new survey.
The $1,655 average deductible is much higher than what most people can afford.

Worker pay has not increased anywhere near the rate of out of pocket healthcare expenses.

Employers shifted costs to employees via higher deductibles and increased co-pays.   PPACA has not helped make healthcare more affordable.  It has made a lot of money for the greed and leverage boys.

WSJ quoted a private equity underwriter (PEU) in its piece:

Health-care affordability is generally the No. 1 issue for voters,” said Dan Mendelson, a founder of a health-care consulting firm and former federal official who is now an operating partner at a private-equity firm.
Mendelson works for PEU Welsh, Carson, Anderson and Stowe.  I've worked twice for PEU healthcare affiliates, the first time in the 1990's.  A private equity firm purchased my current employer last spring. 

Our health insurance deductible rose 78% in the last year, the first year of PEU ownership.   Our owners reduced the number of paid holidays by 25% and holiday pay by 33%.  They eliminated overtime and implemented a payroll system that underpays employees.  These moves impaired my ability to pay for the increased healthcare responsibility designed by my PEU employer. 

PPACA's designer, Nancy Ann Deparle,. came from the PEU world and to it she returned.  The average employee suffers greatly from healthcare greed.  I see it every day from the inside.

Update 9-26-19:  Wolf Street noted the shafting of employees under health reform.

Update 10-14-19:  Congress asked Blackstone and KKR for information on how private equity ownership contributed to rapidly rising healthcare costs. 

Saturday, September 21, 2019

Carlyle to Sell Golden Goose in Cash Raise?

Bloomberg reported:

The Carlyle Group is considering a sale of Golden Goose, the Italian luxury sneaker brand favored by celebrities from Selena Gomez to Taylor Swift, people with knowledge of the matter said.
I doubt Taylor Swift wears Golden Goose after Carlyle funded Scooter Borchetta's buyout of Swift's music library.   The Carlyle Group funded Scooter.  Swift was saddened and grossed out from Carlyle's nightmarish deal.

If Swift made the connection I would hope she donated her Golden Goose sneakers and any Supreme merchandise from their PEU taint.

Bloomberg added:
The private equity firm is working with Bank of America Corp. on the potential deal, according to the people, who asked not to be identified because the information is private. Golden Goose, known for its vintage style footwear emblazoned with the brand’s iconic star on the side, could fetch more than 1 billion euros ($1.1 billion), the people said.

Carlyle acquired Golden Goose from Ergon Capital Partners SA in 2017. The deal valued the business at about 400 million euros.
While other retailers declare bankruptcy left and right Carlyle's GGDB rose nearly 200%?  It's clearly time to cash in before valuations snap in the other direction (like WeWork).

Tuesday, September 17, 2019

Carlyle's Acosta to Restructure $2.7 Billion in Debt?

WSJ reported:

Acosta Inc. has hired law firm Kirkland + Ellis LLP to advise on talks to restructure some $2.7 billion in debt as the struggling marketing-services company faces a looming interest payment, according to people familiar with the matter.
The Carlyle Group bought Acosta in 2014 in a $4.8 billion deal.  Carlyle has $75 billion in dry powder to invest but it never throws good money after bad. 

Reuters reported Acosta's debt as highly leveraged and a potential concern for regulators in 2015.

Moody’s Investors Service puts leverage higher at more than 8.0 times.
S + P lowered its rating on Acosta debt in February:

The downgrade reflects the increased potential for a distressed exchange after the recent amendment to Acosta's credit agreement. While the company temporarily extended the majority of the commitments on its revolver by six months to March 26, 2020, the extending lenders reduced their total commitments by 5% and increased their pricing by 100 basis points. This will likely lead to further pressure on the company's already weakening cash flow. In addition, liquidity could become more constrained after a minority group of lenders chose not to extend their commitments beyond September 2019. 
It's September and at least one distressed exchange is in the works.  Sequa Corporation is another distressed Carlyle affiliate (based on 6-20-2019 debt rating).

Carlyle lost Carlyle Capital Corporation six months before the 2008 financial crisis.  It was massively leveraged and imploded when underlying asset quality deteriorated.