Monday, December 9, 2019

Carlyle's Rubenstein Learned Delta Can't Offer Free Wi-Fi

TravelPulse reported:

Delta Airlines CEO Ed Bastian told podcast host David Rubenstein that charging for internet access prevents too many people from using it.

“One of the reasons why I say it’s ‘not a good reason’ why we charge for internet’ — you don’t pay for internet practically anywhere else — is that the planes do not have the technical capacity, and capability yet that if we made it free the system would crash,” Bastian said. “So, once it gets above about a 10% take-rate onboard performance starts to erode…if you turned it on free.”
Bastian didn/t mention Carlyle owned ARINC which makes airline communication equipment 

FT reported:

Rubenstein has, he admits, always been a workaholic but he denies that the happiest day of his life was the one he found out he could send emails while airborne.
Carlyle bought ARINC in 2007 and sold it in 2013 to Rockwell Collins for $1.4 billion. Not many people know of David Rubenstein's history with airline WiFi systems. Rubenstein received the Digital Patriot Award from CES on the Hill in April 2012.  He received his award for protection of technology. 

Rubenstein cited Delta Airlines in a Spring 2018 Philanthropy interview:

I was surprised to learn that Delta was broadcasting the interviews on airplanes. Friends would e-mail me, saying they were flying and watching an interview. People around the world watch them because Bloomberg is a global television network. 
Rubenstein returned the favor when he interviewed Delta's CEO in Fall 2019.  Bastain's "if you turned it on for free" comment runs against the decade long tide of airline's charging for anything and everything, known as ancillary revenue.

Face the Nation recently interviewed David Rubenstein on his appreciation for history.   Rubenstein, like Thomas Jefferson, started working as an idealistic youth.  Jefferson crafted the "All men are created equal" Declaration of Independence.  Rubenstein worked in President Carter's White House. 

Both used leverage in innovative ways and ended up obsessed with profits.  Jefferson was the first man to use slaves as collateral for a loan when he had access to riches by simply setting his slaves free, something Jefferson refused to do.  Rubenstein pioneered private equity's connection to the seat of power, Washington, D.C. and helped grow covenant light debt. 

Mr. Rubenstein wants people to study and recall history.  Carlyle's history has a number of dark spots, 26 patient deaths at LifeCare Hospitals post Hurricane Katrina, torture rendition flying by Landmark Aviation, World Bank procurement violations by ARINC and several pay to play (bribery) settlements where Carlyle paid tens of millions but admitted no wrongdoing.

History is written by the winners, like Mr. Rubenstein.  Face the Nation did not interview the Brinton's family, who had their company back-doored by Carlyle's purchasing discounted debt and forcing it into bankruptcy.  John Dickerson did not interview Former Texas Governor Rick Perry who gave Carlyle $35 million for 3,000 new jobs at Vought Aircraft Industries' Dallas operations.  Vought cut 35 jobs during the six year performance period for $1 million per job reduced.  Vought sent Boeing 787 Dreamliner production to South Carolina where they gunked up Dreamliner production.

Character is revealed across a person's interactions with others.  Mr. Rubenstein's philanthropy is admirable but it does not counter the tremendous damage the private equity model has done to industries and workers.  Prioritizing profits over people had Thomas Jefferson use slaves as loan collateral.  Private equity is its modern day expression.

Tuesday, December 3, 2019

Cisneros, Albright, Cohen and Rubin: From Clinton Cabinet to PEU

PEU lobbying group American Investment Council reported over seven years ago:

May 31, 2012Former President Bill Clinton appeared on CNN’s Piers Morgan Tonight, guest hosted by Harvey Weinstein, to provide his take on the presidential election.  When Clinton was asked about the recent attacks on private equity, he responded:

“If you go in and try and save a failing company…you can go into a company, have cutbacks and make it more productive with the goal of saving it, and when you try, like anything else you try, you don’t always succeed…so I don’t think that we ought to get into the position where we say this is bad work. This is good work.”
Good work for many former members of the Clinton cabinet.   Many joined the greed and leverage boys after serving President Clinton.

Madeline Albright founded Albright Capital.

APR Energy, an Albright Capital portfolio company, secured a contract to supply the South Australian government with a new fast-start power plant made up of nine turbines to help avert potential shortages over summer.  The company also filled the breach for Tasmania last year when an under-sea power cable to the mainland failed.
In the article, APR Energy's executive chairman John Campion discusses the transaction and the invaluable involvement of Ms Madeleine Albright and Albright Capital Management.
Henry Cisneros is Co-Chief Investment Officer and Chairman of American Triple I Partners.  His PEU landed a deal this week to redevelop New York's JFK Airport.

A minority-owned private equity firm led by Clinton administration veteran Henry Cisneros has been selected as an investment partner for a project at New York’s John F. Kennedy International Airport. American Triple I Partners will contribute 30% of the equity for the redevelopment of terminals 6 and 7 at JFK. 

The addition of American Triple I, a 100% minority-owned business, helps the consortium meet Governor Andrew Cuomo’s goal for the JFK redevelopment plan to include 30% participation from minority and women-owned business enterprises, known as MWBEs. 
The Carlyle Group is behind the new Terminal 1 at JFK.  Carlyle co-founder David Rubenstein worked in President Jimmy Carter's White House but benefited from Clinton's privatizing the government's background check arm.  Carlyle flipped USIS several times for huge returns.

William Cohen founded TCG Financial Partners in 2004.  His co-founding partner sold a Palm Beach house for $2,312 a square foot in June 2019.

Robert Rubin joined Insight Capital Partners before moving on to Centerview Partners.  Rahm Emanuel worked in the Clinton and Obama White Houses and recently joined Rubin at Centerview Partners.

New Democratic Presidential Candidate Deval Patrick headed up the Civil Rights Division under Bill Clinton.  He recently resigned his PEU position with Bain Capital.

A flashback to Bill Clinton defending the PEU boys to Harvey Weinstein is symbolic on a number of levels.  The greed and leverage boys are predatory. 

Sunday, November 24, 2019

PEU Default Risk More than Twice Public Firms

WSJ reported:

The default risk of companies owned by private-equity firms is 2.5 times that of their public counterparts, according to data collected from banks, insurers and asset managers by analytics firm Credit Benchmark.

Private-equity firms use leveraged loans, rated below investment grade, for the financing of buyouts of target companies. Financial institutions raised their estimates of the average probability of default—or nonpayment—for such loans to about 6% in September from 5.44% a year earlier, according to the data.

A jump in leveraged-loan defaults could have more impact on global finance than in years past because there are far more of the loans in existence and they are broadly held by mutual funds, institutional investors and collateralized loan obligations, or CLOs.
Carlyle Group co-founder David Rubenstein said the following on CNBC earlier this year:

Let me just say that private equity has done a pretty good job of improving the efficiency of the companies in the United States for 30 or 40 years. And around the world, people like private equity, that come into their country to show them how to improve and modernize companies. And I think it has created value for the economies in which it operated. There’s no doubt there’s a fair amount of money in private equity now. That’s because the returns have been very good. The people aren’t putting money in private equity because the returns are bad. The returns are good.
How does efficiency result in a much higher debt default risk, which can turn into systemic risk in a major downturn?  That's outside Mr. Rubenstein's approved question list for the business media.

Forbes also wrote about private equity's rising default rate:

a significant amount of high yield debt and leveraged loans are not necessarily being used for sustainable growth strategies for the firms and no evidence points to those funds being used to increase workers’ wages or to hire more. Recently, I wrote about how private equity has been causing unemployment in thousands of the firms that they buy out.
 The greed and leverage boys have one interest in mind and it's not the common citizen's.

Update 11-25-19:  PEU's latest debt shtick, the unitranche which combines "senior and junior debt into a single tier and eliminates the syndication process, unitranches can be arranged in a fraction of the time it takes to complete a traditional leveraged loan."  The articles states they remain untested in distressed scenarios.

Sunday, November 17, 2019

Taylor Swift's Plea for Help Tests Carlyle Cool

Music superstar Taylor Swift has been blocked from using older songs and video in her upcoming American Music Awards appearance.  The Independent wrote:

“I’ve been planning to perform a medley of my hits throughout the American Music Awards,” she wrote, adding that Braun and Borchetta “said that I’m not allowed to perform my old songs on television because they claim that would be re-recording my music before I’m allowed to next year.”
This continues the ongoing bullying of Swift by Big Machine, which purchased Swift's music with funds from The Carlyle Group. 

Swift is being honoured with the Artist of the Decade trophy at the AMAs, which take place on 24 November.
An investor might view this award as adding to the value of their music holdings in Taylor Swift.

The artist is explicitly seeking help from Carlyle.  CNBC reported.

“I’m especially asking for help from The Carlyle Group, who put up money for the sale of my music to these two men.”
The Carlyle Group declined comment on the CNBC story.  Bloomberg reported:

"Taylor Swift’s feud with her record label reveals a little-known fact about the entertainment business: the outsized role private equity plays in funding its biggest stars.Swift asked Carlyle Group in a tweet on Thursday to help her as she battles to secure ownership of albums she recorded with her previous label.  The pop star didn’t criticize Carlyle, only appealing for its help. But her conspicuous mention of the company put a spotlight on an industry her legions of young fans normally wouldn’t have reason to pay attention to. Google searches for Carlyle Group surged after her tweet."
Which cool Carlyle side will they show?  So far it's been the cool, arrogant, disconnected, aloof, greedy side.  That could change.

The public face of Carlyle is co-founder David Rubenstein.  Swift could appeal directly to her fellow rap star.

Rubenstein met with other music legends in the past.  Take Dr. Dre. 

Carlyle Cool could be at risk.  Think Beats, Golden Goose and Supreme.  Carlyle owned Beats for less than a year, making huge money flipping the company to Apple.

Carlyle wants to flip Golden Goose Deluxe Brands, maker of luxury sneakers.

I'd venture these sneakers are popular in entertainment circles.  Does Taylor have a pair of Golden Goose Superstars (retail price $1,770)?  If so, she has options.

Carlyle invested in Supreme, the epitome of urban skater cool.  Esquire is concerned that Carlyle's past profits from death could rub off on Supreme.

Styles can change in a heartbeat, especially under the direction of a pop-star with millions of fans.  How many appearances does David Rubenstein have in the next week?  Will any enterprising reporters ask for Carlyle to respond to Taylor Swift's request?  Carlyle cool is at risk in a way they've never experienced.

Millions of teens could hate The Carlyle Group overnight.  Their parents will surely hear of Carlyle's cruelty to their favorite musician.  These are the very people Carlyle wants to sell retirement investment products in the coming years.   Carlyle spent decades building its good name.  It might swiftly evaporate.

Update 11-28-19:  NYT reported Carlyle intervened to get the parties to a longer term agreement, one that jumps Carlyle's ROE hurdle. 

Update 12-9-19:  Rubenstein told Fox News Maria Bartiromo "In that particular case, I do think there'll be a resolution of that in the near future.  Hopefully, [Swift] can continue to do very good music, but it's something that is more complicated than my being able to resolve it right here."  Rubenstein wants to make Beats like money off of Taylor Swift.  

Thursday, November 14, 2019

Carlyle Group's New Healthcare JV Raised ER Bills $25 Million

BusinessWire ran the following press release on The Carlyle Group's latest healthcare venture:

Cannae Holdings, Inc. (NYSE:CNNE) (“Cannae” or the “Company”) today announced that it has entered into an agreement to participate in a health care joint venture with an investment vehicle advised by an affiliate of The Carlyle Group and another investor with deep health care services experience. The joint venture will focus on acquiring, integrating and operating synergistic health care services companies in the provider and payer space.

Cannae will contribute its T-System business to the joint venture and Cannae’s joint venture partners will contribute equity capital to enable it to acquire other complementary health care services companies. As part of this effort, T-System has also entered into a definitive agreement to acquire a leading provider of coding and clinical documentation services to domestic health care providers which will be funded by the joint venture. 

At closing, it is anticipated that Cannae will be a minority shareholder of the joint venture and have all of its T-System intercompany debt repaid, which totaled approximately $60 million as of September 30, 2019. The investment vehicle affiliated with The Carlyle Group will be the majority controlling shareholder of the joint venture. 
T-Systems helped increase ER bills by $24.8 million for residents of Savannah, Georgia.  The case study showed how Carlyle's new JV will not bring healthcare costs down:

A few months after transitioning to T-System’s RevCycle+® service, Memorial University Medical Center’s revenue quickly increased to the numbers T-System had estimated. And, just a few months later, revenue continued to improve even further to $1,269 per patient visit, from the original baseline of $1,040 per patient visit.
• $24.8 million gross annual revenue increase:
• $259 increase per patient for facility E/M charges\
• $31 increase per patient for facility procedure charges
• $502 increase per patient for observation services charges
A higher level of service was assigned for about 65 percent of the ED patients, and a lower level of service was assigned to three percent. Also, a higher level of service was assigned for about 70 percent of observation cases.
Healthcare is no longer about serving people.  At a recent reunion I asked healthcare professionals: "How has healthcare changed over the last few decades?"  Nurses, physicians and nurse practitioners said universally.  "It's all about money and numbers."

That's because the greed and leverage boys have infected healthcare.  The system may be septic.

Sunday, November 10, 2019

Carlyle's Acosta to Enter Bankruptcy

The Carlyle Group will hand another affiliate back to creditors/bondholders.  PR Newswire reported:
Acosta's "pre-packaged" Chapter 11 Plan of Reorganization (the "Plan")
Acosta, Inc. ("Acosta" or the "Company"), a full-service sales and marketing agency, today announced that it has reached an agreement with more than 70% of its lenders and more than 80% of its noteholders, each by principal amount, on the terms of a comprehensive reorganization and recapitalization.  The deal will eliminate all of the Company's approximately $3 billion of long-term debt.  Further, investors have committed $250 million in new equity capital backstopped by institutions committed to the long-term success of Acosta.
The piece offered no word on how many billions Carlyle pulled from Acosta prior to bankruptcy (September 2014 to present).  Also, the release made no mention of The Carlyle Group.

New York City Retirement Systems invested $330 million in Carlyle's fund that owned Acosta.  A 2017 Q3 report showed the negative impact of Carlyle's ownership of Acosta:

Carlyle Partners VI, L.P. - Side Car, a 2014 Co-Investment partnership, generated a net value loss of $0.03 million during the third quarter of 2017. Acosta, Inc. drove performance as the holding was written down 11% to $226.4 million as of September 30, 2017.
Another PEU Sponsor fail for Carlyle.  How many people got hurt?  Recall LifeCare Hospitals, Carlyle Capital Corporation, ManorCare, Philadelphia Energy Solutions and now Acosta. 

Update 12-1-19:  Bloomberg reported Acosta filed for bankruptcy in the Delaware U.S. District Court.

Tuesday, November 5, 2019

Ex-Medicare Chiefs Love PEU

Presidents George W. Bush and Barack H. Obama enacted significant healthcare reform in their terms in office.  Bush added the Medicare Prescription Drug benefit known as Medicare Part D.  Bush's Medicare Chief Tom Scully stepped down after Congress passed Part D.

Obama enacted the Patient Protection and Affordable Care Act (PPACA).  His White House Health Reformer Nancy-Ann Deparle was a former Medicare Chief under President Bill Clinton.  For a time Marilyn Tavenner and Andy Slavitt served as Obama's Medicare head.

What do these four individuals have in common?  Private equity underwriters (PEU).

Tom Scully - General Partner Welsh, Carson, Anderson and Stowe (WCAS)
Nancy-Ann Deparle - Partner and co-founder Consonance Capital
Andy Slavitt - Founding Partner Town Hall Ventures
Marilyn Tavenner - Board of LifePoint Hospitals, an Apollo Global affiliate, and Board of  Select Medical, a WCAS affiliate
The Atlantic reported PPACA passed due to:

"compromises that led to the ACA, executed by Obama and his then–chief of staff, Rahm Emanuel, are what staved off a full-scale medical-industry uprising against the bill."
PPACA was designed by for-profiteers for PEUs.  The greed and leverage boys have had a field day on citizen's wallets.  Surprise medical billing, thank Blackstone and KKR.

President Donald J. Trump's Medicare Chief Seema Verma:

"blasted "Medicare for All" even as some Democratic presidential candidates continue to propose the idea for healthcare reform. 

"I’m always very concerned that we’re hearing conversations about more government, more Medicare for All. I think those kinds of things are very scary to me,” she said. "We need to put patients in control of care, not the government."
Patients in control?  The only control I have is paying more and more out of pocket for the same limited care I access every year.

For that right I become an instrument in an algorithm.  Humana's Chief Strategy Officer said the company wants to be a healthcare company with elements of insurance:

"Part of predictive analytics is getting close to the member. We're partnering with organizations outside of healthcare where, with the member's consent, we can identify information they are sharing with us. Proximity is the key to predictive ability," 
Having my health insurer emulate the NSA?  That is very scary to me, as is the parade of PEU paid former Medicare Chiefs.

Healthcare is an absolute Gordian knot and it grows larger every year due to greed.

Around 45% of Americans said a major health-related expense could potentially lead to bankruptcy, according to a Gallup poll. Health care expenses can break the bank at any age, but they're especially detrimental to older Americans –- retirees in particular.
America's for-profit healthcare landscape is a trail of tears for many seniors who go bankrupt, even with health insurance coverage.

Two-thirds of people who file for bankruptcy cite medical issues as a key contributor to their financial downfall.

A new study from academic researchers found that 66.5 percent of all bankruptcies were tied to medical issues —either because of high costs for care or time out of work. An estimated 530,000 families turn to bankruptcy each year because of medical issues and bills, the research found.
Scully, Deparle, Slavitt and Tavenner don't have bankruptcy worries.  They count piles of cash from the very PEU healthcare profits breaking seniors bank accounts.

Former Medicare Chief Gail Wilensky sold ManorCare to The Carlyle Group as a board member.  Eleven years later Carlyle bankrupted the nursing home giant and Mrs. Wilensky had over a decade to grow her nearly $3.4 million in proceeds from ManorCare's PEU buyout.

Carlyle just added a huge insurance broker to its PEU family.  The Hilb Group offers health insurance.  Hilb's website states:

Like magic, you can increase benefits while reducing total costs. 
I work for a PEU affiliate and it has only reduced benefits, healthcare and otherwise.  Like evil magic I've seen coworkers disappear and service quality harmed.  This year I've had the highest out of pocket expenses in my lifetime for healthcare.  My employer states it emphasizes preventive care but I am unable to get a basic vaccination without having to drive several hours.

PEU greed and the for-profiteers who've commandeered the healthcare system are not looking out for my best interest.  They are looking out for theirs.