Tuesday, March 24, 2015

Carlyle's Rubenstein Wants TPP Trade Deal

CNBC interviewed Carlyle Group co-founder David Rubenstein.  Near the end of the interview he addressed trade legislation:

"... the business community would like to see is trade legislation passed by the Congress in this session.  I think that would do a great deal for the U.S. economy, particularly the Pacific related trade agreement.  If that could get done, passed through the Congress I think that would do a great deal for the U.S. export market.  I think it would be good for the countries that sign on to it.  We're very focused in the business community on trade legislation.  That's probably the highest priority right now."
Got that Congress?  They pushed through pension busting legislation for the business community with no sunshine or debate.  Next up are trade deals that put business rights above national laws and court systems.  It's our PEU world, where politicians Red and Blue love PEU.

Monday, March 23, 2015

U.S. Congress Clears Deck for Pension Decimation

The Columbus Dispatch reported:

Many retirees are unaware "of the risk to their pension as a result of the legislation passed in December as part of a spending bill meant to run the federal government through the rest of its fiscal year.  The legislation affecting the retirees was added at the last minute.  It is targeted at companies that enter into pension plans with other companies.  There are about 10 million workers and retirees in 1,400 multiemployer plans, according to the Pension Rights Center in Washington."
How does such an important piece of legislation, one impacting millions of retirees on a long term basis, get inserted into a federal temporary funding bill?  It's a result of corporate sponsored politicians.

The Carlyle Group's major innovation was locating in Washington, D.C., the home of purchased politicians and a $3.5 trillion budget.
Corporations and their private equity underwriting (PEU) owners hate funding pensions.  They'd rather use cash and borrowings for dividends and special distributions.

Consider this 2011 statement from an ex-business reporter:

I have seen so many people -- particularly those in their 50s - 70s -- taken apart by what has happened in their industry as greed has hollowed out the economy. These are people took pride in their jobs and held themselves to this invisible standard that we all just took for granted, but is being wiped out. 
The Carlyle Group shed their pension liability in their deals for RAC and Brintons'.  PEUs will take any chance they have to dump health care and retirement expenses to workers.

Congress helped them out with PPACA, commonly known as Obamacare.  Corporations imitated public exchanges, offering private exchanges to retirees.  In doing so many turned retiree healthcare into a defined contribution benefit, where the employer pays a fixed amount and the retiree "shops" for a plan.

The big hits are on the horizon.  Pension accounting changes are expected to show massive funding deficits for many state and local pensions.  If you think this isn't coordinated consider:

May 3, 2014
A new office at the U.S. Treasury Department will focus on state and local finance issues, including distressed municipalities and their management of pension and other unfunded liabilities.

September 9, 2014
In an inscrutable move that has alarmed state treasurers, the Federal Reserve, along with the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency, just changed the liquidity requirements for the nation’s largest banks. Municipal bonds, long considered safe liquid investments, have been eliminated from the list of high-quality liquid collateral. assets (HQLA).
The greed and leverage boys know tapped out state and local governments, with reduced ability to raise debt, will need to turn their way for infrastructure projects.  Private equity likes paying reduced prices for predictable revenue streams.

PEUs and their purchased politicians never let a good crisis go by.  Pensions are the target, which happen to come with spillover benefits. 

Sunday, March 22, 2015

Carlyle's Rubenstein Prophesized Bowden

Carlyle Group co-founder David Rubenstein spoke to SEC regulation of private equity in a Yale interview in 2013.  He stated (at roughly the twelve minute mark):

"Relatively speaking we're not that heavily regulated.  Dodd-Frank legislation was 2,300 pages. It more or less didn't do anything to private equity."

"It said if you manage $50 million or more, you register with the SEC.  It doesn't really mean all that much in terms of oversight."

Which brings us to the SEC's Andrew Bowden, the man who once talked tough about private equity doing shady things to limited partners via fee allocations.  NakedCapitalism reported Bowden's flip-flop at Stanford  Law School, where he appeared with a KKR board member (the moderator) and Oak Hill's general counsel.  Bowden's former tough talk turned to pander:

...the people in private equity, they’re the greatest, they’re actually adding value to their clients, they’re getting paid really really well, you know, if I was in that position, the one thing I would think to myself as I skipped to work was like just “Let’s not mess it up. You know, this is the greatest thing there, I’m helping people, I’m doing OK myself.” 

And so my view on the small ones is, I still think this is one of…I tell my son, I have a teenaged son, I tell him, “Cole, you want to be in private equity. That’s where to go, that’s a great business, that’s a really good business. That’ll be good for you.”  So for me personally, as we share our opinions… 

Questioner [interrupting] I’d love to hire your son, by the way. That’s a deal.

KKR already hired General David Petraeus and Ken Mehlman.  The Carlyle Group hired a young Frist and Axelrod.  Give the teenage Bowden his $18 million, like GTCR founder and Illinois Governor Bruce Rauner did for a younger Rahm Emanuel.  With his security pot in place the teen can focus on making the world safe for private equity, which is the real aim.

Mr. Rubenstein spoke to the top seven to ten private equity underwriters (PEU) in the Yale interview.  He mentioned Carlyle, Blackstone, Apollo, TPG, KKR, Bain, Oaktree, Warburg Pincus and Ares.

They are all based in the United States   How can it be that the United States, which was 46% of the world's economy in 1960, now about 20%, 19% or so.  How can we have 100% of the global private equity firms?"
Rubenstein sees that changing as people in other countries start private equity firms, some with government support.  His prediction provides insights to why America spanks the world in the global private equity race 100% to zero.  First, PEUs avoided oversight, while retaining preferred taxation.  Second, many affiliates receive direct and indirect public subsidies, federal, state and local.

I don't believe the "helping people" meme, especially as Mr. Rubenstein envisions a world where the wealthy do very well and children have less prosperity than their parents.  He and his private equity brethren created that very world. He need not act like he was a bystander for this sad development.

Carlyle and company are a root cause.  Bowden is part of the system making the world safe for global private equity.

U.S. Billionaires Target Global Oil

Financial Review (Australia) reported Carlyle Group and Blackstone have billions to invest in global energy assets: 

"The North Sea is uninvestable, a no-go area," an anonymous investment banker said. "Anybody who has a mature position is desperately trying to get out. But it is extremely difficult to get out."

That means cheap prices for those wanting to get in, like Carlyle and Blackstone.  The United Kingdom made it easier for private equity underwriters by "slashing taxes on industry profits and introducing a new investment allowance to boost exploration."

Sixty per cent of Carlyle's fund was likely to be invested in producing fields, much of them offshore, with a substantial portion in the UK North Sea, said people familiar with the plans.

That's the PEU way.  One the way in they prefer to buy cheap, pay interest-not taxes, and get direct public subsidies.  They also thing long term.  Might Carlyle's North Sea oil production be shipped through an open Arctic, another area where Rubenstein likes to play and invest?

Update 3-24-15:  Carlyle's Rubenstein told CNBC oil and energy are the place to be.

Thursday, March 19, 2015

Carlyle's Addison Lee Private Jets

Private Fly's press release stated::

Addison Lee Private Jets, will provide Addison Lee customers with free executive transfers to and from private London airfields for all charter flights booked via the service.

Launching as part of Addison Lee's redesigned new website, Addison Lee Private Jets offers its customers instant online cost estimates for private jet hire with access to an accredited global charter operator network. PrivateFly.com will also provide Addison Lee customers with 24-hour access to a dedicated operations team for phone advice. Every booking will include Premier VIP Mercedes return transfers.

In addition Addison Lee began offering taxi services in New York City.  DisCo reported:

Driven on by the deep pockets of owners Carlyle Group, Addison Lee has exploded this month into the New York City cab market. They are taking the first step towards what CEO Liam Griffin says will be the first “truly integrated global network of ground transport providers” 
Carlyle is a truly integrated global network of billionaires and gosh darn it, they need luxury transportation.  I bet they don't have to share the Premier VIP Mercedes with five other people.

Wednesday, March 18, 2015

Apple Valley, Call Missoula re: Carlyle's Greed

  Hesperia Star reported:

Scores of residents turned out Monday for two public hearings on the proposed sale of a local water supplier to Algonquin Power Company's Liberty Utilities. More than 150 people crowded the conference room at Apple Valley's Development Center at 2 p.m. Monday. A night session at 6 p.m. attracted even more people.

The proposed sale faces approval or denial by the California Public Utilities Commission and would include payment of $325 million, including assumption of $80 million in debt. 

The Carlyle Group owns Park Water Co. and Western Water Holdings LLC.  The sale price would be $405 million, plus whatever fees Carlyle can take on.  Carlyle paid $102 million for Park/WWH in 2011.  That's a $303 million profit, nearly a triple bagger. 

Also, Carlyle charged Mountain Water $2 million a year in management fees.  They frequently charge a multiple of that amount to cancel those fees.  In addition, Carlyle siphoned off at least $5 million in dividends from Park Water/WWH.

Carlyle's offered their usual spin at the town hall meeting in Apple Valley:

"Carlyle recognized the short-term ownership was an issue," Robert Dove, managing director of The Carlyle Group, told the Daily Press during a break in the first of two sessions. "I think (Liberty) would be a good steward of the asset." 

Flash back to 2011:

While Carlyle often sells companies it acquires for a profit, "it's a very long-term process," Searles said. "These folks are characterized by their ability to boost capital."

Carlyle has been willing in the past to have a fairly long-term investment horizon. The group's approach, generally, is not to drain money out of an acquired company and then try to sell it, Searles said. In fact, Carlyle could spend as long as a decade investing in the water companies to increase their value.

"They typically have not been quote ‘flippers,' " Searles said.

Carlyle is a six pack short of a decade.  Say whatever is necessary to look good in the present moment, that's what PEU boys do.  Robert Dove transformed from a long term investor to a "short-term owner."  It's flipping time.

Monday, March 16, 2015

Carlyle Flipped Indian Companies

The Carlyle Group monetized a number of Indian affiliates for huge returns.  BusinessStandard reported:

Carlyle exited Repco Home Finance with a 6x return, Elitecore with 8x return and Tirumala with 4.5x return on investment.
Returns like that are untouchable.