Friday, November 14, 2008

The Carlyle Group's Debt-a-Palooza Takes Advantage of Blue Mood

Carlyle Group co-founder David Rubenstein repeated his mantra of buying back debt on the cheap in Hong Kong. Reuters reported on the latest strategy of private equity underwriters (PEU's):

"When history is recorded, the single best deals done in this environment will probably be deals done about near the bottom for the debt of one's own company," he said at the Asian Venture Capital Journal conference.

Private equity firms were doing a lot of this right now, he said. As a result, the term "private equity" may soon switch to "private credit," as more buyout firms prepare to purchase the cheap debt of companies they have studied in the past.

The question is whether the Fed will serve as the middle man, now that Hank Paulson's TARP is a pure investment program. Hank's taxpayer funded, sovereign debt fund could clear the decks of struggling financial institutions. How would the average citizen feel about billions in taxpayer money used to clear credit decks on the cheap for PEU's?

The good news is banks will lend to PEU's, at least on a limited basis. The article reported:

With debt consistently traded at 60 cents on the dollar, companies should buy it back, holding it until the turmoil clears and selling it later for a premium. Banks are even allowing debt buyers to borrow money from them for these purchases.

David Rubenstein knows how to make big money off the Financial Rescue Program (FRP). In good times and bad, the Bush administration knows how to deliver Corporafornication. The Carlyle Group enjoyed a wonderful eight year ride.

Unfortunately, they're well positioned for that to continue. A few of their boys on the blue team: McLarty, Marchick, Bayh, Emanuel, Kennard & Rossotti. Suit up! The game is on...