Tuesday, September 11, 2012

Carlyle's Investor Conference Sans LifeCare

WaPo reported:

The Carlyle Group is gearing up its annual investor conference in downtown Washington this week on the heels of a buying binge that constitutes a big bet on the U.S. manufacturing sector.

The investors gathering at the meeting represent the pension funds, foundations, universities, sovereign wealth funds and rich people who give Carlyle their money in hopes of making more with it.
Carlyle's marketing scheme had co-founder David Rubenstein bragging of 30% annual returns on equity investment.

Fellow co-founder William Conway believes Carlyle has a unique, refreshing story to tell at their annual investor meeting.  Part of that story is the U.S. is a great place to invest. 

“We track that growth through data in our portfolio companies, which helps us make smart new investments and best manage current investments,” said Conway, a data hound who scrounges through obscure metrics in search of “ahas.”

“We, in some ways, have better data than economists and some government people. That data tells us things like cargo-shipping rates, leisure-car rentals from Hertz and commercial building-supply sales." 
He bragged about cheap debt for corporate buyouts:

“The last six deals we’ve done, the average cost of borrowing was 6 percent,” said the former chief financial officer of MCI Communications. “That may sound like a lot, but when I was CFO of MCI in the early 1980s, we were paying 15 percent for debt.”

Conway's enthusiasm is in contrast to his former pessimism on the U.S. and his love for China

Conway said the United States continues to have the strongest, deepest and most flexible financial markets in the world, which also makes it a magnet for investment and creates the climate for growth.

“The U.S. is still the center of technological innovation. We have the best university system in the world. The best hospital system in the world. Best medical labs. I like the U.S. for all those reasons.”
Somehow WaPo missed the current state of Carlyle's hospital company, LifeCare Holdings. Carlyle's LifeCare skipped their debt interest payment, due on August 15.  They have four days left to make good, before going into default.

Oddly, LifeCare's interest rates are at Conway's MCI levels, according to Deal Pipeline:

There was $316.8 million of its first-lien loan outstanding as of March 31, filings with the Securities and Exchange Commission said, and the weighted average interest rate on it was 13.83%.
Will Carlyle let LifeCare implode like Carlyle Capital Corporation, BlueWave Partners, SemGroup, Oriental Trading, Hawaiian Telecom, Edscha, IMO Carwash, Willcom, Verari, Stallion Oilfield Services and Church Street Management?  Or is Carlyle using Rothschild's to strong arm its lenders?

For Carlyle it is the best of times.  It was the worst of times for 25 patients in LifeCare's unit in Memorial Medical Center during Hurricane Katrina.  D.C. caters to the Carlyle's.  It should be one heck of an investors meeting.  The PEU stories they'll tell.

P.S.  Unit holders are not invited.  The impact of PE-Ubiquitousness can be seen in America's growing income gap