Saturday, December 28, 2013

Vail to Hear PEU Infomercial


Vail Daily reported on a presentation by Carlyle Group co-founder David Rubenstein to be held later today:

Today, there are almost 3,000 private equity firms holding over $1 billion in assets. The top 10 firms in the U.S. hold assets of about $1 trillion. Over 7.5 million Americans are employed by companies owned (at least in part) by these firms, and they indirectly affect millions more people. That’s because almost 25 percent of the money they raise comes from government pensions, endowments and public foundations.

Our economy has been built in large part on a private equity model. But does it work?
The private equity model became ubiquitous during the George W. Bush and Barack Obama presidencies.  Private equity underwriters (PEU's) were a miniscule part of the economy prior to these two presidents.  One business reporter personally faced the PEU monster and wrote of its devastating impact:

There are very few people out there who will talk and write honestly about private equity. I know from personal experience that the financial press is so eager to break news on "deals" that reporters (who are increasingly compensated on the number of "market moving stories" they write) can't afford to be critical of Carlyle, KKR and Blackstone, and risk losing access to people at those firms.

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.

As for Carlyle co-founder David Rubenstein:

The Carlyle Group scares me more than anything I've ever seen on Wall Street. It seems to exist to corrupt politicians and it's hard to know who they even represent.

I watched a video interview of (David) Rubenstein and his arrogance is really beyond tolerance. He was going on about the debt ceiling problem and how there would need to be cuts in services and higher taxes. When the reporter asked him about tax on carried interest he turned really disdainful and said that this "only" amounted to $22 billion over some number of years and this was not serious money. Boy, nothing like everybody doing their small part to save the country from oblivion!

If the U.S. economy is the Titanic, PEU's and their political sponsors will get the lifeboats.  The rest of us are sunk.

Thursday, December 26, 2013

Mehlman to Head Up PECKER Group


Dealbook reported:

Kenneth B. Mehlman has helped guide the investment giant into becoming more open as the firm transformed from a secretive partnership to a publicly traded company.  Now he is assuming a top role at the private equity industry’s lobbying group.
Mehlman's first task may involve settling a longstanding collusion case involving major private equity underwriters (PEU's).

Eight firms stand accused of agreeing from 2004 through 2008 not to “jump” deals signed by the others, Kosman writes, which collusion is claimed to have depressed buyout prices. The PE firms have repeatedly tried to get the 2007 suit thrown out.  

The eight firms are a who's who of PEU's:

The PE firms in the suit making its way through federal court in Boston include KKR & Co. (KKR), Blackstone Group (BX), Bain Capital, Carlyle Group (CG), and Goldman Sachs Capital Partners (GS).

Mehlman has the skills and connections to deliver a settlement where over $1 billion changes hands and no PEU's go to jail.  Ken served both sides of the Government-Corporate Monstrosity, Eisenhower's Military-Industrial Complex on trillions in federal steroids. 

Wednesday, December 25, 2013

Bright Christmas for Carlyle Group


WSJ reported on Carlyle's Merry Christmas:

Amid a slow-down in the private equity investment pace in one of Europe’s fastest growing economies, Carlyle Group has eked out an exit for a Turkish hospital chain it backed in 2009.  The firm agreed to sell a 40% stake in Medical Park

The Medical Park sale tops a month full of international exits for Carlyle Group, coming a week after the surprisingly lively Hong Kong debut of Fu Shou Yuan International Group, an operator of funeral facilities and cemeteries.

It also follows the initial public offering in Milan of Moncler SpA, the upscale coat maker backed by Carlyle and Eurazeo, and a tender sale of Chimney Co., a Japanese pub-restaurant operator, which relisted on the Tokyo Stock Exchange last year.
Carlyle had a number of Santa's over the years, ranging from Texas Governor Rick Perry to FDIC Chair Sheila Bair.  Here's hoping your Christmas is as profitable as Carlyle's!

Monday, December 23, 2013

PEU Holiday Chuckles


NYT Dealbook helped spread the Carlyle message:

It’s a reprise of a mockumentary the firm made two years ago, when the three billionaires imagined themselves in far more humble circumstances. Like that video, this one was produced by SKDKnickerbocker, a communications firm known for its political advertising offerings.
Private equity underwriters (PEU's) are but one side of the Government-Corporate Monstrosity (GCM), Eisenhower's Military-Industrial Complex on trillions in federal steroids.

That includes PPACA, where Carlyle is in the lead to buy Johnson & Johnson's ortho clinical diagnostic unit for $4 billion.  PEU KKR added billions in healthcare costs via its ownership of giant hospital chain HCA.

Like the Carlyle "yuk it up" video, it's dark comedy time in America.  Greed sells with the help of the NYT.

Saturday, December 21, 2013

The PEU American Way


American Way magazine reported on New YorkCity's hosting an outdoor cold weather Super Bowl:

The facilities are first-rate — and ticket prices reflect that. For the Super Bowl, high-end customers will pay $2,600 per ticket for about 9,000 premium seats — more than twice the price of a premium seat at last year’s Super Bowl in New Orleans. But Tisch points out that until the recent sports building boom, “New York was woefully underserved in terms of state-of-the-art facilities.” The increased prices simply reflect the economics of the area. “Many corporations, hedge funds, private-equity companies and families that can support the economics of private suites and clubs are in the tri-state region,” he says, referring to New York, New Jersey and Connecticut.

PEU seats aren't out in the cold.  They're protected from the elements.

Sunday, December 15, 2013

Carlyle Group Invests in Discover Exploration: Offshore Drilling in New Zealand, Africa


FT reported:

The Carlyle Group, a US-listed private equity group is to pay $200m for a majority stake in Discover Exploration, a venture launched in March by former Cove executives Michael Blaha, John Craven and Michael Nolan.

Discover Exploration holds an interest in two deepwater licenses offshore New Zealand.  Drilling began two weeks ago via the ultra-deepwater drillship Noble Bob Douglas.  Discover also holds "exploration licences in the Comoros, a former French colony between northern Mozambique and Madagascar."

Wednesday, December 11, 2013

Nothing Beyond Reach of Government Corporate Monstrosity

 
U.S. Intelligence claims nothing is beyond their reach via an octopus centered logo.  The octopus symbol was once used to characterize corporate greed.  Greed and power combine in America's Government-Corporate Monstrosity (GCM), President Eisenhower's Military-Industrial Complex (MIC) on $ trillions in federal steroids. 

The GCM gorged on government juice for several decades, long enough to have a bad case of "Roid Rage."  Anyone pointing out inconvenient facts or truths will find themselves smack in the reach of U.S. branded global intelligence, piss colored and pissed off.

Tuesday, December 10, 2013

Carlyle's Cov-Light PEU Financing

Carlyle Group co-founder Bill Conway echoed fellow co-founder David Rubenstein's assessment that conditions are similar to those before the Fall 2008 financial crisis in that valuations are high and debt is cheap and easy. 

Bill Conway, Carlyle Group LP (CG:US)’s co-chief executive officer, said the financing environment for leveraged buyouts is as accommodating as it was immediately preceding the 2008 U.S. financial crisis. 

“Every deal that’s getting done today is cov-light,” Conway said today at Goldman Sachs Group Inc.’s financial-services conference in New York, referring to loans that have few covenants, or restrictive terms. “In the United States, they’ll lend us more than we’ll borrow. The lessons of the past have been forgotten.”

Repeat them they will, given the greed and leverage boys will exercise their urges.  How long before our leaders say things like:

"Wall Street got drunk."-President George W. Bush who ushered in the golden age of private equity underwriters (PEU's)
 
"I analogise it to sex. You realise there were certain things you shouldn't do, but the urge is there, and you can't resist."-Carlyle Group co-founder David Rubenstein on access to cheap and covenant light credit.

Your guess is as good as mine, but the same factors are in play.

Monday, December 9, 2013

The Rubenstein PEU Fascination

Forbes interviewed Carlyle Group co-founder David Rubenstein, one of the most public faces in private equity underwriting (PEU).  They found five fascinating things about Rubenstein:

Number 1: Sub-Saharan Africa and Other Emerging Opportunities

When you have a young population combined with enormous minerals extraction opportunities and a growing consumer market, you also have enormous potential opportunity.
It sounds like the place for a huge PEU profitgasm.  Recall that Carlyle mostly buys and sells companies for huge profits.  Some of those companies are in the energy space and others in consumer goods/services.  Carlyle and its ilk hollowed out America's middle class during the President George W. Bush years and Africans are supposed to trust the latest group of predatory white PEU men looking to profitably trade local companies?   

Number 2: Private Equity Investing: Now and the Future

As for investing in private equity now, David says it’s a wonderful time to sell since company valuations are so high, but a tougher time to invest for the same reason.  He is bullish, naturally, on private equity, and believes that more investors will have an opportunity to invest in private equity funds. David believes that in future years, investors may even be able to access private equity funds in their company 401ks.
High valuations echo 2007-2008, the run up to the financial crisis. Remember Rubenstein is the consummate PEU salesman and Forbes gave him free promo space.  No matter what's going on it's the perfect time for high net worth individuals and sovereign wealth funds to invest with Carlyle.

Everything distinctive about private equity, that supposedly contributed to Carlyle's incredible 30% annual returns on equity, will have disappeared when the SEC allows individuals to stock their retirement funds with PEU investments.  Investors who believe in Carlyle can become unit-holders today, have no say on anything and sit at the foot of the master's table waiting for crumbs to fall.  

Number 3: About the Fed and Future Taper Tantrums

We’re in uncharted waters and no one really knows what will happen when the Fed pulls back its bond buying program – even the Fed.
The Carlyle Group feasted off low interest financing, thanks to the Fed.  Carlyle executed  numerous liquidity recaps, i.e. loaded affiliates with more debt in order to pay themselves (sponsors) huge dividends.  If interest rates go up many of these debt instruments would likely explode, long after Carlyle monetized the affiliate for a multiple of their original investment (2 to 10 times).

Number 4: The Importance of Patriotic Philanthropy

While many may feel that the Federal government already takes too much of our money, David points out that it just doesn’t have the money to make the necessary renovations to our national treasures and symbols, like the National Mall in Washington, DC. He thinks that everyone can participate in patriotic philanthropy in some way and help preserve our beloved historical sites.
Rubenstein saved hundreds of millions in taxes from Carlyle's being a virtual nonprofit, and paying preferred carried interest tax rates on PEU income.  The Carlyle Group located in Washington, D.C. for the very purpose of being close to Uncle Sam's wallet, currently spending $13 trillion per year.

PEU's want lower corporate taxes and the D.C. crowd seems determined to comply.  Rubenstein knows his banks wouldn't fund the annual budget deficits our federal government runs.  He also knows the Fed will.  Carlyle will suckle for as long as possible on the federal teat by rotating in and out of companies services the government funds (which leads to his next fascinating statement).

Number 5: Making the Case for Higher Education

“Over the course of history, education produces people who are better citizens,” David said. “We should want people who are better educated.”

Knowledge and wisdom are characteristic of people who are better citizens.  The people have been repeatedly lied to by our political and business leaders.  Better citizens learned "eliminating nonexistent weapons of mass destruction opened up new markets to Western goods or gave American branded multinationals access to our oil."

Rubenstein wants citizens to believe "his greed is good" and "crony capitalism is free market capitalism."  I hope many in our league of humanity know better.  That includes Africa and 401(k) holders.

Friday, December 6, 2013

BankUnited Update: FDIC Subsidy Nearly $6 Billion


Bloomberg reported on the huge public subsidy given by the FDIC to private equity underwriters  (PEU's) on BankUnited. 

It (FDIC) would reimburse BankUnited for 80 percent of the first $4 billion in losses and 95 percent of all additional losses. The FDIC also provided $2.2 billion in cash. By selling to Kanas’s group, the FDIC expected to lose $4.9 billion on the bank—which was still $1.5 billion less than it estimated it would spend if it had to liquidate it. The agency says its losses have grown to $5.9 billion.
What's an extra $1 billion in subsidy for The Carlyle Group and company?  The Carlyle Group, Blackstone and Wilbur Ross put up $900 million in new capital vs. $5.9 billion in FDIC funds.  PEU owners took the bank public the next year. 

Carlyle Group's Planned Cash-Ins


Seeking Alpha identified Carlyle's efforts to cash in on two affiliates, PQ Corp and CVC:

Sources tell Reuters Carlyle (CG) is preparing to either sell specialty chemical maker PQ Corp. for up to $3B (after factoring debt), or take it public.  Carlyle paid $1.5B to acquire PQ in '07. Since then, the company has been merged with industry peer INEOS Silicas, and has shed its engineered glass products busines (Potters Industries).   PQ is estimated to have annual EBITDA of $300M.Carlyle will reportedly talk with banks next week to select IPO underwriters for PQ, but will simultaneously continue exploring a sale.

"If they thought the moment for an IPO last year was unfavorable [last year], maybe now things are just as bad, or even worse, which will probably have quite an impact on the demand," says analyst Rodolfo Amstalden of Carlyle Group's (CG) plan to revive the offering of Brazilian travel agency CVC Brasil Operadora e Agencia de Viagens SA.  The offering will try and raise up to $418M and would be just the 10th this year in Brazil, which is the world's worst-performing major stock market in 2013.  Hurting the IPOs prospects even more - its purpose is to allow Carlyle (a 63% owner) and other investors to cash out, rather than the company raising money.  The 2014 World Cup and 2016 Olympics can't come fast enough for the slumping economy and market.
Any S-1's would provide information on Carlyle's management fee and dividend bleeding of both companies under PEU ownership. Any sales to fellow private equity underwriters would keep this information under wraps. 

Thursday, December 5, 2013

PEU Rubenstein Handles Hillary with Kid Gloves

Politico reported:

Missing from the litany of questions from the Carlyle Group’s David Rubenstein was one about the former secretary of state’s (Hillary Clinton's) view of the Obama administration’s nuclear-freeze deal with Iran, an issue that’s dominated international headlines.

“She’s very smart and she’s very cautious,” said Rubenstein. “She wasn’t going to say anything that was going to make news.”


His goal, he said, was to “give the crowd a good time” with a mix of personal stories, humor and anecdotes about her life.

The well-heeled crowd at the event at the Metropolitan Museum of Art in Manhattan for the Richard C. Holbrooke Forum was a mixture of long-time Clinton supporters — Vernon Jordan, former White House chief of staff William Daley, investor Steve Rattner, CNN’s Christiane Amanpour and former World Bank head Jim Wolfensohn — and foreign policy elite.

Plus, he added, “I’m not a journalist; I’m a businessman.”

The Carlyle Group co-founder is a private equity underwriter (PEU), who hired Hillary Clinton to speak at Carlyle's investor meeting (not the unitholder version).

Hillary is the Blue side of Red and Blue love PEU.  So is Vernon Jordan (Lazard), Jim Wolfensohn (Wolfensohn & Company), William Daley (Evercore, JP Morgan). 

Sunday, December 1, 2013

Carlyle's Public Investor Day Beats Veterans Day


WaPo reported on The Carlyle Group's investor conference, which occurred on Veterans' Day, 11-11-13.  Rather than beat a drum to honor those who served, Carlyle offered a pair of Beats to unitholders and investment house analysts:

To help ensure that the Carlyle Group’s tune was heard loud and clear, each attendee at the District-based private equity firm’s recent investor conference was given a pair of Beats by Dr. Dre earphones. The button-down Carlyle recently made a $500 million investment in Dr. Dre, which garnered attention from the financial world because it was a step in a different direction for the firm, which made its name in the defense and aerospace industries. For seven hours, Carlyle’s top brass, including co-founders David Rubenstein, Bill Conway and Dan D’Aniello, walked investors as well as stock analysts through the fine print of Carlyle’s business. Goldman Sachs analysts liked what they heard, upgrading their rating from “neutral” to “buy” with a price target of $36.
In today's economy Beats earphones are considered an "affordable luxury." How many earphones, headphones and speakers can Carlyle's co-founders purchase with their roughly $3 billion net worth?   Carlyle's troika rose 41 spots on the Forbes 400 Richest People in America, going from #250 in 2012 to #209 in 2013.

Friday, November 29, 2013

Carlyle Co-Founder Buys Bay Psalm Book for $14.2 Million


Carlyle Group co-founder David Rubenstein added another historic treasure to his vast holdings, one of eleven copies of the first book printed in America, Bay Psalm Book.  WaPo reported:

Published in Cambridge, Mass., in 1640, the book is one of only 11 surviving copies and one of the rarest volumes in the world. It is also now the most expensive.

The Bay Psalm Book bought by Rubenstein was one of two owned by Boston’s Old South Church and is one of the finest copies remaining of 1,700 that were originally printed.
You have to love how Rubenstein redefined philanthropy, normally associated with donations of money or assets to a nonprofit organization.  Rubenstein purchased the Bay Psalm Book, like he did other historic documents, Magna Carta, Declaration of Independence, and Emancipation Proclamation.  The private equity underwriter (PEU) did not give these away, but retains ownership, even as these documents are on loan.

Given the record prices of historical document auctions, Rubenstein's holdings keep rising.  It remains to be seen how Rubenstein's philanthropic generosity will weigh against the tremendous economic damage Carlyle and its PEU brethren have inflicted on so many.  Judging the impact of PEU greed over seven generations of workers, that's one karmic challenge.  Someday, Carlyle's founders will meet their maker and their billions will be useless.

If the gatekeeper "sponsor" gives a thumbs up and wink on liquidity recaps, carried interest, and management fees they might want to repent, turn around.  I imagine Hades has a special room for those pursuing "Just Us" in their time on earth. 

Monday, November 25, 2013

Carlyle Group's Flagship $13 Billion Fund

FT reported:

The Carlyle Group has underlined the return of the large buyout funds that were a trademark of the boom years after it secured $13bn for its flagship North American vehicle.

It took Carlyle, its fundraising partner David Rubenstein and 269 investors from 43 countries two years to close the fund, which had a $10bn initial target.

WSJ reported that Carlyle purchased a hedge fund of funds firm, Diversified Global Asset Management Corp.

Recall the boom years went BOOM, causing Carlyle to make over $650 million in capital calls to CalPERS and to roll up its Blue Wave Partners hedge fund. 

Saturday, November 23, 2013

Eagle Killing Duke Energy Adds PEU Kennard


Duke Energy filled the headlines with one story and a press release.  BBC reported the story of Duke Energy's wind farms killing 14 golden eagles and paying a $1 million fine.  Duke is a $50 billion company, so the fine is .002% of the firms current market cap.

Wind energy facilities in 10 US states have killed at least 67 golden and bald eagles since 2008, according to one federal study.  The bald eagle symbolizes America's majestic beauty, great strength, long life.  While wind energy killed eagles over the last five years, private equity underwriters (PEU's) continued their march to acquire and flip the world.

Duke's press release stated PEU William Kennard would join their board of directors on January 1, 2014.  Kennard's PEU lineage involved The Carlyle Group from 2001 to 2009.  He now PEU's with Grain Management.  Kennard joined Grain last month.  Grain Management was founded by David J. Grain.  Grain is a certified, minority-owned business enterprise.  His website bio states:

President Barack Obama appointed Mr. Grain to the National Infrastructure Advisory Council (NIAC) in July 2011. The NIAC provides the President through the Secretary of Homeland Security with advice on the security of the critical infrastructure sectors and their information systems.

I venture Kennard's presence should minimize future fines from the Blue White House.  Kennard joins James A. Hance, Jr., another Carlyle Group executive on Duke Energy's board.  Hance made $263,000 in board compensation from Duke Energy in 2012.  Kennard will make at least $200,000, $75,000 in cash and $125,000 in stock.  Also, Duke pays board members $2,000 per phone call meeting. 

It might be a stretch to connect the killing of America's symbolic strength with greedy, soul-sucking PEU's.  Then again, it might not. 

Update 12-7-13:  The AP reported "Under pressure from the wind-power industry, the Obama administration said Friday it will allow companies to kill or injure eagles without the fear of prosecution for up to three decades."

Sunday, November 17, 2013

Carlyle Co-Founder's Cheap Gas: Unique American Advantage


Crain's Business News reported:

Cheap domestic natural gas supplies will lead to a rebirth of American manufacturing, according to a presentation Thursday by William Conway Jr., co-CEO and managing director of the Washington, D.C.-based Carlyle Group.

"Shale has changed everything. We can use this cheap energy to make a more energy-efficient America," said Conway, who recommended investing in companies that provide supplies, such as pipelines, to the natural gas industry, as well as companies that use a lot of energy, since lower costs of operation will lead to improvements in the bottom line.

"The U.S. has a huge advantage over the rest of the world, including China, because of cheap energy costs. And those costs can be sustained. The reindustrialization of America will give us a competitive advantage for a long time," Conway said. 

Under Bill Conway's tutelage United Components shifted thousands of jobs to China under Carlyle Group ownership (2004-2010).

The man who helped deindustrialize America under the siren song of cheap Chinese labor plans to reindustrialize it with cheap gas?  The catch is Carlyle has major investments in cheap gas and any new industrial jobs will need ample public subsidy.

Despite his long-term optimism in U.S. investment opportunities — he likes health care services and medical devices
Carlyle cut its teeth on Uncle Sam funded companies and sees PPACA as one way to make their next killing.  Obama's health reform was led by a former PEU, who returned to private equity after public service.  PPACA's landscape is a PEU paradise

Recall when Carlyle co-founders words come back to haunt them in court, their defense is "puffery."  I consider Conway's talk a different form of cheap gas, a sales call. 

Friday, November 15, 2013

Geithner PEU's with Warburg

WSJ reported late on a Friday evening:

Former U.S. Treasury Secretary Timothy Geithner, one of the architects of the federal government's rescue of the financial system, is joining private-equity firm Warburg Pincus LLC.  At Warburg, he will serve as president and managing director.
Warburg Pincus test drove Geithner with a $200,000 speaking fee.  Treasury Secretary Geithner was kind to private equity underwriters (PEU's) while in office.  Now he is one.

The Friday night news release is intended to make sure this story is six feet deep come Monday.   

Update 11-16-17:  HuffPo did their part to keep it floating.  Their piece picked up my meme of Dodd-Frank going easy on PEU's.   NYPo noted Treasury Secretary PEUbiquity after public service, "Five of the past nine Treasury secretaries have joined private equity firms since leaving office."  No wonder PEU's keep their preferred tax status. 

Update 11-19-13:  Zerohedge pointed me to Geithner's words when he announced his leave of public service.  "Geithner says it’s “extremely unlikely” he will take a job in the world of finance, but the idea that he is somehow, secretly, working hand in hand with that community persists, and every once in a while someone pulls out records of his phone calls and meetings with CEOs as evidence. Geithner is not really sure what to say about that. “I’m the secretary of the Treasury.” He laughs. “How am I supposed to run a financial rescue if I don’t take phone calls from people?”

Thursday, November 14, 2013

Murthy Water Around Surgeon General Nominee


President Barak Obama will nominate Vivek Murthy, M.D. for Surgeon General, America's medical bully pulpit.  Besides being a talented hospitalist at Boston's Brigham & Women's, Murthy is chair of Doctors for America.

Doctors for America's first campaign occurred in February 2009, one month after President Obama was sworn into office.  Their website lists nearly 70 campaigns conducted by the group.   The following disclosure is on their donation page:

Doctors for America is a project of the Center for American Progress, which has been incorporated and is operated as a public charity. The Center for American Progress has received official IRS recognition of its tax exempt status under sections 501(c)(3) and 509(a)(1) of the Internal Revenue Code. Our federal ID number is 30-0126510. With the exception of conference registration fees and donor gifts ($40 per fleece, $5 per USB), donations will be tax deductible and may be disclosed to the IRS.
Dr. Murthy's Doctors for America is wedded to PPACA, in both design and implementation.


John Podesta, founder of the Center for American Progress, served as the head of President-elect Obama's transition team.  CAP's current President served as senior advisor for health reform at HHS and worked with the White House's Nancy-Ann DeParle on health reform.  DeParle since left the White House to found a health-oriented private equity firm, Consonance Capital Partners.  The Consonance team is made of former JP Morgan Partners members.  They describe their investment strategy as:

The firm targets growth equity, leveraged buyouts, and recapitalization transactions in the lower middle market. Target companies generally have between $20 million and $150 million in revenues. The sources of these opportunities are typically derived from private/family-owned businesses seeking liquidity, growth capital, or both – and large corporations seeking to divest non-core assets. The principals build value for the firm's investors by leveraging their relationships and resources to drive internal growth initiatives, operational improvements, and mergers & acquisitions.
With over 25 years of health care investing, across numerous economic cycles, the team has broad experience across multiple sub-sectors, including:
  • Providers (specialty providers, inpatient and outpatient facilities)
  • Payors (commercial, Medicare, Medicaid, and carve outs)
  • Distribution (pharmaceuticals, products, and specialty)
  • Devices (commercialized products)
  • Specialty pharmaceuticals (commercialized and later-stage development products)
  • Outsourced services (servicing managed care, pharma, and providers)
  • Healthcare information technology

Dr. Murthy may need capital from firms like Consonance Capital going forward.

He (Murthy) also helped found two technology companies related to medicine: Trial Networks, a cloud-based platform for pharmaceutical and biotechnology trials; and Epernicus LLC, a networking site for research scientists.

Time will show how Nancy-Ann DeParle and Dr. Murthy play their political/business hands to their advantage.   President Obama's first Surgeon General had a heart for caring for people regardless of their insurance status.  Dr. Murthy looks like a pure political appointment, a reward for a loyal follower. 

PPACA sets the stage for employers to shed that pesky health insurance benefit, in part or in whole.  Retirees are finding themselves jettisoned into an into individual exchanges by companies wishing to cap the amount of money they pay for retiree healthcare.  With their group health policies eliminated, elderly retirees have to navigate a complex sign up procedure, one that takes hours by phone for each person covered under the plan.

Similarly, PPACA's complexity ensures many Americans will not be able to navigate the signup process.  I couldn't imagine individual high-deductible health plans as the solution to America's legions of uninsureds, but that's exactly what PPACA provides. 

If approved by the U.S. Senate, America will have two years of Dr. Vivek Murthy as Surgeon General.  Watch what happens to employer sponsored health insurance over that period and pay attention to private equity underwriters with ex-politicians making hay over the unique features of PPACA.  Those who set up the field know how to profit from it.

In the immortal words of Vice President Joe Biden, "This is a big fucking deal!" --Biden caught on an open mic congratulating President Barack Obama during the health care signing ceremony, Washington, D.C., March 23, 2010

Watch the deals and decide who's getting screwed.  

Monday, November 4, 2013

Carlyle Goes to China, Again


FT reported on an event that occurred two weeks ago:

Chinese President Xi Jinping was almost effusive as he welcomed an all-star group of global capitalists.

“Many of you are renowned entrepreneurs and business leaders in the world today and you all have profound insight into the global economy,” Mr Xi told the likes of Mike Duke, Walmart CEO, Indra Nooyi, the head of PepsiCo, Muhtar Kent, Coca-Cola chairman, David Rubenstein, Carlyle Group founder, and Maurice “Hank” Greenberg, the former AIG boss. “Your suggestions are a very important source of inspiration for the Chinese government.”
A number of Chinese companies have an abysmal quality record and carry two sets of quality records, one for western buyers and the other for Chinese.  The FT article highlighted President Xi's investigation into western firms for bribes and bad behavior.  They surmise the move to be political, but it could also shore up the market position of Chinese firms.  

By pursuing foreign companies the authorities are sending a message to entire industries that they intend to clean things up in order to provide quality products at reasonable prices in industries about which the public is concerned.

By forcing multinationals to lower prices and improve their offerings they are hoping to raise the bar for domestic competitors as well as provide concrete examples to the masses of how their lives are improving under the new administration.
Two weeks ago Carlyle's David Rubenstein was silent on the prospect of U.S. government default.   Shortly thereafter, The Economist noted the new world of PEU sponsored capitalism, the one that turns private equity underwriters into nonprofits. I refer to this as peu-palism.

Rubenstein once said this about China:

However, the Chinese have been reasonably open to people like us. But we had to have a Chinese face on us. Every one of our professionals is a Chinese native. I feel we are welcome there. And many of the government officials there are relatively easy to meet -- in fact easier to meet than probably in any other country in the world.

An ex-Bloomberg reporter provided PEUReport with this comment on Chinese leaders and private equity:

I can't tell if the PE guys are being insincere when they talk about China or they are actually stupid. There is no way that the Chinese govt would let American firms come in and strip cashout of Chinese companies the way they've been allowed to in the US! I imagine the Chinese welcome the PE guys because they see it as another way (through PE orchestrated mergers) to get hold of more American technology and companies and jobs.
Carlyle loves both the U.S. and China.  PEU boys pit world governments against one another in their race to the bottom on taxes, worker pay/benefits and regulation.  There's little sign of this trend abating.

Friday, November 1, 2013

PEU Whistler


Carlyle Group Managing Director and the Director of Global Communications Christopher Ullman whistled the Titanic theme song to the President of the Bank of China making all well in the PEU world.  Before becoming a private equity underwriter (PEU) Ullman had a smattering of political experiences:

He interned in the office of then-Rep. Chuck Schumer, D-N.Y., working alongside a young Anthony Weiner, who would go on to win seven terms in Congress.  About a year after his graduation in 1986, Ullman returned to Washington and began climbing the ladder in communications: He worked for a small public-relations firm; for a citizens’ advocacy group; for former Rep. John Kasich, R-Ohio; for former Securities and Exchange Commission Chairman Arthur Levitt; and for the White House under President George W. Bush, as spokesman for Office of Management and Budget Director Mitch Daniels.
His twelve years with Carlyle saw assets under management grow from $15 billion to over $180 billion.  Ullman can thank Schumer, Levitt and George W. Bush for their assistance in fertilizing the PEU soil. The Carlyle Group is a virtual nonprofit for federal taxes, much like your local nonprofit community hospital.  That's enough to make any PEU whistle.

Update 12-7-13:  Whistler is set to get an award from United Steelworkers Local 10-1.  

Monday, October 28, 2013

Carlyle's Rubenstein Breaks Silence on Shutdown


Carlyle Group co-founder David Rubenstein wouldn't weigh in publicly when Congress played its latest game of economic chicken.  Yet, he somehow found his voice in an AP interview:

Q: What was your reaction to the 16-day government shutdown and the near breach of the nation's debt ceiling?
A: I am relieved that the shutdown and debt ceiling crisis are behind us. Hopefully something like this will not occur again. But I am disappointed, saddened and embarrassed for our country that our democracy did not work as the founding fathers had hoped.
The Founding Fathers didn't hope.  They designed a government that has been co-opted by power, greed and influence.  America's democracy serves Rubenstein's PEU class.  (PEU is my abbreviation for private equity underwriter)

Any doubts can be dispelled by looking at the Red and Blue teams' major funders and employment of ex-politicians.  Drop a lure in the ex-public servant water and you're bound to snag a private equity top-sucker or bottom-feeder. 
 
Q: What should Congress tackle first — now that the debt ceiling and shutdown is resolved?
A: They should try to reassure the country — and the world — that the last few weeks were an aberration and not likely to be repeated early next year. Once that re-assurance occurs, focus on how to spur economic growth — while reducing economic disparity — (which) would be a great plus for everyone.
Spur economic growth means tax cuts for corporations, which PEU's own.  Private equity firms are treated as nonprofits by the same Congress that calls nonprofit community hospitals "tax exempt facilities."  Using similar logic, PEU's should be called "tax exempt corporate flippers" or "slave makers." 

PEU flippers contributed greatly to America's economic disparity growth over the last twelve years.  They cut or eliminated pensions, sent jobs overseas, eliminated traditional middle class jobs and loaded affiliates with debt to pay themselves millions in dividends.

Elected officials need to land on someone's teat to feed their greed and power addictions.  Rubenstein knows this and chose Washington, D.C. for Carlyle's corporate headquarters.  Carlyle employed legions of Red and Blue team members.  They worked tirelessly to grow Rubenstein's billions, which he nobly will give away via "patriotic philanthropy," while detesting every tax he spies.     

D.C. Police to Utilize Redflex Cameras

 

Redflex's annual report revealed a project in Washington, D.C.

Redflex was awarded a contract to supply over-height and over-weight enforcement camera systems to the District of Columbia Metropolitan Police Department in Washington DC, USA. This contract arose through the joint efforts of the USA and Australian business units. The camera systems are currently being installed and revenue will be recognized in the Australia/International business segment.
Oddly, D.C. based Carlyle Group made a short run at Redflex and both companies have a history of bribery, Carlyle in Connecticut and Redflex in Chicago.  Macquarie ceased to be a substantial holder of Redflex on October 23rd. 

Redflex's products include automatic license plate number reading, vehicle counting/classification, and traffic enforcement (red light, speeding, school bus stop and train intersection violations). 

What did Carlyle see that made Redflex attractive?  Did their intelligence source the D.C. Police buy or was something greater luring the private equity underwriter (PEU)?  How might Carlyle profit from "making the world safer?"

Sunday, October 27, 2013

Carlyle Does Complicated for Breakfast


Missoula City Mayor John Engen is taking a hard run at buying Mountain Water from its private equity owner The Carlyle Group.  Carlyle purchased Park Water, the owner of Mountain Water, on December 20, 2011.  Less than two years later Mayor Engen courts Mountain Water with serious ardor and a potential condemnation order.

The Missoulian stated Mountain Water's extensive holdings complicate the deal.  The Carlyle Group birthed "the complicated" in business.  They'll use that to obfuscate, deflect and deny any fair offer for Mountain Water. 

Mountain Water's John Kappes detailed an extensive list of the company's holdings and assets.  After Carlyle's Chinese forestry and fertilizer assets evaporated into smog filled air, rest assured The Carlyle Group did an extensive valuation of Park Water's numerous assets, including those of Mountain Water.   

Ideally, Engen and Carlyle would sit down with that valuation and mark things up or down.  That's far too simple and wouldn't get the greed/leverage boys the millions they covet. 

As for the employees how much of a stake do they hold in Mountain Water?  I expect it to be none or infinitesimal.

Carlyle will seek a premium to split off Mountain from the rest of Park Water.  I expect they'll press for a multiple of their original equity investment in Park.  How much might Carlyle's DBD's and Robert Dove make on holding Mountain Water two years? 

Saturday, October 26, 2013

PEU-palism Finally Noticed


The Economist reported on the New American Capitalism distinguished by the virus like spread of Master Limited Partnerships:

The new popularity of the MLP is part of a larger shift in the way businesses structure themselves that is changing how American capitalism works. The essence is a move towards types of firm which retain very little of their earnings: “pass-through” companies which every year pay out more or less as much as they take in. Many of the standard rules that corporations which retain their earnings have to follow when dealing with shareholders do not apply to such firms. And, crucially, so long as they distribute their earnings such set-ups can largely avoid corporate tax.

Private equity underwriters (PEU's) behave like MLP's, even after going public:

In 2007 private-equity firms seized on another clause in the tax law on interest and dividends that enabled the MLP structure to be used for publicly listed components of Apollo, Blackstone, Carlyle, KKR and other private-equity companies.
Which explains why The Carlyle Group is a virtual nonprofit in the taxes it pays.

Meanwhile, an entire layer of public companies using these new structures stands outside the (shareholder rights) debate. The prospectuses that Apollo, Blackstone, Carlyle and KKR published before listing are clear about the rights of unit holders to influence corporate decisions: “limited” is an understatement.
Consider how PEUbiquitization occurred in our country without one peep from 60 Minutes.

Among all firms, in 2008 pass-through structures accounted for 23% of companies and 63% of profits, according to the latest data available from the Internal Revenue Service (IRS)
I noticed PEU tax avoidance early on and asked my CPA Congressman about it in August 2007.  He ignored my question.  Then again he received substantial donations from PEU affiliates.

The new American capitalism is PEU-palism.

Update 10-28-13:  Senator Bernie Sanders (I-VT) noticed what 60 Minutes hasn't been able to find.  Carlyle co-founder David Rubenstein talked about many things in a recent interview, but not this subject.

Update 7-19-14:  Others noticed how 60 Minutes now offers puff pieces.

Wednesday, October 23, 2013

Quality Indicators for PPACA's Health Exchange

The AP reported:

A review of internal architectural diagrams obtained by the AP revealed the system's complexity. Insurance applicants have a host of personal information verified, including income and immigration status. The system connects to other federal computer networks, including ones at the Social Security Administration, IRS, Veterans Administration, Office of Personnel Management and the Peace Corps.

The government spent at least $394 million in contracts to build the federal health care exchange and the data hub. Those contracts included major awards to Virginia-based CGI Federal Inc., Maryland-based Quality Software Services Inc. and Booz Allen Hamilton Inc.

Complexity is a widespread management phenomenon and is integral to PPACA's health deform, which will spread Bush's high deductible health plans like a Santa Anna wildfire.  Note the five interfaces listed above, plus the need to connect to insurance company systems.  Also, The Carlyle Group's Booz Allen Hamilton did work on the health exchange website, a project that came in three times its expected cost.

Poor design and a lack of pre-release testing contributed to the debacle:

Congressional investigators have concluded that the government's Centers for Medicare and Medicaid Services, not private software developers, tested the exchange's computer systems during the final weeks. That task, known as integration testing, is usually handled by software companies because it ferrets out problems before the public sees the final product.
The HHS team rolled out an untested, complex system and the public experiences it daily.  This story is too common in today's world. 

For HHS history buffs:  President George W. Bush kept Tom Scully from testifying on Medicare Part D to an upset Congress.  I'll venture President Obama does likewise with HHS Secretary Sebelius and HHS Chief Marilyn Tavenner.  Scully went on the become a PEU with Welsh, Carson, Anderson & Stowe.  We'll see which PEU's call Tavenner and Sebelius after their public dis-service. 

Tuesday, October 22, 2013

PEU Courting of Baby Boomers



Private equity underwriters (PEU's) may soon be ready to tap money in individual Baby Boomer retirement accounts.

History shows PEU's selling a twofold cause for their stellar returns.  One, they were not publicly held, thus they could be more patient in growing their equity stakes in affiliates.  In the last few years a spate of PEU's went public, discrediting this critical success factor. 

Two, they invested big money from a few long term "patient" investors, pension plans, extremely wealthy investors and sovereign wealth funds.  Now PEU's have their eye on the mass of less wealthy investors saving for retirement.  Forbes reported:

"The looming pension fund squeeze explains an increasingly urgent search by major private equity groups to find a way to tap retail money: in particular 401 (k) retirement accounts. These individually managed accounts are the fastest growing form of defined contribution plans – where the sum invested is fixed.

But selling private equity funds to individuals is going to be tough. Individuals are not comfortable losing discretionary control over their money for a decade or longer. Creating feeder funds for the vast majority of individual investors, who don’t meet accredited investor status, will also add difficult-to-digest expenses in an asset class where fund managers already, on average, impose a 2 percent annual management fee, and typically take 20 percent of profits above an 8 percent annual return hurdle rate."
The Forbes columnist suggested PEU's stick to their knitting and chase new wealth around the globe, whether that be wealthy individuals or sovereign wealth funds.  

If anyone has the resources and time to successfully invest in private equity – arguably the most complex asset class that exists – it’s professional investors.
Complexity and greed, two PEU memes, seem to be spreading wildly throughout the globe.  Can their volcano like growth be reigned in or will they grow so fast they collapse back onto themselves?

Those who believe in the PEU model can already buy stock in Blackstone, The Carlyle Group, KKR and Apollo Global Management.   If that isn't the PEU bridge to riches why would one believe in their next retail offering?

Wednesday, October 16, 2013

PEU Mavens Silent on Default

Fortune noticed the silence from private equity underwriter (PEU) legends on the prospect of a U.S. debt default. 

As the debt ceiling and government shutdown talks stalled yesterday, I reached out to several top private equity executives for their thoughts on what would (or wouldn't) happen if there was no deal by Thursday. Did they believe it would be catastrophic? Did they believe continued implementation of Obamacare would be worse? What were they telling their portfolio company CEOs?

No comment.

That's what I heard from representatives for people like Leon Black of Apollo Global Management (APO), Henry Kravis of Kohlberg Kravis Roberts & Co. (KKR), David Rubenstein of The Carlyle Group (CG) and Stephen Schwarzman of the Blackstone Group (BX).
PEU's like market dislocation.  Congress and the White House could be serving their PEU backers by delivering chaos.  Any comments by PEU legends would be explored deeply in hindsight and might reveal the bets each made in the debt default run up.

Update 10-19-13:  The Red and Blue Teams came together on a short term package to keep government operating until after the first of the year.  Oddly, the business community wants Congress to commit to no more government shutdowns or debt defaults.  The meme is businesses want predictability so customers will let lose of hoarded cash.  PEU mavens want lower taxes all around and wish to hold onto PEU preferred carried interest taxation.  Congress usually delivers for their funders.

Update 10-28-13:  Carlyle co-founder David Rubenstein weighed in after the fact.

Tuesday, October 15, 2013

Carlyle Exits Apartments, Buys Trailer Parks


WSJ reported The Carlyle Group will acquire two trailer parks from Shamrock Holdings LLC.  The parks are in Florida.

Analysts said the deal is evidence that big investors are betting that the demand for low-cost manufactured housing, the latest generation of trailers or mobile homes, will rise as other housing alternatives become too expensive for a number of Americans, especially senior citizens.

This comes after Carlyle said it would reduce its apartment real estate investments.  Bloomberg reported:

Carlyle Group LP (CG), the private-equity firm with more than a third of its $2.3 billion U.S. real estate fund in apartments, is reducing holdings of multifamily housing as rent growth slows from a post-recession surge.

The company is considering apartment sales as rising construction reduces multifamily shortages and price gains for rental properties make them less attractive for private-equity firms that seek returns of 20 percent or more, said Robert Stuckey, the Washington-based firm’s head of U.S. real estate investing. Carlyle has invested or committed about $800 million of equity in 61 multifamily properties since the start of 2011, he said.
Trailer parks, rented by senior citizens, is the place for returns of 20% or more.  Who won't Carlyle take advantage of in their greed quest?  Private equity underwriters did their part to grow America's trailer parks. 

Sunday, October 13, 2013

PEUbiquity

"They’re so ubiquitous, you can’t get away from them even if you tried... To not be able to comment or critique or parody that (ubiquity), I just think it’s morally unacceptable.”  Filmmaker Randy Moore on Disney

'Tis also the case with private equity underwriters (PEU;s), now ubiquitous in the power/greed arenas of business and politics. 

Saturday, October 12, 2013

Carlyle Ready for Commscope IPO


Reuters reported The Carlyle Group plans to take affiliate Commscope public:

Telecommunications equipment company CommScope Holding Co Inc set pricing terms for its initial public offering, which could value the company at up to $3.9 billion, the price at which it was taken private in 2011 by Carlyle Group LP.
How much did Carlyle suck from Commscope in dividends and management fees the last three years?  The S-1/A stated:

Since January 1, 2011, we have declared and paid special cash dividends and distributions in an aggregate amount of $750.7 million to our equity holders.

...special dividends of $1.29 per share in 2012 and $3.48 per share in 2013.

Carlyle added debt to Commscope in a dividend freeing move:

In May 2013, we issued $550 million of the 2020 Notes, the net proceeds of which were used to pay cash dividends to our common shareholders and distributions to certain option holders.

And who were the "certain option holders" enriched by Commscope's debt for dividend move?

In a mere seven months Carlyle stripped $750 million from Commscope:

On November 30, 2012, we declared and paid a special dividend of $200.0 million, or $1.293 per share, on our common stock, which we refer to herein as the “2012 Dividend.” In addition, on May 20, 2013 and June 28, 2013 we declared special dividends of $342.8 million, or $2.213 per share (paid on May 28, 2013), and $195.9 million, or $1.265 per share (paid on June 28, 2013), respectively, on our common stock, which we refer to herein together as the “2013 Dividends.” The 2012 Dividend and the 2013 Dividends are referred to herein together as the “Special Dividends.  Of these amounts, approximately $727.0 million was paid to Carlyle according to its ownership of common stock.”
As for PEU deal costs and management fees paid by Commscope:

Reflects charges of $3.0 million, $2.5 million, $3.3 million, $1.8 million and $2.7 million and for the years ended December 31, 2010, 2011 and 2012 and the six months ended June 30, 2012 and 2013, respectively, related to due diligence and other transaction related costs on potential and consummated acquisitions. Includes $2.9 million, $3.0 million, $1.5 million and $1.5 million for the years ended December 31, 2011 and 2012 and the six months ended June 30, 2012 and 2013, respectively, related to the Carlyle management fee.

Tack on another $50 million in entry and exit fees to Carlyle:

...we paid an annual management fee to Carlyle of $3 million plus expenses. Further, under this agreement Carlyle was entitled to additional reasonable fees and compensation agreed upon by the parties for advisory and other services provided by Carlyle to us from time to time, including additional advisory and other services associated with acquisitions and divestitures or sales of equity or debt instruments. Carlyle also received a one-time transaction fee of $30 million upon consummation of the Acquisition for transactional advisory and other services. Except for this one-time transaction fee, Carlyle did not provide any additional services beyond consulting and oversight services for the years ended December 31, 2012 and 2011. We will pay Carlyle a fee of approximately $20 million to terminate the management agreement in connection with the consummation of this offering.
Carlyle gets theirs, even when it appears they don't.

Update 10-25-13:  Commscope's IPO price came in below the expected range.  

Friday, October 11, 2013

Carlyle Group: Hot on Street


The Street.com could barely contain their enthusiasm for The Carlyle Group's use of proxy measures to predict key economic outcomes.

Who wouldn't want to invest with such smart financial managers?

Smart?  Correlation is not causation.  Proxy measures can fail miserably when key causal factors behave erratically or break altogether with historical patterns.

It is positive that Carlyle Group, which indirectly employs hundreds of thousands of workers and invests billions on behalf of public pension funds, feels it can play a role in mitigating the deleterious impact of the federal government's partial shutdown. 

Carlyle's endless marketing machine is led by co-founder David Rubenstein.  PEU's like economic dislocation as it enables them to bring on new affiliates at discounted prices.  But there's a deeper issue for Carlyle in the shutdown. 

Numerous Carlyle affiliates do the government's work in many arenas.   Carlyle needs access to trillions in federal juice to keep flipping companies for major multiples.

The surface image is Carlyle is cute and smart.  The subsurface base of the iceberg has Carlyle's profit machine reliant on market dislocations, ongoing federal funding and continuation of private equity's preferred tax status.

Boy, those Carlyle yams are hot.  Who wouldn't want a piece of that?  WaPo, which will become PEUPo, agreed with The Street about Carlyle's greatness.  Fawning over The Carlyle Group is a near universal phenomenon.  Who wouldn't love such smart financial managers? Carlyle Capital Corporation investors.

Thursday, October 10, 2013

Obama Bundler Opens PEU

 Dusable Capital Management

Bloomberg reported:
Barack Obama’s top individual fundraiser, a former technology executive who collected millions of dollars for the president, is seeking as much as $1 billion for a private-equity fund that will invest in infrastructure and renewable energy, according to a person with knowledge of the matter. 

Frank White Jr. has teamed up with two other Obama backers, Shomik Dutta and two-time Grammy Award-winning rapper Prakazrel Michel, to establish a Washington-based money-management firm called DuSable Capital Management LLC, according to a regulatory filing. DuSable plans to raise $500 million to $1 billion, said the person, who requested anonymity because the details are private.

Watch to see how the Obama team dishes out infrastructure and renewable energy franchises to friends.  It's the game in Washington, evidenced by DuSable's Senior Advisor fresh from a Chief of Staff job with the Department of Energy.

President George Bush had Robert L. Johnson, III.  President Barack Obama has Frank White, Jr.  I've said for years Red and Blue love PEU.  It's disturbing that they're proliferating in The Carlyle Group's backyard.  D.C. is a strategic place to tap Uncle Sam's largess.

Carlyle Group in Middle East-North Africa


WSJ ran an interview with The Carlyle Group's co-head for the Middle East-North Africa:

We feel very comfortable with the GCC (Gulf Cooperation Council states), with Turkey, Morocco and Jordan.

The GCC is comprised of Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and United Arab Emirates.
I take it Arab money is no longer mad at Carlyle. 

Monday, September 30, 2013

Carlyle to Bid on J&J Diagnostic Unit


Reuters reported:

Some of the world's largest private equity firms have made preliminary offers for Johnson & Johnson's Ortho Clinical Diagnostics unit, which makes blood screening equipment and laboratory blood tests and could fetch around $5 billion, several people familiar with the matter said on Monday.

Blackstone Group LP, KKR & Co LP, Bain Capital LLC, Carlyle Group LP and BC Partners Ltd are among the buyout firms that submitted first-round bids last week and are waiting to hear back this week on who made the shortlist, the sources said.

Recall how KKR's purchase of HCA added tens of billions in new health care costs.  Private equity underwriters are not the balm that heals unaffordable healthcare.  Their aim is to ride discontinuity, enabling them to buy health care assets on the cheap, bleed cash from affiliates via management fees and special distributions, then flip the company for a multiple of the original price.  The flip can be anywhere from 2 to 10 times their original equity.

As for quality I'll pass on any Blackstone, Bain or Carlyle Group blood test or transfusion.  Think Chinese infant formula or toxic kids' jewelry.