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. 

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.

Saturday, November 2, 2019

Carlyle Co-Founder Rubenstein History Maker

The Guardian ran a piece on Carlyle Group co-founder David Rubenstein and his historic life as a modern day robber baron.  The story began with Rubenstein's revealing interview at The Economic Club of Washington, D.C. 

Rubenstein interviewed Secretary of State Mike Pompeo in late July.  Pompeo noted President Donald Trump's use of financial leverage to achieve diplomatic goals.  Somehow burnishing Trump's image and re-election chances became a U.S. diplomatic goal.

MR. RUBENSTEIN: OK. So, when you have decisions with the president, meetings with him, is he best with oral communications, written communications? What’s the process by which decisions are made? Is it through the NSC10 or informal?

SEC. POMPEO: Yeah. So, there’s a very robust NSC process. When I brief him myself, I always prefer to have a document. It’s the way I prefer to receive information. So, I almost always bring something – a one-page summary at the very least, that says here’s the outline of what it is that I think are the priorities now. We should think about how we should frame this particular problem. And then the president does like to engage in oral exchanges. And I’ve found them to be elucidating for myself. I often learn things as well. He’s very focused on where the money is, and how we use economic leverage to achieve our diplomatic ends.
The piece ignored Rubenstein's profiting from the American military-corporate-economic juggernaut.  That is part of The Carlyle Group's history.

David Rubenstein has a book to sell, in addition to his ever present cheer leading for private equity underwriters (PEU), also known as the greed and leverage boys.  His book highlights great men among our Founding Fathers.

Thomas Jefferson was the first businessman to use his slaves a collateral for debt.  The Smithsonian wrote:

It had long been accepted that slaves could be seized for debt, but Jefferson turned this around when he used slaves as collateral for a very large loan taken out in 1796 from a Dutch banking house in order to rebuild Monticello.  He pioneered the monetizing of slaves, just as he pioneered the industrialization and diversification of slavery.
The Carlyle Group used very large loans for Carlyle Capital Corporation.  CCC's 2007 year end results stated:

As of February 27, 2008, the Companys $21.7 billion investment portfolio is comprised exclusively of AAA-rated floating rate capped residential mortgage backed securities issued by Fannie Mae and Freddie Mac, which are considered to have the implied guarantee of the U.S. government and are expected to pay at par at maturity. 
One week later Carlyle Capital Corporation was in deep trouble:

Carlyle Capital Corporation touched off a wave of selling on Thursday, especially in mortgage real estate investment trusts, after the company failed to meet some of its margin calls and received a default notice.

Carlyle Capital is a European listed, publicly traded company that is an affiliate of the much larger Carlyle Group, a private equity firm.

Carlyle Capital apparently received margin calls from seven different parties on Wednesday, totaling $37 million dollars. The company said that these parties demanded additional collateral and that Carlyle Capital was unable to satisfy four of their demands.

Carlyle Capital fell 58% on Thursday, touching off a wave of selling across the world that saw some REITS fall as much of 20%. The company is listed in Amsterdam.

According to a report in Bloomberg, most of Carlyle's counterparties are Wall Street firms
Two weeks later Carlyle revealed CCC would declare bankruptcy.  BBC reported:

On Wednesday, CCC said that it had not been able to refinance its business. It said it had so far defaulted on about $16.6bn (£8.1bn) of its debt and the only assets it had left were US government AAA-rated residential mortgage-backed securities. 

CCC said it also expected to default on this after the portfolio's value was marked down again on Wednesday.
On March 16, 2008 Reuter's reported:

Carlyle Capital, an affiliate of U.S.-based buyout firm Carlyle Group CYL.UL, said it has received default notices from its last two remaining lenders and believes that its lenders have now taken possession of substantially all of its U.S. government agency AAA-rated residential mortgage-backed securities (RMBS).
Carlyle Capital had $600 million in equity and $21 billion in debt.  A lawsuit revealed how Carlyle set up CCC's financing:

The RMBS assets were purchased using one-month repurchase (repo) borrowing. The assets were subject to daily margin calls if prices changed.
Financing long term assets with short term money, what could go wrong?  That question was not asked of Mr. Rubenstein.  It has bearing today as the Federal Reserve Bank entered the repo lending market in a big way

Carlyle danced away from CCC's carcass as it neared an IPO for China Pacific Insurance.

Previously, Carlyle Group announced that it was just an investment consultant for Carlyle Capital, under the agreement between them, and it did not buy any securities of Carlyle Capital, although some persons in Carlyle Group totally hold an about 15% stake in Carlyle Capital.
One might expect better from a storied private equity firm.  BBC noted at the time:

"Almost within the blink of an eye, a business that had borrowed $21bn from the world's biggest banks to invest in high-quality mortgage-backed securities will be gone, liquidated, kaput," said BBC business editor Robert Peston. 

"Such is the whirlwind blowing through global financial markets."
Six months after CCC's implosion the Financial Crisis hit.  Did that whirlwind grow into a Category 5 hurricane in part due to The Carlyle Group's actions?  Not asked, thus not answered.

Another item not recorded for history is why the Carlyle Group withdrew completely from the Corpus Christi oil shipping terminal at Harbor Island.  Carlyle lauded their role as "exclusive developer" one short year ago.

Trump's ongoing greatness and Rubenstein's ever present greed are unique in history. Neither make for an honest exploration of events.

Update 11-4-19:  PEU Blackstone's chief strategist warned the "mother of all bubbles" could blow up.  One sign of instability cited is the failure of the repo market.  JessesCafeAmericain shared a quote worthy of PEU founders and their exalted status:

"His money came from human misery and death and despair, as always it does.  Yet, there is none to reproach him, neither God nor man, and all fawn upon him and he will be a senator and crowds will laud him and he will have the ear of the President and all will honor his riches and consider him worthier than other men because of it.
Mankind adores its betrayers, and murders its saviors."

Taylor Caldwell, Captains and Kings
Update 11-5-19:  CNBC interviewed Carlyle co-founder David Rubenstein.  The PEU greed and leverage boys hate paying taxes. 

Thursday, October 31, 2019

Retirees Aren't Clamoring for PEU Investments

St. Louis Business Journal reported:

Edward Jones CEO and Managing Partner Penny Pennington said her firm's clients are not clamoring for access to investments in private companies but said that could change over time.

Private equity investments, which are less liquid and more risky, historically have been the purview of very wealthy investors and outside the reach of most retail investors. "We're not seeing that demand yet in our marketplace," Pennington said. "Though what we know is what's attractive to ultra-high-net-worth individuals becomes more attractive, and manufacturers look at getting it more into retail investments. So I am hearing a little bit about that, but I think it will take a bit."

Pennington's comments came during an interview with Bloomberg about the economy and the current investing climate. 

As for the risk of private equity investments, Pennington said: "Private equity is illiquid. When you are talking about the need for liquidity, when you are talking about folks getting into a comfortable retirement and needing to produce income, private equity is not set up right now to do that.
Thus private equity investments will need to be dressed in a way that cons the retiree into thinking they have a liquid, predictable income producing asset.   Rest assured it will come with layers of fees.

Harken back to Carlyle Capital Corporation.  Forbes reported Carlyle's sales pitch to Michael Huffington, who sued The Carlyle Group for losing his $20 million investment:

the fund was "conservative,' 'low risk' and that the 'downside [was] very limited"
Huffington was concerned about the safety of private equity underwriters (PEU).

Huffington expressed reservations about the risky nature of private equity, but Rubenstein responded that he would "look for something appropriate for you."
Carlyle Capital Corporation was listed in Amstedam, giving it the appearance of a stable investment.  The mortgage backed security firm was levered 32 times.  Four days ago Carlyle Group co-founder David Rubenstein said on Sunday Morning:

"What we've learned over thousands of years is that history repeats itself," Carlyle Group co-founder David Rubenstein said. "And if you can find the solutions that people came up with or the mistakes they made in trying to deal with these problems, you're probably going to avoid some of the mistakes that people made in the past."
Beware whatever the PEU boys package for retirees needing safe, predictable income.   Someone may be telling you a story. 

Someone has to be the final mark for the greed and leverage boys holding trillions in dry powder.  Beware the spark that makes it go "Boom."

Monday, October 28, 2019

Rise Fund's Bill McGlashan PEU Fall

TPG Capital, a Forth Worth, Texas based private equity underwriter (PEU), targeted social and environmental impact in addition to massive profits in their Rise Fund.  TPG calls that "complete returns."

The Rise Fund, which launched in December 2016, was co-founded by Bill McGlashan, Founder and Managing Partner of TPG Growth and Co-Founder and CEO of The Rise Fund; U2 lead singer Bono, a well-known activist and a special partner with TPG Growth; and Jeff Skoll, a global entrepreneur, film producer, and impact investor. 

Education is a crucial part of The Rise Fund’s mission. Expanding access to quality education creates a foundation for long-term growth, progress, and prosperity,” said Bill McGlashan. “There is a vast need for improved and expanded educational resources around the world. At the same time, there are exciting opportunities to build innovative and impactful educational businesses and technologies.  
Rise refers to the fund as a "leading global education investor."  Institutional Investor reported:

Bill McGlashan, founder and managing partner at TPG Growth and co-founder of The Rise Fund, a social and environmental impact fund, was accused of allegedly paying bribes to facilitate his children's admission to colleges, federal prosecutors said.

Institutional Investor later added:

TPG was a few months into fundraising for Rise Fund II when co-founder McGlashan was accused of bribing a University of Southern California official to facilitate his son’s admission to the school as a recruited athlete.
CNBC reported Rise co-founder McGlashin was either fired for cause or quit:

“After reviewing the allegations of personal misconduct in the criminal complaint, we believe the behavior described to be inexcusable and antithetical to the values of our entire organization."

McGlashan is disputing the terms of his departure, saying he resigned.
TPG co-founder David Bonderman made a sexist remark at an Uber board meeting which caused his resignation from the Uber board.  I am not aware of any funds pulled from TPG as a result of Bonderman's comment to fellow board member Arianna Huffington.

The impact of McGlashin's actions has not hurt Rise Fund fundraising.  Rise Fund II is at $1.7 billion with a target of $2.5 billion.  Contrast this with Ken Fisher of Fisher Investments.  Pensions and Investments reported:

The toll exacted by asset owners for Kenneth L. Fisher's sexist comments made at a conference earlier this month is $3 billion and counting.
The same groups put money into Rise and Fisher investments.   How does one firm get a free pass while the other gets pummeled?  The big money boys will have to answer. 

It's like the Dubai Ports World brouhaha where the prospect of American ports falling into Middle Eastern hands caused a giant uproar.  Shortly after that The Carlyle Group sold fifty U.S. airport operations to Dubai Aerospace and there was not one peep in the media.  

It's a rising PEU world, even as one of their stars fell. 

Saturday, October 26, 2019

Business School Tale Has PEU Odor

A Duke University law professor questioned the purpose of private equity. 

"private equity emerged as a knight in shining armor, reuniting ownership and control in corporate America and turning bloated, inefficient companies into slimmed-down cash machines."
Her thesis is private equity underwriter's (PEU) original purpose was to reform corporate governance.  PEU ownership turned the board into an insider group laser focused on returning large amounts of cash to sponsor via deal fees, management fees, special dividends/distributions and finally flipping the company for a multiple of its original purchase price.  Along the way sponsor PEU placed as little up front cash in the project (equity), saddling the company with massive debt relative to its prior inefficient public ownership.

The professor cites how the corporate world has changed and stated private equity's current distinctive competency might be providing "cheap debt" to companies.  I am not sure that is true as riskier junk bonds pay more in interest than investment grade bonds.  Most private equity transactions are not investment grade so they pay higher interest rates.

Cheap debt is a function of The Federal Reserve Bank and top leaders Jay Powell and Randall Quarles are former PEU boys.  Both worked for Washington, D.C. based The Carlyle Group.

One frequent spinner of the "knight in shining armor" story is Carlyle Group co-founder David Rubenstein.  He sat on the Duke University board until from 2005-2017, serving the last four years as board chair and made significant contributions to a number of Duke programs.  Rubenstein has his own Duke University webpage.

Do knights in shining armor lead on a family owned company, only to foreclose via highly discounted debt?  The deal jettisoned the employee pension.  That's the Carlyle Brintons story.

Do rescuing knights get banned from the World Bank for 33 months for procurement violations?  That's Carlyle and ARINC.

Do knights go bankrupt from bad financial bets not revealed in SEC filings?  That's Carlyle and Semgroup.

There are many more black knight PEU stories for Carlyle.  Older examples include LifeCare, Manorcare, Vought Aircraft, and Synagro.  The newest is Carlyle's abandonment of the Corpus Christi Harbor Island oil terminal.

I don't believe the greed and leverage boys were ever knights in shining armor, not in the '80's and not today.  They are obsessed with image and utilize every lever to shape the world to their advantage.

Rather than White Knight private equity is more like a Great White Shark.  The PEU appetite for money is insatiable.  Watch out for financial sharks when they gather in groups at Davos in Desert, like their great white counterparts, currently off North Carolina's Outer Banks.

Thursday, October 24, 2019

Washington's Blog Ending

Washington's Blog will cease operation at the end of October.  I will miss a cohort in reigning in the out-sized influence of private equity in our country.  Washington's Blog stated:

We are not calling for lawlessness. We are calling for an end to lawlessness and lack of accountability and a return to the rule of law. 

Rather than trying to subvert the constitution, we are calling for its enforcement.

We are patriotic Americans born and raised in this country. We love the U.S. We don't seek to destroy or attack America ... we seek to restore her to strength, prosperity, liberty and respect.
And that strength comes from an aware electorate.  I recall September 2008 trying to understand how an economy could be taken to its knees by the failure of a few financial firms.  Washington's Blog delved into the crisis, as did I.

PEUReport began in July 2007 after noticing preferential treatment given to The Carlyle Group in its sale of Landmark Aviation (the first time) and Standard Aero to Dubai Aerospace.  Washington's Blog archives show a similar time start.  

I appreciate the good fight Washington's Blog gave, even as junk statistics smeared their reputation to give Hillary Clinton a better night's sleep.  Unfortunately politicians red and blue love PEU (private equity underwriters).  Fighting the PEU stain means taking on their sponsored politicians.  It's a daunting effort, one made better by numbers.  

Thank you, Washington's Blog from PEUReport.

Wednesday, October 23, 2019

Jilted Berry Drops Lawsuit Against Carlyle Group

Shipping media sources referred to Carlyle's abandonment of a $1 billion crude oil shipping facility in Corpus Christi:  (Tradewinds, Lloyd's, Big and Kallanish)

Drops out, quits, dissolves.  The change in language is noticeably different from the announcement in which Carlyle "agreed to lead the construction and ongoing operations of the Terminal on an exclusive basis".

Exclusive turned into a joint venture with The Berry Group, which became a solo deal without Carlyle.  

How many companies drop a lawsuit after failing to reach an amicable separation?  Isn't that the purpose of a lawsuit?  The Berry Group and Lone Star Ports let Carlyle (with its $223 billion in AUM) off the hook..  

It's a move reminiscent of The Carlyle Group's abandonment of nursing home giant ManorCare.  In that case Carlyle handed the company over to debtholders, not a joint venture partner.

It would appear Carlyle foisted its equity stake on Berry.  How many government agencies will trust Carlyle to carry the ball on infrastructure projects going forward?  How many will trust Carlyle as a potential partner?

Update 11-2-19:  Corpus Christi BizNews reported Berry and Carlyle reached a settlement on the lawsuit.

Saturday, October 19, 2019

Port of Corpus Christi gets PEU'd by Carlyle

Last year The Carlyle Group announced it would develop a new oil export terminal for the Port of Corpus Christi.  Carlyle's website stated:

Under the terms of the Agreement, the Port will work exclusively with Carlyle to bring together world-class oil producers, marketers, pipeline operators and marine terminal operators to ensure a significant portion of the new oil production in Texas will have a reliable gateway to international markets. As part of the Agreement, Carlyle agreed to lead the construction and ongoing operations of the Terminal on an exclusive basis. Carlyle also agreed that it would arrange for a private funding solution for a dredging project to bring fully-laden VLCCs to Harbor Island (at least a 75-foot main channel depth).

The Terminal is expected to be operational in late 2020. Carlyle’s equity for this investment will come from its Global Infrastructure Fund
Reuter's reported that Carlyle is out of the Corpus Christi project, as did the Corpus Christi Caller Times and KRIS TV.  Carlyle's joint venture signed a fifty year lease with the Port in March.

The Port of Corpus Christi Port Commission met on October 15 and the board packet made no mention of The Carlyle Group.  The agenda had the following item for Lone Star Ports, the joint venture between Carlyle and The Berry Group:

Receive legal advice from PCCA's counsel in connection with Lease Agreement between the PCCA and Lone Star Ports, LLC
That was in executive session. The Port's September commission packet had this agenda item for Lone Star Ports (before Carlyle officially pulled out).

10h. Professional Engineering Services Contract with Schneider Electric: Staff recommended approval, in the form presented to the meeting, of a Professional Engineering Services Contract with Schneider Electric in an amount not to exceed $251,502 to provide the engineering services necessary to assess facts and optimal power choices to meet Lone Star Ports’ project schedule, cost, resilience, and sustainability options at Harbor Island.
Schneider Electric and The Carlyle Group announced a partnership/joint venture in April:

Global investment firm, The Carlyle Group (NASDAQ: CG) and Schneider Electric SE (EPA: SU), the leader in the digital transformation of energy management and automation, today announced the enhancement of their partnership to develop new and innovative infrastructure projects. 

In addition to creating new investment and energy-as-a-service opportunities, this collaboration will apply Schneider Electric’s capabilities in advanced connectivity and real-time insights to current and future Carlyle infrastructure and microgrid investments. In a market which faced sustained underinvestment in critical infrastructure due to funding constraints, the new partnership will offer innovative and efficient solutions meeting the needs of a rapidly changing energy landscape. 

The Carlyle Group recently announced several large infrastructure projects, including the JFK Airport Terminal One Redevelopment, Munich Airport Joint Venture (Reach Airports) and Lone Star Ports Harbor Island Crude Export Terminal, which are expected to benefit from this partnership and Schneider’s breadth of technology-enabled products, solutions and services. 

The new partnership also entails the formation of a joint venture, named AlphaStruxure to drive from the design and engineering phase the development of smarter infrastructure projects and more reliable distributed energy and microgrid networks.  
Carlyle cut its teeth on government contractors, has connections to leverage Uncle Sam's checkbook and learned long ago to layer businesses.  It also knows how to contain responsibility and liability, which makes it easier to abandon a project once profits aren't big enough or public opposition gets too great.  The Carlyle Group embodies greed and leverage.  They pulled out when they couldn't get enough of either.

Corpus isn't alone in Carlyle abandoning a project they'd started. Boise, Idaho had a similar experience with its tank farm project.

Update 10-30-19:  Hellenic Shipping News reported "Carlyle quit the venture without providing a reason.  Ferris Hussein, a Carlyle managing director, declined to comment on the reason for its withdrawal.

Tuesday, October 8, 2019

Denka Executives Dishonor Cancer Victims

The Guardian reported:

Residents of Reserve, Louisiana aimed to present evidence to Denka that its plant’s toxic emissions are responsible for high rates of cancer in their town.

Lydia Gerard and Robert Taylor never came close to losing their composure, even when it became clear that that their 7,000-mile journey from the southern United States to Japan was about to come to nought.

Denied even the courtesy of a brief meeting – in a country fabled for its levels of civility – with representatives of a Japanese company they blame for spewing a toxic chemical into the air above their home town, they listened patiently as uniformed guards repeatedly told them to turn around and leave – immediately.
Denka executives dishonored their visitors from Cancer Town, USA, as they pursue medical ventures.

Denka's President prioritized private equity underwriting (PEU) over basic courtesy.

That's not sound social development.  It's the way of the word-twisting greed and leverage boys. 

Saturday, October 5, 2019

Soft Pedaling Deluxe Entertainment Bankruptcy

Forbes reported in 2005:

Through his main investment vehicle, MacAndrews & Forbes Holdings and its subsidiary DX III Holdings, Perelman has bought Deluxe Film, one of the world's largest replicators of film for the global movie industry, for some $745 million. 
Under MacAndrews and Forbes Deluxe's debt grew to almost $1.3 billion.  Moody's downgraded Deluxe's debt in August and estimated leverage to be around 12x.  

On October 3rd Deluxe entered Chapter 11 bankruptcy.  Deluxe's press release omitted the word bankruptcy altogether. 

All parties involved determined that the best way to implement the debt-for-equity exchange is through a controlled, efficient Court-supervised process, and today the Company took steps to start that process. "We have been working to put Deluxe in a strong financial position, and these steps are the best and most efficient way to finalize and implement the comprehensive financial restructuring,"
MacAndrews and Forbes did not include Deluxe's bankruptcy news on their website.

Frances Townsend is Executive Vice President, Worldwide Government, Legal and Business Affairs for MacAndrews and Forbes.  She omitted the hospital with the highest death toll after Hurricane Katrina.  Carlyle Group affiliate LifeCare Hospitals had 26 deaths after Katrina made landfall. 

Whitewashing remains alive and well and the PEU boys are particularly adept at it. 

Thursday, October 3, 2019

Politicians Red and Blue Cater to PEU

Bloomberg had two stories on federal laws that helped private equity underwriters (PEU).  The first dealt their latest massive lobbying push to preserve PEU preferred taxation, the billionaire tax break known as carried interest.

As Republicans set out to overhaul the federal tax code in 2017, the private equity world leveraged its influence. The mission: protect the wildly lucrative tax break that’s helped mint more billionaires than almost any other industry.

An industry that’s reshaped the American economy now appears to be heading into an even bigger war to preserve the generous tax breaks and loose oversight that helped it amass more than $4 trillion in assets and launch a new Gilded Age.
A different article on imploding unicorns mentioned:

....deregulation efforts in the investing industry in the 1990s, particularly the National Securities Markets Improvement Act of 1996. That law made it easier for startups to raise funds by reducing some disclosure requirements. It also increased the number of investors allowed in a fund before it was required to register under the Investment Company Act. The result, according to the authors, is that the spigots of private equity and venture capital were opened wide.

President Bill Clinton sold the government background check division to the PEU boys.  The Carlyle Group ended up owning the company twice.  USIS changed to Altegrity but ended up bankrupt, like many over-leveraged companies batted back and forth under various PEU ownership.

Clinton's team also brought deregulation through the repeal of Glass-Steagal.  This enabled financial shenanigans that put many retirees savings in jeopardy.  Guess who wants to help workers grow their retiree nest egss?  The same PEU boys that successfully got the Obama and Trump White Houses to ignore their campaign pledges to take away carried interest and tax PEU profits as income.  Their has to be a final bagholder and who better than America's elderly.

Politicians Red and Blue love PEU.   Clinton, Bush, Obama and Trump have all served the greed and leverage boys.  All have been and will be rewarded for a PEU job well done.  

Update 10-3-19:  Someone else figured out the PEU way:  "the billionaire class has already proven with its actions that it cannot exist without actively working to manipulate governments in a way that undeniably subverts democracy and the will of the people."  Another researcher noted the bipartisan Wall Street White House.

Wednesday, October 2, 2019

Carlyle to Shakedown Active Seniors?

The Carlyle Group sees dollar signs around America's aging population.  From California trailer parks to North Alabama medical office buildings, active senior housing to Atlanta luxury apartments Carlyle wants rent/lease money.

Senior Housing News reported:

Seasoned players in the active adult market — including private equity giant The Carlyle Group — say that it is a product where average lengths of stay are more than two times the average of independent living, and at profit margins that outperform senior housing. 
Active seniors would be wise to consider Carlyle's ownership of nursing home giant ManorCare.  It ended in bankruptcy after Carlyle bled ManorCare with management fees, dividends and asset sell offs. 

NY Post reported on ManorCare's demise:

The stumble could sully Carlyle’s reputation, it may escape the investment with a profit thanks to a dividend in the wake of the real estate sale-lease back deal, sources said.
Active seniors might wish to understand Carlyle's handling of tenants in a California trailer park.

The Real Deal reported last month:

Carlyle, one of the country’s largest private equity firms, made a splash in 2015 when it bought a manufactured home community in Silicon Valley for $152 million.

Tenants in the area soon complained of exorbitant rent hikes and a deterioration in management responsiveness — sparking new calls for statewide rent control in California. The D.C.-based investment group recently flipped the complex, selling it to Chicago-based Hometown America for $237.4 million this August, according to California property records.
How does one charge massively more in rent and reduce management responsiveness?  It's the private equity underwriter (PEU) way.  

Addendum:  PEUReport did many pieces on Carlyle-Manorcare over the years.

Wednesday, September 25, 2019

PPACA Report Card: An Accelerated Cost Curve

WSJ reported:

The average total cost of employer-provided health coverage passed $20,000 for a family plan this year, according to a new survey.
The $1,655 average deductible is much higher than what most people can afford.

Worker pay has not increased anywhere near the rate of out of pocket healthcare expenses.

Employers shifted costs to employees via higher deductibles and increased co-pays.   PPACA has not helped make healthcare more affordable.  It has made a lot of money for the greed and leverage boys.

WSJ quoted a private equity underwriter (PEU) in its piece:

Health-care affordability is generally the No. 1 issue for voters,” said Dan Mendelson, a founder of a health-care consulting firm and former federal official who is now an operating partner at a private-equity firm.
Mendelson works for PEU Welsh, Carson, Anderson and Stowe.  I've worked twice for PEU healthcare affiliates, the first time in the 1990's.  A private equity firm purchased my current employer last spring. 

Our health insurance deductible rose 78% in the last year, the first year of PEU ownership.   Our owners reduced the number of paid holidays by 25% and holiday pay by 33%.  They eliminated overtime and implemented a payroll system that underpays employees.  These moves impaired my ability to pay for the increased healthcare responsibility designed by my PEU employer. 

PPACA's designer, Nancy Ann Deparle,. came from the PEU world and to it she returned.  The average employee suffers greatly from healthcare greed.  I see it every day from the inside.

Update 9-26-19:  Wolf Street noted the shafting of employees under health reform.

Update 10-14-19:  Congress asked Blackstone and KKR for information on how private equity ownership contributed to rapidly rising healthcare costs. 

Saturday, September 21, 2019

Carlyle to Sell Golden Goose in Cash Raise?

Bloomberg reported:

The Carlyle Group is considering a sale of Golden Goose, the Italian luxury sneaker brand favored by celebrities from Selena Gomez to Taylor Swift, people with knowledge of the matter said.
I doubt Taylor Swift wears Golden Goose after Carlyle funded Scooter Borchetta's buyout of Swift's music library.   The Carlyle Group funded Scooter.  Swift was saddened and grossed out from Carlyle's nightmarish deal.

If Swift made the connection I would hope she donated her Golden Goose sneakers and any Supreme merchandise from their PEU taint.

Bloomberg added:
The private equity firm is working with Bank of America Corp. on the potential deal, according to the people, who asked not to be identified because the information is private. Golden Goose, known for its vintage style footwear emblazoned with the brand’s iconic star on the side, could fetch more than 1 billion euros ($1.1 billion), the people said.

Carlyle acquired Golden Goose from Ergon Capital Partners SA in 2017. The deal valued the business at about 400 million euros.
While other retailers declare bankruptcy left and right Carlyle's GGDB rose nearly 200%?  It's clearly time to cash in before valuations snap in the other direction (like WeWork).

Tuesday, September 17, 2019

Carlyle's Acosta to Restructure $2.7 Billion in Debt?

WSJ reported:

Acosta Inc. has hired law firm Kirkland + Ellis LLP to advise on talks to restructure some $2.7 billion in debt as the struggling marketing-services company faces a looming interest payment, according to people familiar with the matter.
The Carlyle Group bought Acosta in 2014 in a $4.8 billion deal.  Carlyle has $75 billion in dry powder to invest but it never throws good money after bad. 

Reuters reported Acosta's debt as highly leveraged and a potential concern for regulators in 2015.

Moody’s Investors Service puts leverage higher at more than 8.0 times.
S + P lowered its rating on Acosta debt in February:

The downgrade reflects the increased potential for a distressed exchange after the recent amendment to Acosta's credit agreement. While the company temporarily extended the majority of the commitments on its revolver by six months to March 26, 2020, the extending lenders reduced their total commitments by 5% and increased their pricing by 100 basis points. This will likely lead to further pressure on the company's already weakening cash flow. In addition, liquidity could become more constrained after a minority group of lenders chose not to extend their commitments beyond September 2019. 
It's September and at least one distressed exchange is in the works.  Sequa Corporation is another distressed Carlyle affiliate (based on 6-20-2019 debt rating).

Carlyle lost Carlyle Capital Corporation six months before the 2008 financial crisis.  It was massively leveraged and imploded when underlying asset quality deteriorated.

Update 11-10-19:   Acosta will declare bankruptcy and will be taken over by creditors.  The prepackaged Chapter 11 bankruptcy will place Acosta in the hands of creditors.  It's not clear how much money Carlyle pulled out of Acosta since 2014 (prior to turning it over to lenders and bondholders).

Monday, September 16, 2019

Harold Hamm Said PEU Model is Broken

Continental Resources CEO Harold Hamm talked about private equity in the oil field on Bloomberg:

"There is consolidation going on.  All the money that came in from private equity.  Basically their model was to buy acreage and flip it to someone else.  So they were big competition in the plays that we did/developed.  That model is broken.  The private equities are in trouble and some of the publics."
Six weeks ago Bloomberg ran a story on private equity underwriters (PEU) buying pipelines at premium prices (15x earnings).  Two firms mentioned in the piece were Energy Transfer and SemGroup. 

Energy Transfer announced it would buy SemGroup in a $5 billion deal.  That is a month after Bloomberg reported:

Meanwhile, SemGroup Corp., which recently hired an adviser to look at joint ventures, saw its shares jump on Wednesday after a report by Reorg M&A that the company is evaluating takeover interest from at least one private equity consortium.
In 2008 SemGroup declared bankruptcy under Carlyle Group ownership after $3.2 billion in bad energy bets.  The implosion came a year after Carlyle Capital Corporation crashed.  Former FBI Director Louis Freeh investigated SemGroup's demise and his report revealed Carlyle pulled enough cash from SemGroup to cover it's initial investment.

An Energy Transfer subsidiary owned Philadelphia Energy Solutions alongside The Carlyle Group.  Their refinery exploded in June and permanently closed after a massive fire.

Philadelphia residents may not be fans of private equity as thousands of jobs will be lost at Philadelphia Energy Solutions (1,000) and Hahnemann University Hospital (2,500).  It took PEU Paladin eighteen months to run Hahnemann, a safety net hospital, into the ground.  Not included in the bankruptcy filing were significant real estate assets in downtown Philadelphia. 

The Carlyle Group's ManorCare, a giant nursing home company, declared bankruptcy after eleven years of PEU ownership.  Carlyle sold ManorCare's facilities for $6.1 billion to a healthcare REIT in 2011.  Carlyle's financial manipulations put ManorCare under.

Where else is the PEU model broken?  Possibly healthcare.  I'd say so.

Wednesday, September 11, 2019

UVA Health System Under Microscope for Greed

University of Virginia Health System CEO Pamela Sutton-Wallace announced she will leave her position for a COO slot with New York Presbyterian Hospital.   UVA received intense scrutiny over its collection practices.  WaPo reported:

Over six years ending in June 2018, the health system and its doctors sued former patients more than 36,000 times for over $106 million, seizing wages and bank accounts, putting liens on property and homes and forcing families into bankruptcy.
It's called aggressive revenue cycle management.  The University Medical Center has to justify its nonprofit status and a challenge would seem in order.

Unpaid medical bills are a leading cause of personal debt and bankruptcy, with hospitals from Memphis to Baltimore criticized for their role in pushing families over the financial edge. But UVA Health System stands out for the scope of its collection efforts and how persistently it goes after payment, pursuing poor as well as middle-class patients for almost all they’re worth, according to court records, hospital documents and interviews with hospital officials and dozens of patients.
Early in her career at Duke University Sutton-Wallace said:

"I am creating systems where I am having an impact on the communities that I serve."
For some served by UVA Health System the impact has been traumatic and horrific. It's not clear if collections were included in the measures determining her bonus, but extrinsic motivators could have contributed to the last four years of the study period under CEO Sutton-Wallace.  The CEO has a $750,000 annual salary with bonus potential to reach $1 million.

Greed has infected our healthcare system and it is causing real harm to individuals and families.

Friday, September 6, 2019

PEU Pete for President

The Late Show hosted presidential candidate Pete Buttigieg.  The candidate said:

If you start the clock in the early '80s when I was born, that's about the time that alot of things slowed down or stopped in this country from wage growth for most Americans to progress in alot of issues of equity...

Pete was born in the same decade as many private equity underwriters, which donated significant sums to the Buttigieg campaign.

The greed and leverage boys are betting on Buttigieg.  They will make numerous wagers such that their political influence remains outsized. 

Update 10-22-19:  Another media source noticed Pete's corporate bona fides.

Thursday, September 5, 2019

PEU Backed Physician Companies Behind Surprise Medical Billing

KKR's Envision and Blackstone's TeamHealth, huge physician companies, are behind surprise medical bills.   The Hill reported in May:

Patients hate surprise medical bills, but they are very profitable for the private equity owners of companies like EmCare (now called Envision) and TeamHealth. Fixing this problem may be more difficult than the White House imagines.
Legislation to address this significant problem faces stiff opposition.  The Hill reported today:

The surprise billing measure has support from bipartisan committee leaders in both the House and Senate, patient advocates and insurers — and was moving forward quickly before Congress left town for August. It was seen as one of the most promising avenues for lawmakers to target health costs this year.

But those efforts are stalling amid a fierce lobbying blitz and political pressures as the 2020 elections nears.

Doctors groups are running millions of dollars in ads against the effort.
Doctor Patient Unity has spent at least $10 million opposing legislation to reign in surprise medical bills.  The group does not disclose its donors.

TeamHealth's PEU owner Blackstone spent over $12.7 million in soft money (outside spending groups) for the 2018 elections cycle.   Envision's sponsor KKR historically gave more to Republicans, but increased donations to the Blue team during Clinton and Obama's successful Presidential runs.  

Blackstone's Stephen Schwarzman and KKR's Henry Kravis can pick up the phone and reach President Trump and most Congressional representatives.  There is no way the common person is lobbying for surprise medical bills, which only add to America's greatest stressor, money.

If Congress cannot address an opaque healthcare system that allows patients to be gouged then my longtime saying remains true.  Politicians Red and Blue love PEU.

Update 9-11-19:  One meme for not eliminating surprise medical bill gouging has politicians giving empathy to PEU companies that need to pay back their bond/debt obligations.  ""What we've seen (from industry) is, 'First, protect me financially.'"  A Daily Beast story on this issue reveals how widespread the PEU virus is in today's world.

Tuesday, September 3, 2019


Seeking Alpha reported:

Carlyle Group agrees to take a majority stake in HireVue, a provider of AI-driven talent assessment and video interviewing solutions.
Hirevue's website describes the company:

HireVue is transforming the way companies discover, hire and develop the best talent by combining the power of video, games and AI for better hiring decisions. The HireVue Assessments and Video Interviewing Platform uses a ground-breaking combination of industrial/organizational science and rigorously tested, predictive artificial intelligence to help customers find and engage higher quality talent, faster.
My healthcare employer used artificial intelligence to predict patient decline.  Our experienced nurses laughed at the number produced by the company's complex algorithm.  Our doctors shook their heads over the need to reduce a patient's myriad of disease processes into a single score and pretend it meant more than the eye of a good nurse or the consensus of a healthcare team.  The company never asked our physicians for any kind of input, even though they had decades of experience.

Human Resources morphed into human neglect as virtually every function was contacted out to a vendor.  HR served executives not employees.  Strategic HR existed to implement the will of our new private equity owners.  They fired critical staff to meet financial targets.  Customer service became abysmal.  Nobody cared, not even our well insulated compliance department.

Video, games and AI will do nothing to hire experienced clinicians.  But it may ensure fans of private equity get ranked higher.

I cannot think of a more evil combination, the merging of algorithms with the greed and leverage boys.  Algorithms blew up Wall Street.  I'm sure they and private equity can make any workplace a living hell.

Update 11-11-19:  Google's healthcare partnership has access to millions of health records and plans to use artificial intelligence to "identify diseases and make predictions aimed at improving outcomes and reducing cost."  How about we reduce costs by not spending a penny on healthcare AI?  I don't want an algorithm deciding what treatment I need or can't get.  The public has seen the driver-less car not recognize a jaywalker and Goldman's Apple credit card employ a sexist algorithm without even know the cardholder's gender.  The Boeing 737 Max shows MCAS system programming can be deadly on a mass scale.