Saturday, November 7, 2009

The Carlyle Group's Distressed PEU Deals

Tyler Durden of ZeroHedge summed a Moody's report on flagging private equity underwriting (PEU) deals. He posted the detailed analysis. The Carlyle Group's distressed affiliates include:

Allison Transmissions

Freescale Semiconductor

Frontier Drilling

Harrah's-(not credited to Carlyle in the report)
Hawaiian Telecom-bankruptcy

HD Supply

LifeCare Holdings

Oriental Trading

PQ Corporation

Sequa Corporation

Stallion Oilfield Services-bankruptcy

Synagro Technologies

TSI Acquisitions (Titan Specialties)

UCI Holdco (United Components)

Veyance Technologies

LifeCare, Synagro and SemGroup have interesting subplots. LifeCare lost 24 patients in their New Orleans facility in the aftermath of Hurricane Katrina. The White House omitted this important fact in their Lessons Learned report. The political connections are disturbing.

Synagro bribed the wife of Rep. John Conyers in a Detroit sewage sludge processing deal. SemGroup imploded from bad energy hedging. It's SEC filings never mentioned hedging as a key business function.

Other Carlyle implosions not in the Moody's report:

American Achievement- severely distressed
BlueWave Partners-bankruptcy

Carlyle Capital Corporation-bankruptcy

IMO Carwash-bankruptcy

Tyler is concerned about the massive amount of rollover debt coming due before 2015. He's sure Uncle Sam will fill the void. If the feds can't aid the subsidiary directly with billions in contracts, they'll find a way to help out the PEU boys. Consider the benefits to date for Carlyle and company:

BankUnited-$4.9 billion in FDIC subsidies
Boston Private Financial Holdings-$153 million in TARP funds

The Obama Stimulus included a $25 billion tax break for firms buying back debt for pennies on the dollar. LifeCare Holdings repurchased 4.5% of outstanding debt for 39% of face value, 39 cents on the dollar. Would you like to do that with your mortgage, complete with a stimulating tax break?

Under the coming financial reform, taxpayers will back shadow bankers like the Carlyle Group and its PEU brethren. Feeling distressed?