Friday, December 4, 2009

Terrance Watanabe: Carlyle Group Giveth, Carlyle Taketh Away

The Carlyle Group purchased Oriental Trading from Terrance Watanabe in July 2006. Mr. Watanabe lost $127 million gambling at Carlyle's other affiliate, Harrah's in Vegas. He paid $112 million, but refuses to pay 100% of his gambling debts.

The Carlyle Group should understand a 10% haircut on debt. Carlyle affiliates repeatedly cram down down bond holders for much more than a measly 10%.

Watanabe should use the going price of debt as his defense, not Harrah's loading him with booze and drugs. Carlyle's big money boys should understand debt devaluation. How might Freescale Semiconductor's debt restructuring end up? Will risky bond holders take a 50% haircut?