Saturday, July 31, 2010

Carlyle Group Yuans, In Talks with B&B Hotels

One Carlyle danced on two sides of the globe. The politically-connected private equity underwriter (PEU) launched a Chinese renminbi fund. It raised 2.4 billion yuan to date, with a target of 5 billion. The fund "closed" so Carlyle can begin investing in consumer related and health care companies.

What nightmares will be exported as a result of the unholy alliance of corporate greed and abysmal quality? Carlyle & China have deadly failures in their corporate genes.

Meanwhile, Carlyle pursued another target halfway around the globe, European budget B&B Hotels.

ABC News reported:

B&B Hotels operates over 200 budget hotels in France and Germany, and is expanding in Italy, Poland and Portugal.
While the need for frugality grows, Carlyle's PEU money machine churns.

Friday, July 30, 2010

Pennsylvania's Privatization Train Has 75 Seats

Private equity underwriters (PEU's) posture to help stressed state governments with their infrastructure needs. New Jersey and Pennsylvania chug toward public-private partnerships. Philadelphia will host "P3 - Public/Private Partnerships for the 21st Century." The meeting description states:

Growing demands to upgrade our deteriorating public infrastructure, combined with dwindling municipal and state budgets, have led to a dramatic increase in the use of Public Private Partnerships (P3). Benefits include lower costs, improvements in the quality of public services, access to private sector capital, and professional expertise, as well as centralized management and oversight.
The list of confirmed speakers includes:

Frank Rapoport, Partner, McKenna Long & Aldridge LLP.
Dennis Martin, President, The Keating Group.

John A. Flaherty
, Principal, Global Infrastructure, The Carlyle Group (Washington DC).
The Honorable Richard A. Zimmer, Chair, New Jersey Privatization Task Force.
John Rafferty, State Senator, 44th Senatorial District, Commonwealth of Pennsylvania.
Invited: The
Honorable Edward G. Rendell, Governor, Commonwealth of Pennsylvania.

Disaster capitalism finds states selling off revenue streams for a one-time cash boost. Virginia plans to sell its ABC (alcohol) store franchise for less than 1x sales. Liquor prices are not expected to go down for consumers, despite being provided by the "more efficient" private sector. Also, Virginia hopes to sell its port operations with Carlyle Group as a bidder.

PEU's hire politically connected insiders, using them to steer government business and structure markets to their advantage. PEU's milk affiliates via annual management fees, special dividends and IPO's. They load firms with debt, dramatically increasing interest expenses. After a few years they flip them for huge profits.

Not everyone wins in a Ponzi scheme. Likewise, not everyone can attend the P3 meeting in Philadelphia. Attendance is limited to the first 75 registrants. It's an exclusive club, those selling public resources and those wishing to buy them on the cheap.

Carlyle Sells Rest of Wall Street Institute to Pearson

WSJ reported:

The Carlyle Group Thursday said that it has sold English training business, the Wall Street Institute, to U.K.-based publisher Pearson PLC (PSON.LN) for $92 million.

The Journal failed to note Pearson's 2009 purchase of Wall Street English, the firm's China division. Pearson paid $142 million. Carlyle's combined proceeds equal $234 million.

The Carlyle Group paid $40 million for the firm in 2005. Their $194 million profit is nearly a quintuple. Carlyle's great cash in continues.

Carlyle Group's "Quadrilla"

The Carlyle Group, a politically connected private equity underwriter (PEU), aims to double, triple, even quadruple its investment. Energy is a ripe sector for Carlyle. Two stories hit the wires.

First, Carlyle invested significant capital in Quorum Business Solutions, a a provider of software and systems to the oil, gas, and renewable energy industry.

Second, Cuadrilla Resources, a Carlyle/Riverstone affiliate seeks natural gas in Blackpool, England. Lord John Browne is Managing Director at Riverstone Holdings. He plans to transform domestic natural gas production as well as government services in the UK.

The United States went light on Browne for 15 deaths that occurred on his watch at BP's Texas City refinery. Rather than live up to his promise to make things right, Lord John skittered off to Riverstone Holdings, Carlyle's energy joint venture partner. Ironically, Carlyle connected James A. Baker, III conducted the inquiry into the BP blast. The first time Browne gave testimony on Texas City came three years after the deadly explosion.

Cuadrilla promises a safe operation. Similar to Lord Browne in the burned out wreckage of Texas City, CEO Chris Cornelius is adamant about it.

"I think there are certain cases in the US where certain operators have been documented as having some issues and they do exist. But I think we have done everything here working with the Health and Safety Executive and the Environmental Protection Agency here in the UK to ensure that doesn't happen on Cuadrilla's location."

I hope Cornelius has better luck and processes than Browne's BP. How far might they push the safety envelope in pursuit of a quadruple on Cuadrilla?

Tuesday, July 27, 2010

Carlyle Group Invests in Companeo

The Carlyle Group purchased a majority stake in French online purchaser Companeo. The company provides an online marketplace for small and medium companies to receive quotes from qualified suppliers. Will a qualification entail being a Carlyle Group affiliate?

Companeo joins nearly 1,000 firms held by Carlyle, a politically connected private equity underwriter (PEU). Carlyle Group co-founder William Conway loves a playing field tilted in his PEU's favor. How might Companeo add a few degrees to Conway's angle?

Monday, July 26, 2010

Apollo, Ares & Countrywide

Private equity group Apollo Management will establish a new bank under an obscure provision buried in the US financial regulations signed into law last week.

Apollo is to take advantage of a change that allows banks to operate in multiple US states without a national charter, lawyers say.

Apollo will work with ex-Countrywide executives in setting up Ares Bank. Senator Chris Dodd took Countrywide payola in the past as a "Friend of Mozilla." Dodd's bill gave private equity underwriters (PEU's) a virtual free pass under financial reform.

Apollo's readiness to pull the loophole trigger implies what? Did they lobby for the obscure "new bank" provision?

Apollo plans to get round ownership restrictions which can force a private equity group to be considered a bank holding company by asking its investors to put money alongside it in the new bank, to be called Ares.

The Gods favor PEU's. Might private equity be Congress' Aphrodite.

Saturday, July 24, 2010

Arthur Levitt Call Robert Wenzel

Carlyle Group Senior Advisor Arthur Levitt sees no relationship between the SEC suit against Goldman Sachs and financial regulatory reform. Robert Wenzel of EconomicPolicyJournal sees otherwise. Maybe they can chat at the next Economic Club of Washington meeting. Better yet, have ECW President and Carlyle Group co-founder David Rubenstein moderate the discussion.
Note: Levitt is a paid advisor for Goldman Sachs.
Update 5-1-22:  I am saddened to report the death of Robert Wenzel.  His family said Robert passed away peacefully in his sleep on May 25th, 2021.  I am grateful to have learned from him and wish his family peace.  May their memories of Robert be of solace. 

Thursday, July 22, 2010

Carlyle Group to Cash-In Philosophy

The Carlyle Group is shopping Philosophy, a skin care products maker, for $1 billion. The private equity underwriter (PEU) purchased Philosophy in 2007 for $475 million. Carlyle could ring the register for more than a double. Add four years of management fees and dividends, the latest at $50 million, and returns grow to what?

Carlyle continues their Exit-pallooza. Churn has a new smell. It's PEU.

Monday, July 19, 2010

Carlyle Group Buys Qualicorp

The Carlyle Group purchased Qualicorp, a Brazilian health insurance company. Carlyle is buying General Atlantic's stake in the firm. Terms of the deal were not disclosed. Carlyle's press release stated:

Qualicorp will be well positioned to continue its strategy of enabling Brazil’s middle class to access high-quality private health insurance.

Carlyle's incredible growth the last decade coincided with a shrinking U.S. middle class. The private equity underwriter (PEU) expects 30% returns. I'm sure they can drive up Brazilian health insurance costs while chasing bazillions in returns.

Sunday, July 18, 2010

Carlyle Group & TPG Win Healthscope

Private equity underwriters (PEU's) paired up to snare Healthscope, a for-profit hospital company in Australia. The Carlyle Group and TPG beat out KKR. The PEU's offered $6.26 a share for the firm. The board bit on the bid, valued at $2.7 billion. WSJ reported:

"After careful consideration, the board has unanimously concluded that the consortium's offer provides shareholders with an excellent opportunity to realize considerable value from their investment in Healthscope," Healthscope Chairman Linda Nicholls said in a statement.
Carlyle expects 30% returns. Will they bleed Healthscope the way KKR sucked billions from HCA? What will this do to Australian health care costs? What implications does it offer for America's?

Saturday, July 17, 2010

Alaska House Closed

The Alaska House opened the day Lehman Brothers fell. It too met the vagaries of Wall Street. Anchorage Daily News reported:

The Alaska House art gallery in Manhattan has closed. The doors are locked, the lights are off, and a large square sign with red lettering advertises 'space for rent.'

The gallery in New York's trendy SoHo neighborhood, which also served as a travel service and cultural center, opened with great fanfare on Sept. 15, 2008. Guests at the event included Gov. Sarah Palin's husband, Todd, Alaska U.S. Sen. Lisa Murkowski and Alaska artists Sylvester Ayek, Perry Eaton and Poldine Carlo.

Supporters included billionaire New York City Mayor Michael Bloomberg and philanthropist Daisy Soros, sister-in-law of international money fund mogul George Soros. The gallery and its partner organization, the Alaska Native Arts Foundation, were founded by Alice Rogoff Rubenstein, former chief financial officer of U.S. News and World Report and wife of The Carlyle Group's co-founder, David Rubenstein.

Despite political star power and billionaire support, the Alaska House closed less than two years after opening. Why? Poor timing and lack of money.

Rogoff-Rubenstein's plan to raise $1 million per year from Alaska Permanent Fund money managers mired in Wall Street's meltdown. Oddly, while her husband's personal finances recovered in 2009 and Carlyle monetized affiliates, donors remained hard to find.

Alice Rogoff-Rubenstein turned to the government, which did not deliver. Senator Murkowski failed to submit a $1.5 million federal earmark to fund operations. The Alaska State Legislature passed on a requested $600,000 appropriation.

Oddly, billionaire husband David Rubenstein made big money off Alaskan natives.
In 1984, a law was passed allowing native corporations in Alaska—that is, Eskimo owned companies created by Congress to manage native lands—to sell their losses to businesses looking for tax write-offs. The Marriott executives, working with David Rubenstein at Shaw Pittman, discovered the Eskimo clause and vigorously bought the losses to offset gains. The adventure has become known in some quarters as the Great Eskimo Tax Scam.

Nervousness will help him do so again. The Alaska House opened in the thunderclap of the financial storm. Is its closing a harbinger of the next stage of financial manipulation?

Update 10-17-20:  David Rubenstein was presented with the Award for Philanthropic Distinction in support of his understanding of how philanthropy can change the world.

Friday, July 16, 2010

Healthscope Bids: Carlyle Group In

SMH reported:

At least two takeover bids for private hospital and pathology company Healthscope are believed to have been forwarded to the company's board overnight, placing dueling private equity firms Texas Pacific Group and the Carlyle Group in the lead position to buy the listed healthcare company for about $1.85 billion.

The board of Healthscope will meet this weekend to discuss the bids, as well as an expected $1.84 billion offer from Kohlberg Kravis Roberts, and whether or not to allow the takeover proposals to be put to shareholders for their blessing.
Bidders expect a response by Monday. That doesn't give the board much time to run diagnostics.

Which American branded, global private equity underwriter (PEU) will win? Surely there's a derivative bet on it.

Update: Carlyle/TPG will be designated the preferred PEU bidder according to Bloomberg.

Thursday, July 15, 2010

SEC Settlement: Goldman Sachs Follows JP Morgan

Two Wall Street giants settled investigations with the Securities and Exchange Commission.

Goldman Sachs - $550 million
JP Morgan - $722 million
Goldman admitted it made "a mistake" as part of its settlement. JP Morgan's settlement had the company neither "admitting or denying the allegations."

Robert Wenzel of Economic Policy Journal has an interesting view of the Goldman case and its many coincidences.

Carlyle Group to Buy NBTY for $3.8 billion

The Carlyle Group will pay $55 a share for NBTY, a leading global manufacturer and marketer of nutritional supplements. The private equity underwriter (PEU) stated in their press release:

“NBTY is an outstanding business with well-established brands, a proven vertically integrated multi-channel/multi-geography strategy and strong, long-standing customer relationships."

How might the $3.8 billion price tag (with debt comprising $2.4 billion) impact supplement prices? Does Carlyle plan for NBTY to buy supplies from any of its Chinese affiliates, which include fisheries, nutrients, infant formula, fertilizer, and wood?

Given Carlyle's cadmium children's jewelry and other debacles (some deadly), how might their PEU drive to maximize profit impact the following brands?

Nature's Bounty®
Vitamin World®
Puritan's Pride®
Holland & Barrett®
Worldwide Sport Nutrition®
American Health®
Good 'n' Natural®
Home Health™
Julian Graves
Natural Wealth

Time will tell. Indications show greed and the ethically challenged riding together.

Update 5-26-11:   NBTY reported second quarter results, which stated "Net loss was $20.1 million compared with net income of $46.1 million in the prior year. NBTY says the net loss is attributable to slower sales and costs related to its takeover by private equity firm The Carlyle Group in August 2010."  Carlyle is known for charging management fees, ramping up interest expense and taking special dividends.  Did that combo send NBTY to a second quarter loss?

Update 10-20-12:  Carlyle plans to pull $700 million from NBTY via a special dividend.   Carlyle put up $1.55 billion in equity when it purchased NBTY two years ago. 

Wednesday, July 14, 2010

Florida Pension Money Sets Up Hong Kong

Florida's State Board of Administration invested over $40 million in Lexington Partners, a private equity underwriter (PEU). Florida's public pension fund gets a 10% stake in Lexington. A person familiar with the deal said:

Lexington plans to use the money to help the firm expand, including opening a new office in Hong Kong.
Carlyle Group co-founder predicted all major PEU's will be publicly traded within 2 to 3 years. CALPERS and Abu Dhabi Investment Authority could be big winners in a Carlyle Group or Apollo Management IPO.

Carlyle Group Reconsidering HealthScope Bid

Australian Business with WSJ reported on the HealthScope takeover battle:

A combination of poor debt market conditions and heightened conservatism are believed to be behind Carlyle Group, one of the world's largest private equity houses, signalling to its partners yesterday that it was contemplating withdrawing from the bidding syndicate.

Carlyle will decide in the next 24 hours whether to stay in the consortium with Blackstone and TPG. They're competing against private equity underwriters (PEU's) KKR and CVC.

A source close to the situation said that Carlyle was wavering for a variety of factors, including the "eye-watering upfront fees and spreads" being demanded by lenders and the unfriendly terms attached to expensive subordinated debt, also known as mezzanine finance. Another factor causing anxiety was the recent deterioration in the market structure of the pathology sector -- which makes up close to a fifth of Healthscope's operations -- because of unfavourable government reforms.

That unfavorable government reform? Deregulation. Carlyle counts on government protected franchises and huge amounts of government funded business in many of its takeovers.

As for the upfront fees, spreads and unfriendly terms from lenders, might they be upset from past Carlyle bankruptcies or debt cramdowns? The latest to default is Oriental Trading. Carlyle and its PEU brethren might reap what it they've sown.

Update: Blackstone Group pulled out of the consortium, leaving Carlyle and TPG scrambling.

Tuesday, July 13, 2010

D.C.'s Monument Capital Hires Rothschild

James Rothschild has been appointed Vice President and Partner of the Washington DC based private investment and advisory firm, Monument Capital Group LLC, a private equity underwriter (PEU) focused on defense and homeland security.

Rothschild will work at Monument's D.C. and London offices. He will be aided by the firm's hands-on Advisory Board, which has extensive domestic and international experience. The Board includes:

James A. Baker III, Former Secretary of State and former Treasury Secretary

Frank C. Carlucci,
Chairman Emeritus of the Carlyle Group and former Secretary of Defense

Mustafa Koc
, Chairman of Koc Holdings, Turkey's largest conglomerate

Thomas F. McLarty III
, former White House Chief of Staff & Carlyle Group Senior Advisor
Monument Capital looks like a Carlyle Group franchise. That globalists added a Rothschild should be no surprise.

Rothschild joins Frances Townsend, Senior Advisor for Monument Capital. Fran heads the Risk Management Consulting Practice for Baker Botts, the law firm of James A. Baker, III.

Townsend performed at least one favor for the Carlyle Group while President Bush's Homeland Security Adviser. Fran omitted Memorial Medical Center, the hospital with the highest patient death toll, from her Katrina Lessons Learned Report. She managed risk for Carlyle's LifeCare Hospitals while a public servant. The private sector noticed.

Even in February 2006, there was One Carlyle PEU.

JP Morgan Lands Mel Martinez

Ex Senator and HUD Director Mel Martinez will head up JP Morgan's Latin American operations, including Florida, Mexico, Central America and the Caribbean. Martinez will serve on JP Morgan Chase's Executive Committee.

Martinez leaves DLA Piper, a law firm where he worked as a lobbyist. He served in the Senate from 2004 to 2009.

One might expect Martinez to conduct due diligence on his employer. JP Morgan settled with the SEC for $722 million to end a probe into the sale of bonds and derivatives to Jefferson County, Alabama. Where else is JP Morgan buying influence?

What does Mel's move portend for retiring Senators Chris Dodd and Evan Bayh? Both had Wall Street's back for much longer than a partial term. How will that turn into payback? Will either speak words similar to Mel's?

"I'm thrilled to accept this new challenge and look forward to building upon the reputation of this premier financial services company."

JP Morgan bagged a "less than one term" Senator in its pursuit of big bucks. That bang starts Wall Street's open season.

Monday, July 12, 2010

Further Down the Rabbit Hole: Public Private Equity

Carlyle Group co-founder David Rubenstein said:

“I believe all of the global private equity firms will probably be public within two or three years.”

With this week's independent public offering, KKR joins The Blackstone Group as a publicly traded firm on the NYSE.

Carlyle Group & GTCR Golder Rauner Shop for Health Insurers

Bloomberg reported:

Private-equity firms Carlyle Group and GTCR Golder Rauner LLC are looking to buy medical insurers, made newly attractive by a surge of customers expected from the U.S. health-care overhaul.

Experts say private equity underwriters (PEU's) are interested in companies providing coverage for the poor via state Medicaid programs. The federal government foots 65 to 70 cents, while states kick in the rest.

PEU's have a rich history of buying companies in areas Uncle Sam is ready to spend. The Carlyle Group and GTCR Golder Rauner have a history of dealing affiliates. One had deadly outcomes. Political connections kept Carlyle and GTCR's good name out of any investigations.

Bloomberg cited Tom Scully, for-profiteer par excellence with PEU Welsh, Carson, Anderson & Stowe (WCAS). WCAS and Carlyle announced the sale of MultiPlan, a huge preferred provider organization. Carlyle lauded its tripling of its investment. They didn't say how much the $3.1 billion sale would add to America's health care costs.

Carlyle sees medical insurers as “an attractive investment opportunity,” said Karen Bechtel, the managing director who heads the company’s health-care team. Carlyle “will likely continue to make investments in this sector.”

The article mentioned Medicaid insurer AmeriGroup. Did you know a noted health economist, who wrote numerous pieces for the NY Times, stands to win financially from the health reform bill? Dr. Uwe Reinhardt sits on the board of AmeriGroup. Uwe controls over 160,000 shares of common stock, restricted stock and stock options. Dr. Stuart Altman is on the board of health insurer Aveta. The aforementioned Tom Scully is on the board of Universal American, a health insurer.

Health reform is designed to profit privates. PEU's designed the bill. That they're betting on the reset, also known as Peter Orszag's "political economy of delayed implementation," should be no surprise.

Update 5-20-11:  GTCR founder Bruce Rauner called U.S. government policies “anti-business” and “unpredictable.” He said they have prevented the market from regaining stability.  If GTCR lands a health insurer, Rauner will count on the government to send clients.

Update 12-11-11:  Texas health plans do well off state and federal HMOs.

Sunday, July 11, 2010

WSJ Takes on Obama's Oil Spew Commission

Rupert Murdoch's Wall Street Journal pushed the fiction that Obama's Oil Spew Commission is loaded with anti-oil and anti-drilling activists. Opinion editors couldn't find a DEF 14A or a University of Alaska donor report? Both reveal significant BP connections to Obama's Oil Spew Commission. Here's what Murdoch's team missed:

ConocoPhillips 2010 proxy statement shows Commission co-chair William Reilly controlling over $2 million in stock. ConocoPhillips is a joint venture partner with BP in the massive Tiber field in the Gulf of Mexico. Stock holdings don't go away during a temporary leave of absence.

BP donated over $3 million to Chancellor Fran Ulmer's University of Alaska. BP and ConocoPhillips donated over $30 million to the University over the last decade. Fran's boss sat on BP America's external advisory council.

HoumaToday highlighted Fran Ulmer's visit. Their article stated:

Some have criticized the panel for including too many representatives from the environmental community critical of the oil industry.
The reporter noted Ulmer's Alaska ties, but failed to drill deeper. I understand a local paper not having the investigative muscle, but the WSJ? They missed direct and indirect conflicts of interest. Who declares those anymore? That's so last century.

Saturday, July 10, 2010

U.S. Bank Failures Double in Year

WaPo reported:

Regulators shut down two banks in Maryland and one each in New York and Oklahoma on Friday, raising to 90 the number of U.S. bank failures this year.

The pace of bank failures this year far outstrips that of 2009. By this time last year, regulators had closed 45 banks.

The rate is double. Private equity underwriters (PEU's) are eager to take over failed banks at distressed sale prices, preferably along with FDIC subsidies.

The U.S. Treasury was as feckless as the FDIC in Carlyle Group's Hampton Roads Bankshares. Carlyle's $72 million got 23% of Hampton Roads, while Treasury's $80 million got 6%. Taxpayers put in more and got less.

With 271 banks on the "extreme risk of failure list", I smell PEU opportunity.

Friday, July 9, 2010

Texas Landowners Sue The Carlyle Group

Courthouse News Service reported:

Vantage Energy, The Carlyle Group and others defrauded dozens of Texas landowners by offering lucrative deals for mineral rights in the Barnett Shale natural gas formation - $27,500 per "net mineral acre" - then failing to pay up, the landowners say in eight new complaints in Fort Worth.

Twenty such complaints, all with multiple plaintiffs, have been filed in Tarrant County Court since April, claiming that Vantage, Carlyle and others colluded to "drive down bonus payments" by locking up mineral rights in the formation, denying the landowners the chance to negotiate with other companies.

Carlyle, a private equity underwriter (PEU), will deploy yet another vigorous legal defense. Through its energy joint venture Riverstone Holdings, Carlyle faces lawsuits regarding SemGroup and Vantage Energy.

Disgruntled investors in Carlyle Capital Corporation Ltd. sued in Delaware Chancery Court seeking over $1 billion. Carlyle's LifeCare Hospitals faces up to 25 lawsuits for patient deaths after Hurricane Katrina. Ironically LifeCare's corporate office is in the Dallas-Fort Worth area, where Texas landowners claim they were defrauded.

It's not clear how Governor Rick Perry can come to Carlyle's aid. I'm sure he's working on a way. Might it involve another PEU? KKR is prospecting for shale gas.

Carlyle Group to Invest in CP Pokphand

Shanghai Daily reported The Carlyle Group will acquire an 11.3-percent stake in CP Pokphand Co Ltd. Like Carlyle, the Thai company has big plans for China.

American Chronicle didn't detail any arrangements with private equity underwriters (PEU's). It's piece on Pokphand's growth stated:

The Chia Tai Group, the Chinese unit of the Thai agribusiness giant Charoen Pokphand, will increase its investment in China of more than US$1 billion (32.4 billion baht) over the next six years. New projects will consist mainly of shopping complexes, hotels, condominiums and office buildings.

"Funding will stem mainly from the group's Chinese revenue, joint-venture partners and bank loans."

CP was the first foreign investor in China. Over nearly four decades it has poured billions of dollars into such ventures as shopping malls, the poultry industry, animal feed and motorcycle plants.

indicated CP would focus "on promoting its CP brand ready-to-eat foods in China."

Given Carlyle's stated objective of making massive profits in China, how will fat PEU profits impact Chinese waistlines?

Thursday, July 8, 2010

MultiPlan a 3 Bagger for Carlyle Group & WCAS

Private equity underwriters (PEU's) will deal MultiPlan, America's largest preferred provider organization. The Carlyle Group and Welsh, Carson, Anderson & Stowe will sell MultiPlan for $3.1 billion to BC Partners and Silver Lake Partners.

The Carlyle Group purchased MultiPlan in 2006. The amount was not disclosed. Carlyle added Viant, owned by WCAS, and PHCS. Neither purchase price was revealed. How much did Carlyle make from MultiPlan via management fees and special distributions over the last four years? The public won't know as the deal is private.

However, Carlyle wanted one number shared. The WSJ stated the politically connected PEU will make more than three times its investment in MultiPlan. This is Carlyle's latest cash in, partly designed to beat changes to carried interest taxation. It's also good to let investors touch their money now & then.

Buying prices undisclosed, while selling proceeds are broadcast widely? It's new fund marketing time.

MultiPlan will pass on deal costs to the health insurance plans it serves. How much will interest expense go up? How will increased valuations work their way through depreciation schedules and goodwill amortization? Will BC Partners and Silver Lake expect a lower rate of return than Carlyle & company?

What will Carlyle do with their proceeds? Buy HealthScope, an Australian for-profit hospital chain, or Tenet Healthcare, a domestic for-profiteer? Stay tuned.
PPACA is a boon to PEU's.

Update: Ferrer Freeman & Co. owns part of MultiPlan. This fact was omitted from Carlyle's press release.

Swings of James H. Hance, Jr.

It was a day of highs and lows for James H. Hance, Jr., Senior Advisor for The Carlyle Group. The former Director and Chairman of Carlyle Capital Corporation (CCC) Limited was sued in Delaware Chancery Court for more than $1 billion. CCC was Carlyle's highly leveraged mortgage backed security fund. It imploded in March 2008.

The high came when Hance was appointed to the Ford Motor board of directors. James already served on a number of boards. SEC filings show:

An interesting aside, Obama's Deficit Commission co-chair Erskine Bowles serves on the Morgan Stanley and Cousins Properties boards. Erskine, like Hance, is a private equity underwriter (PEU). Bowles is Senior Advisor for Carousel Capital.

PEU's successfully defended their preferred taxation on carried interest. How might Bowles watch Hance's back?

Wednesday, July 7, 2010

Red Thumbs Up: Wilbur Ross to Buy His Third Bank

Wilbur Ross will invest $50 million in Sun Bancorp for a 24.9 percent stake in the New Jersey bank. Ross owns part of BankUnited, which has a $4.9 billion subsidy from the FDIC, and First Michigan Bank, which has an $800 million loss sharing deal.

Through May 2010, the FDIC has entered into 161 loss sharing agreements, with $173.5 billion in assets under loss sharing.
Wilbur Ross is involved in two agreements with $5.7 billion in federal support. Did Sheila Bair and her staff know of Wilbur's background as owner of the Sago Mine, where 12 miners died? Dastardly deeds rarely come back to haunt the wealthy and politically connected, even those with blood on their hands.

Update 2-12-2011:  Wilbur Ross landed another $331 million loss sharing deal with the FDIC, which took over Peoples State Bank, based in Hamtramck, Mich., with $390.5 million in assets.  Ross' First Michigan Bank, based in Troy, Mich., is acquiring the assets and deposits of Peoples State Bank  In addition, the FDIC and First Michigan Bank agreed to share losses on $331 million of Peoples State Bank's loans and other assets.Ross' loss sharing deals with the FDIC are now over $6 billion. It's bank four for Wilbur, how many more? 

Carlyle Group's Latest Defense: Unprecedented Tumult

Carlyle Capital Corporation (CCC) went belly up seven months after its independent public offering. It was one canary in financial crisis coal mine. Bloomberg reported on the latest CCC investor lawsuit:

Carlyle Group, the world’s second- largest private-equity firm, was sued by liquidators of the buyout company’s defunct mortgage bond fund, saying executives lost $945 million in overly risky investments.

Liquidators for Carlyle Capital Corp. Ltd, a Guernsey, Channel Islands-based hedge fund that collapsed in March 2008, contend Carlyle directors turned a blind eye to questionable investments in residential mortgage-backed securities and failed to stop the loss of all the company’s capital, according to a lawsuit filed in Delaware.

“In the short space of eight months, the entirety of CCC’s capital was spectacularly lost under the reckless and grossly negligent direction, supervision, management and advice of the defendants,” the liquidators said in the suit, filed today in Delaware Chancery Court.

Carlyle promised an aggressive defense, a pattern for the private equity underwriter.

“We will vigorously contest all claims and are confident we will prevail,” Chris Ullman, a company spokesman, said.

The losses were a result of “unprecedented” tumult in the mortgage-backed securities market, Ullman added.
That "unprecedented tumult" expressed as margin calls on Carlyle's highly leveraged Guernsey fund.

Lenders seized Carlyle Capital’s assets after it failed to meet more than $400 million of margin calls on mortgage-backed collateral that had plunged in value.
Where would Carlyle be if CALPERS behaved similarly? The Carlyle Group made $680 million in capital calls to CALPERS during the financial crisis. Unlike Carlyle, CALPERS stood behind their investment.

Currently, Carlyle has other aggressive legal defenses. In a SemGroup investor lawsuit, Carlyle claimed puffery as its defense. In LifeCare's wrongful patient death lawsuits, Carlyle blames the feds, claiming patients became wards of the federal government when FEMA evacuation teams set up in New Orleans. LifeCare deaths came during another unprecedented disaster, Hurricane Katrina.

Carlyle works to delay justice, that is clearly precedented. How will Delaware judge Carlyle Capital Corp. Ltd. v. William Elias Conway Jr., CA5625, Delaware Chancery Court? Stay tuned.

Update: The lawsuit contends that Carlyle siphoned off $20 million in management fees while the fund only had $75 million to meet margin calls.

Executive Pay: A Matter of Perspective

Bloomberg highlighted the plight of underpaid Japanese executives.

Japan is the land of the bargain-basement CEO.

Recent disclosure laws revealed how few Japanese CEO's make more than $1.1 million. Contrast that with average U.S. CEO compensation of $3.5 million.

Will this information entice American branded companies to go head hunting in Japan? Doubtful.

The pattern has been in place for some time:

Average public company CEO compensation is 400 times that of the average employee.

By contrast, the ratio of CEO pay to that of the average employee has remained around 22 in Britain, 20 in Canada and 11 in Japan.

While production seeks low wage sectors of the global economy, management resides in protected turf.

CEO's populate each other's boards. Executive compensation formulas peg other American branded corporations as "competitors" for leadership talent. Boards vote on pay packages, for themselves and executives. It's not unusual for a director to make $250,000 to $333,000 a year in compensation. Those on multiple boards make out like bandits.

It seems Bloomberg has a blind spot.

Tuesday, July 6, 2010

Carlyle Group: A Great Decade

How much sweeter will the next one be? Congress gave private equity underwriters (PEU's) a free pass under financial reform. For the fourth time, politicians kept PEU's preferred taxation on carried interest, which made this trend line more enriching.

The rabbit hole deepens as Carlyle & company ply the globe for riches, ironically driven by public pension funds needing greater returns to meet promised commitments. Carlyle has a history of taking public money and sending jobs elsewhere. How will this interaction keep American employment in the doldrums?

Expect Carlyle to have another great decade, as Uncle Sam sees PEU's as the answer to America's ills in banking, infrastructure, healthcare, and education. May yours be as sweet.

Monday, July 5, 2010

Libya's SWF to Invest in BP?

Libya's top oil executive believes his country's sovereign wealth fund, the Libyan Investment Authority (LIA), should invest in BP. The IndependentUK reported:

"BP is interesting now with the price lower by half and I still have trust in BP. I will recommend it to the LIA," said Mr Shokri Ghanem, Chairman of Libya's National Oil Company. "I think that BP shares are good value for bargain hunters."

BP has large interests in Libya and is known to have a strong relationship with officials in the country.
Shokri signed the deal with BP's Tony Hayward as PM Tony Blair looked on.

That 2007 agreement helped release the Lockerbie Pan Am Flight 103 bomber. Col. Gadhafi's son spoke in front of a television camera, telling the freed bomber:

"It is to be said for the first time, you were present on the table in all commercial, oil and gas agreements that we supervised in that period.

You were
on the table in all British interests when it came to Libya, and I personally supervised this matter."

Libya's British oil deals helped free a convicted terrorist. Proceeds from that oil could free a serial safety abuser from financial handcuffs. Will Senator John McCain tweet on this?

Update: Four U.S. Senators noted the pattern. BP admitted they lobbied for the bomber's release.

Sunday, July 4, 2010

BP's Entrix

WaPo reported the Obama administration's collaboration with BP on assessing environmental damage from the Deepwater Horizon oil catastrophe. Their article stated:

BP spokeswoman Anne Kolton wrote in an e-mail that the company is working with state and federal officials "conducting joint sampling to gather information about the condition of the environment before the spill and to establish the environmental impacts of the spill and extent of restoration that is required."

In most cases, BP is represented by employees of Entrix, an environmental consulting firm it contacted within hours of the Deepwater Horizon explosion.
Entrix experienced sea changes after April 20. It was bought out by an Australian firm, Cardno Limited. Seller Riverside Capital owned 58% of Entrix, while employees owned 42%. The deal was announced June 10, but was effective June 1.

Highlights from Cardno's investor presentation on its acquisition of Entrix and ERI include:

--Entrix and ERI's clients include BP, Chevron, ExxonMobil, ConocoPhillips, TransCanada, PG&E, Dow Chemical, U.S. Army Corps of Engineers, FEMA and the U.S. State Department.

--Entrix is also regarded as a leader in the assessment of the environmental and economic impact of oil spills and the associated restoration, rehabilitation and monitoring of impacted sites. It has standing response management contracts with the world's leading oil producers.

--ERI is an environmental soil and groundwater remediation firm focused on the petro-chemical market in the U.S.
Cardno dialed into the sweet spot of BP's oil spew. My questions are:

1. Who is Entrix officially working for?

2. Did Entrix have a response management contract with BP? What did it specify?

3. Does Entrix have an incentive to refer remediation work to ERI, its sister division within Cardno?

On July 1 Cardno announced a trading halt to its stock, due to capital raising. Private equity underwriters (PEU's) fancy Australian companies.

Cardno's vision is to become a World Leader in infrastructure services. Most PEU's have an infrastructure division. They also have billions of capital to invest.

Will any PIPE their way into Cardno? The answer will come soon, as the trading halt is expected to end July 5.