Thursday, August 26, 2010

Carlyle's Latest Implosion: Oriental Trading

The Carlyle Group's Oriental Trading declared bankruptcy. It's the tenth failure for the politically connected private equity underwriter (PEU):

Carlyle Capital Corporation
BlueWave Partners
Hawaiian Telecom
IMO Carwash
Stallion Oilfield Services
Verari Systems

Oriental Trading
Oriental Trading was recently in the news for selling cadmium tainted children's jewelry. What happens to product liability cases under bankruptcy?

One might expect Carlyle's huge cash in to help Oriental Trading. Maybe they need funds to support other distressed deals.

In a sick irony, Carlyle affiliate Harrah's got $127 million back from the former owner of Oriental Trading, Terrance Watanabe. Carlyle will push big debt haircuts on others, but was unwilling to cut Watanabe a break.

The company said it plans to slash its debt - estimated at nearly $700 million - by more than 70 percent.
Carlyle will wipe out more than $500 million in debt. Harrah's wouldn't give Terrance a 15% break. Oriental ended up being unlucky in more ways than one.

Update 11-4-12:  Oriental Trading ended up owned by KKR and a smattering of other debt holders.  KKR and company sold Oriental Trading for a double to Warren Buffet's Bershire Hathaway.