Tuesday, November 30, 2010

Erskine Bowles: Fortune Grower

Erskine Bowles stated his desire to make another fortune as co-chair of President Obama's Deficit Commission.  Bowles failed to mention his current fortune.  Since May, Bowles acquired over 11,200 shares of Morgan Stanley, bringing his total to over 51,500 shares.  Of his 11,200 new shares, over 80% or 9,282 were free.  Bowles earned the shares for his Morgan Stanley board service.

During the same period, Bowles added over 7,000 new Cousins Properties shares.  He now holds 23,350 shares of Cousins.

Morgan Stanley traded at $24.46 today, valuing Bowles' holdings at $1.25 million

Cousins Properties closed at $7.42, making Bowles' stock worth roughly $175,000

Bowles fortune grew while he worked on the Deficit Commission. Their final report is due tomorrow.  How will it help Erskine become wealthier, his stated aim?  Stay tuned...

Update 12-1-10:  Morgan Stanley took out a $47 billion loan from the Fed.

Update 8-11-12:  Ezra Klein predicted Erskine Bowles will be the next Treasury Secretary.  It would be hard to grow another fortune at $170,000 per year, but the Government-Corporate Monstrosity offers so much more to connected insiders.

Update 8-26-14:  Bowles' Carousel Capital earned high fees from North Carolina's public pension fund.

Carlyle Shifts Gears: Sells UCI to Rank

The Carlyle Group slammed the brakes on UCI's upcoming independent public offering, instead selling the auto parts maker to New Zealand's Rank Group for $375 million.  NZHerald reported:

Carlyle bought about 90 per cent of UCI International in 2003 for some $800 million in cash. 
Don't cry for Carlyle.  UCI sold off three divisions in 2006.  Carlyle likely got their initial investment and more, via their signature strategies, management fees ($2 million per year) and  a whopping special dividend ($96 per share or $35.3 million in January 2007).

Funny, their 2007 10-K posted a different dividend amount:

In December 2006, we paid a special cash dividend of $35,305 per share on our common stock. Prior to that time, we did not pay dividends since the date of our incorporation on April 16, 2003.
This points to a major stock split.  How else did UCI change under 8 years of Carlyle ownership?  It turned Chinese.

Globalist Carlyle ramped up from exporting jobs, by exporting the whole company (recall three divisions were sold in 2006).  SEC filings show:

UCI had 6,900 employees as of December 31, 2004. In 2004, our net sales were $1,026.7 million

As of December 31, 2009, we had approximately 4,350 employees.  In 2009, our net sales were $885 million.

As for the state of reporting, Carlyle didn't pay $800 million in cash for UCI.  SEC filings show:

The purchase price paid was $808 million, plus transaction fees. The Acquisition was financed through a combination of debt and $260 million in cash.

I find it somewhat reassuring that Greed and Rank got together on this deal.  Who's next in Carlyle's Great Cash-In?

Update 7-7-11:  Rank builds its auto parts empire on a mountain of debt.

Update 3-28-16:  UCI bonds near default with the postponement of a $17.3 million interest payment

Update 6-11-16:  UCI could not bear the debt taken on with Carlyle's monetization and declared bankruptcy

Monday, November 29, 2010

SERSO Invests with Carlyle Group for 4th Time

The School Employees' Retirement System of Ohio (SERSO) approved a $30 million investment in Carlyle Realty Partners VI.  The Carlyle Group is targeting Realty VI as a $1.5 billion fund.

SERSO's  first three Carlyle Group investments are on track to:

"return all of the pension fund's capital originally invested into the commingled fund."
Real estate investments between 2005 and 2008 faced serious headwinds.   Will the fourth roll of the dice will bring charm to the SERSO? Carlyle is clearly back on track.

Saturday, November 27, 2010

Will Santa bring Carlyle an Irish Bank?

Final bids for Irish bank EBS are due the week before Christmas.  The Carlyle Group joined Wilbur Ross and Cardinal Asset Management in bidding for EBS.  Other governmental gifts to Carlyle, a politically connected private equity underwriter (PEU), include:

$2.3 billion cash on BankUnited, courtesy of President Obama's FDIC.  Recipients Carlyle & Ross are partners in death.

President George W. Bush gifted ManorCare to The Carlyle Group.  Bush & Carlyle failed 25 long term acute hospital patients after Hurricane Katrina.

Uncle Sam got warrants for 10% of BankUnited, despite putting up two thirds of the new capital. Carlyle and Ross will offer the Irish government the same deal, warrants to take a 10 percent stake in EBS.

Twas the week before Christmas and all through the moor
Not a creature was heard, not even a PEU whore...

Will EBS get Irish IMF funding? I mean only the cash, leaving the public high and dry (and with the repayment obligation).

Friday, November 26, 2010

Carlyle's Chinese Chicken Could Supply KFC

The Carlyle Group bid for control of KFC Holdings Bhd., Maylasia's biggest fast-food operator.  QSR Brands' holdings include the Pizza Hut chain of restaurants in Malaysia and Singapore.While Bloomberg and TheStar highlight Carlyle's franchise track record, they ignore Carlyle's Asian poultry grower, CP Pokphand.  QSR has three brand opportunities for poultry growers, KFC, Rasamas, and Ayamas retail.  Should CP Pokphand garner QSR sales, might China Fishery Group be next?

Retail suddenly has Carlyle's interest.  The Carlyle Group loves layers of profit.  Add that China will soon unleash private equity underwriters (PEU's). FT reported:

“A three-to-five-year investment is relatively long in the private equity world so we’re quite transitory,” says David Rubenstein, Carlyle co-founder. “The Chinese government also recognizes how we can help local companies acquire western competitors and technologies and that’s something they’re very interested in.  GE is not teaching people in China to buy companies in the west like we are.”
This should work out badly.

Update11-29-10:  QSR chose to stay independent, rejecting all bids.

Carlyle's Offshore Incorporations

The Carlyle Group will sell Offshore Incorporations, a Hong Kong based company.  WSJ reported:

Established in 1986, the Offshore Incorporations Group sets up off-shore companies registered in jurisdictions of Anguilla, Bahamas, British Virgin Islands, Cayman Islands, Delaware, Hong Kong, Mauritius, Samoa, Seychelles and Singapore, according to its web site. 
Carlyle's co-founders have a Cayman Islands fund, where they park their massive profits.  Given all of Carlyle's cash-in's, DBD Cayman and DBD Investors V should be grossly obese.  However, it takes time for financial turkey to work through the digestive process.

(Link to dollar-turkey art)

OSI Systems' Rapiscan

OSI Systems Inc. has forty seven subsidiaries, thirteen of which bear the name Rapiscan. Rapiscan makes the naked body scanner, currently multiplying in U.S. airports.

ECIL Rapiscan Ltd.-- Andhra Pradesh, India

The Annual Report describes this subsidiary (on page 47).

In 1994, we, together with an unrelated company, formed ECIL-Rapiscan Security Products Limited, a joint venture organized under the laws of India. We own a 36% interest in the joint venture, our Chairman and Chief Executive Officer owns a 10.5% interest, and our Executive Vice President and the President of our Security division owns a 4.5% ownership interest.
Rapiscan CEO Deepak Chopra (not the M.D.) is politically connected, flying with President Obama to India.  Ex-Homeland Security Chief Michael Chertoff consulted with the firm and is a huge proponent of naked body imaging.

Ajay Mehra is President of Rapiscan.  Their DEF-14A states:

Ajay Mehra is the first cousin of Deepak Chopra.

Other Rapiscan subsidiaries include:

Rapiscan Systems Electrical Trading LLC
Abu Dhabi

Rapiscan do Brazil Ltda
Rio de Janeiro, Brazil

Rapiscan Laboratories, Inc.
Sunnyvale, California

Rapiscan Systems (Cyprus) Limited
Nicosia, Cyprus

Rapiscan Systems Australia Pty Ltd
Victoria, Australia

Rapiscan Systems Hong Kong Limited
Hong Kong

Rapiscan Systems Limited
Salfords, United Kingdom

Rapiscan Systems Oy
Espoo, Finland

Rapiscan Systems Pte. Ltd.

Rapiscan Systems Sdn. Bhd.
Johor Bahru, Malaysia

Rapiscan Systems, Inc.
Hawthorne, California

Rapiscan Systems, S.A. de C.V.
Colonia Juarez, Mexico

Only two, roughly 15%, of Rapiscan's corporations are American.  This fits with the un-American nature of their product.

Two large holders have 19% of OSI's stock:

Wells Fargo & Company(4)

Wellington Management Company, LLP(5)

One month after the underwear bomber leaked flames on a Detroit bound jet, OSI released earnings:

We expect to benefit from the recent announcements by the TSA and other international authorities to expand the use of full body scanners at airport security checkpoints. We are currently fulfilling the initial order quantities from the $173 million Indefinite Delivery, Indefinite Quantity (IDIQ) contract with the TSA, which is for multiple units of the Rapiscan Secure 1000 Single Pose advanced checkpoint security screening system.
Ten months after a Nigerian terrorist set himself ablaze, OSI released earnings:

"Our Security Division is well-positioned to realize significant growth. With outstanding bookings of $112 million during the first quarter, our Security Division’s backlog grew to a record $205 million by quarter-end, which is a 42% increase since the beginning of the fiscal year. We were awarded several large contracts during the quarter including, among others, $35 million of orders from the TSA for checkpoint X-ray baggage inspection systems to screen passengers’ carry-on baggage. These TSA orders are among the first to be placed under the terms of our recently awarded, five year $325 million Indefinite Delivery, Indefinite Quantity (IDIQ) contract. Other orders include a contract worth up to $12 million from the U.S. Department of Homeland Security (DHS) to assist DHS in conducting transformational research and development initiatives to advance the country's nuclear materials detection capabilities; $31 million of orders from U.S. government agencies for cargo and vehicle inspection systems and people screening systems; and a $9 million order from the European Customs Agency for cargo and vehicle inspection systems.”

Rapiscan doubled orders from TSA in less than a year.  That doesn't count their Department of Defense work.

Growth needs capital and banks lined up to provide $250 million in loans to OSI.  With money and political connections, the Rapiscan train won't jump the tracks anytime soon.

Hold on to your nuts and drive, or fly and let the TSA do it for you.

Update 6-29-11:  Public safety won't interfere with Rapiscan's money machine anytime soon, despite cancer concerns amongst TSA workers.

Tuesday, November 23, 2010

Greedier Carlyle to Cash in on Kinder Affiliate

Kinder Morgan and its 180 subsidiaries will go public in The Carlyle Group's latest profit-gasm, a $1.5 billion IPO.  Yes, Carlyle has to share proceeds with Riverstone Holdings, its joint venture energy partner, and two other private equity underwriters (PEU's).  Together, Carlyle & Riverstone hold 22.4% of the company.

Carlyle and company bled Kinder Morgan of distributions during its ownership. 

What is Carlyle's total profit with IPO proceeds?  They'll tell investors, but the public has no right to know.  It's "non-public information."  For those curious about The Carlyle Group's "great cash in," it continued with Britax and Philosophy sales.  Profits from sales have Carlyle back on rocket track.

What Carlyle won't do with the money?  Pay back Carlyle Capital Corporation investors or Texas taxpayers.  Meanwhile, private equity tax rates remain low.  There's nothing kind about PEU's.

Sunday, November 21, 2010

General Wesley Clark PEU

General Wesley Clark highlighted the need for alternative energy in his CSPAN appearance.  He failed to mention his financial conflicts of interest. His Rodman & Renshaw Capital Group bio states:

General Clark serves on the board of directors of AMG Advanced Metallurgical Group N.V., a global producer of specialty metals and metallurgical vacuum furnace systems, Bankers Petroleum Ltd., a Canadian-based oil and gas exploration and production company, Juhl Energy, Inc., a wind energy provider and Prysmian S.r.L.a provider of high-technology cables and systems for energy and telecommunication. He is a former director of Adams Aircraft Industries, Inc., Argyle Security, Inc., CVR Energy, Inc., Nutracea Inc. and Summit Global Logistics, Inc.

General Clark was appointed Chairman on July 10, 2007 and became a director on July 22, 2007. He was appointed chairman of Rodman & Renshaw Holding LLC (“Holding”), our predecessor, in January 2006. In addition to being an educator, writer and commentator, General Clark is chairman and chief executive officer of Wesley K. Clark & Associates, a strategic advisory firm he founded in March 2003. From June 2000 through March 2003, General Clark was a managing director at Stephens, Inc., an investment banking firm based in Arkansas.

Clark is hardly unusual in failing to declare his conflicts of interest, while selling advisory services and pushing positions that benefit his financial interests.  Rodman gave Clark an incentive to steer business to the firm:

Wesley K. Clark is employed by us as the Chairman of the Board and serves as a Director. His employment commenced January 30, 2006. Under his current employment agreement, he receives an annual base salary of $250,000. In addition, he is eligible to receive the following cash bonuses: (i) up to 15% of fees received by R&R, our broker-dealer affiliate, in connection with any transaction introduced by him; and (ii) a discretionary amount at the end of each calendar quarter.

I smell a PEU, private equity underwriter.  Greed will save America.  Who knew it would be shown on C-SPAN, even local news?

Several C-SPAN callers cited Eisenhower's Military-Industrial Complex, now on steroids.  Generals Wesley Clark and Peter Pace are poster boys for the Government-Corporate Monstrosity.  Clark's last questioner used the  F word, fascism.  C-SPAN never raised the General's current employment, board positions, or their potential conflicts of interest.  Why am I not surprised?

Update 4-24-23:   Rodham and Renshaw changed names before shutting down brokerage services in 2012.  It earned a $315,000 fine from the SEC before that event occurred.

Saturday, November 20, 2010

Carlyle Group's Delicious Decade

The Carlyle Group grew from $3.3 billion in assets under management in 2000 to $97.7 billion in 2010.  Now that's a delectable PEU decade.  (PEU stands for private equity underwriter).

Carlyle sold virtually any affiliate not nailed down in the last year.  Got to beat any tax hikes, especially on carried interest.

You haven't heard of PEU's.  Well, they're the rage.  Gonna save all of America's ills, education, health care, infrastructure...   Heck, they're going to save our relationship with Mexico, according to former Bush White House Homeland Security Adviser Frances Townsend.  Fran holds a spot at Monument Capital, a Carlyle Group franchisee.

You name it, PEU's are the answer to our problems, except one.   Greed...

Update:  In contrast to Carlyle's experience, over half of Americans (54%) found the past decade the most difficult of their life.  Correlation or cause and effect?

Wednesday, November 17, 2010

Carlyle Group: Dunkin' Debt for Dividend

Dunkin Brands will float more debt, of which $500 million will be used to pay dividends to The Carlyle Group, Bain Capital and Thomas H. Lee Partners. Private equity underwriters (PEU's) dunk affiliates via management fees, dividend bleeding and flipping holdings.

America runs on Dunkin'.  PEU's run on meanness & greed.

Carlyle's Booz Prices at Low End of Range

The Carlyle Group's Booz Allen Hamilton priced at $17 a share, at the bottom of the expected range. Bloomberg reported:
Carlyle, the world’s second-largest private equity firm, is taking Booz Allen public in the biggest week for U.S. initial offerings since 2008.

Other independent public offerings (IPO) have a Carlyle tie. GM is headed by ex-Carlyle manager Daniel Akerson.  Harrah's is a holding in Carlyle Mezzanine Partners II, like Booz Allen Hamilton.  Maybe, ARINC will sell this week.  It's on the block.

Update 6-7-11:  Uncle Sam keeps on giving to Booz, still majority owned by Carlyle.

Update 9-2-11:  BAH traded down over 6% to close at $15.02.  Bad timing for Carlyle's IPO. 

Monday, November 15, 2010

Hell Hound Cerberus Gets Vatican & AG Blessing

Cerberus Capital Management acquired Caritas Christi Health System with the blessing of the Vatican, the Boston Archdiocese, and Massachusetts Attorney General Martha Coakley.  Coakley looked for conflicts of interest.  Here's what she found:

The Board and Senior Management appropriately disclosed and managed conflicts of interest that existed.  Members of the Board and Senior Management had no existing financial interests or business relationships with Cerberus.

The Steward Board has six of seven slots occupied by private equity underwriters (PEU's).  For-profit firms typically pay board members, some handsomely.  Board members often are required to hold equity in the firm.

PEU's entice senior management with future pay.  While they claim such pay is "performance based," the big payday comes when Cerberus flips Caritas Christi.  For senior management to participate, they must hold an equity stake.

Any incentive compensation granted to any members of the senior management team by Steward will be designed so as to reward individuals based on post-Closing  performance.
Surely the hell hound hinted to senior managers as to their future pot of gold?

The government of Massachusetts couldn't compel Cerberus to make clear their resources.

As Cerberus is privately held, its true size and the magnitude of its resources cannot be independently verified.

Cerberus pays an external auditing firm, does it not?  One might expect that kind of independent verification from a firm buying the largest nonprofit community hospital system in New England.

State and local governments expect to collect as much as "$100 million in taxes over the next four to five years."  The Attorney General's office received $1.5 million to conduct assessments on the impact of the acquisition over time. 

Caritas' pension plans have been frozen for some time.  While underfunded by as much as $225 million, they have assets.  The size was never stated in any documents.

Purchaser shall have significant input into the selection of asset managers for Pension Assets

Given Cerberus sells to pension funds, what can they do with a captive pension, one now insured by the feds?

PEU's are infamous for management fees and dividend bleeding.  Neither are prohibited under the agreement.

Sellers and Purchaser shall enter into a management services agreement in a form reasonably satisfactory to Purchaser.
It remains how much Cerberus charges for oversight.  It will take an S-1 to find out.  An IPO could come in three years.

There are many twists and turns to the Caritas-Ceberus deal.  Note:  Martha Coakley found Caritas Christi unsustainable, three years into Massachusetts health reform.  What does this say about stressed safety net hospitals, given Uncle Sam's help doesn't arrive in earnest until 2014?

America's health care future has a distinct PEU odor.  Uncle Sam, state governments, even the Vatican, don't mind the smell.

Update 1-26-24:  American Prospect summarized the damage Cerberus and Steward Healthcare did to Massachusetts hospitals.  Steward hired a restructuring advisor and may be headed to bankruptcy.

Update 3-8-24:  Axios did a story on Cerberus and Steward.  It accuses Cerberus of acting naively.  Haahaahaahaaa!  Once again the smartest guys in the room go stupid...

Sunday, November 14, 2010

Carlyle Group's BAH IPO Could Go This Week

The Carlyle Group's independent public offering (IPO) for Booz Allen Hamilton (BAH) could launch this week, according to MarketWatch.  Champagne toasts would be in order if Booz priced at $18.00 a share.  Carlyle paid $5.40 per share for BAH, then bled the company for $5.73 a share in dividends.    In addition to holding free shares, Carlyle will control 70-71% of voting power after the IPO, including 78-79% of Class A voting stock.  The debt picture looks like this, according to Booz's most recent S-1A:

Senior secured loan facilities provided a $125.0 million Tranche A term facility, $585.0 million Tranche B term facility, $350.0 million Tranche C term facility and $245.0 million revolving credit facility. As of September 30, 2010, BAH had $1,013.8 million outstanding under their senior credit facilities.

$550.0 million under a mezzanine term loan facility. As of September 30, 2010, on an as adjusted basis after giving effect to this offering and the use of the net proceeds therefrom, which is based on the midpoint of the price range set forth on the cover page of this prospectus, BAH would have had $239.8 million of debt outstanding under our mezzanine credit facility

Dividends paid in July and December 2009 amounted to $612.4 million or $5.73 per share.

On July 27, 2009, we declared a special cash dividend on all issued and outstanding shares of Class A common stock, Class B non-voting common stock, and Class C restricted common stock in the aggregate amount of $114.9 million payable to holders of record as of July 29, 2009. On December 7, 2009, we declared another special cash dividend on all issued and outstanding shares to the same equity classes described above in the aggregate amount of $497.5 million payable to the holders of record as of December 8, 2009.

BAH intends to use the net proceeds received from the sale of Class A common stock to repay $223.2 million of their mezzanine credit facility and a $6.7 million prepayment penalty.

Given the way corporate debt traded the last two years, will another arm of Carlyle collect the $6.7 prepayment penalty? 

Booz is helping Uncle Sam transform healthcare, which means more PEU hospital deals, dividend bleeding, then "debt retiring" IPO's .  Expect many more Booz-like deals under health reform. Watch for 10-for-1 stock splits prior to any IPO. You'll know by the PEU odor emanating from layers of corporate shells.

P.S.  The latest S-1A corrected Carlyle's management fee information.

Tuesday, November 9, 2010

PEU's Stick HCA for Another Dividend Bleeding

KKR and Bain Capital will bleed HCA for another $2 billion in 2010.  This is on top of $2.25 billion paid out earlier this year.  Bloomberg reported debt will fund the latest dividend.

HCA, the largest U.S. hospital chain, said today it will sell $1.53 billion in high-yield debt to finance the payout to its private-equity owners.
Private equity underwriters (PEU's) don't call this bleeding.  That's too crass.  PEU's prefer monetization.  Owners expect to make three times their initial investment in HCA. 

Interest costs are included in hospital cost reports.  Over time, this will impact reimbursement from Medicare and Medicaid.  Patients and Uncle Sam will pay.

Health reform has PEU's dealing hospitals.  What's happening with HCA could be Caritas Christi in four years.  Will Cerberus have exercised Catholic identity buyout by then?

Update 11-14-10  Offering debt for dividends is PEU sleight of hand, given later IPO proceeds are marketed as "reducing debt."  This masks prior bleedings.  Take Carlyle Group's Booz Allen Hamilton.  Dividends, totaling $5.73 per share, gave Carlyle free shares.  They paid $5.40 per share to acquire BAH  The public will pay 3.3 times what Carlyle did in August 2008, $18 per share for 14 million shares.  Proceeds will be used to "pay down debt"  Is it the original debt or debt used to pay PEU's handsome dividends?

Update 5-24-11:  PEU's took a final vial of blood from HCA with a $181 million fee for terminating their management agreement.

Sunday, November 7, 2010

Heads Roll at HealthScope under Carlyle & TPG

The top three positions at HealthScope will change under The Carlyle Group's and TPG's ownership.  Months ago, CEO Bruce Dixon extolled the virtues of private equity underwriters (PEU's).  He said:

"It's good timing for the group to go private and be off the front pages for a while, while we try to grow," he said.

"The benefit of private equity is . . . you can fast-track things without upsetting investors."
Apparently,  a PEU benefit is upsetting current leadership.  In addition to Dixon, HealthScope will get a new COO and CFO.  Did leadership get a look at EBDITA targets in light of increased interest expense, transaction and annual management fees?  HealthScope executives should understand a bleeding, even pathology, which PEU's have in spades.  

Rubenstein Supports DC Schools

WaPo's Bill Turque highlighted an "Academy Award like" teacher recognition ceremony for Washington D.C. schools:

But if the evening signaled a transition in tone and leadership, it also underscored the growing influence of private money in public education -- led by many funders who support changes in teacher pay and evaluation that are still subject to considerable debate.

The event was organized as a fundraiser by the D.C. Public Education Fund -- the nonprofit fundraising arm of the school system -- and sponsored by a group of corporations and nonprofits that are frequent contributors to local education causes, including CityBridge, McKinsey & Co., Mark David Ein, Verizon, Marriott and Alice and David Rubenstein, the latter being the co-founder and managing director of the Carlisle Group, the giant private equity firm.

To Bill and his editor:

It's The Carlyle Group, not Carlisle. 

Carlyle dropped their private equity underwriter (PEU) label for GAAM, global alternative asset management..  The Private Equity Council added Growth Capital to its name.  Will WaPo's Kaplan update their knowledge testing to reflect these developments?

WaPo has much in common with Carlyle, given its many subsidiaries.  No gold star for the education writer or his editor.

Saturday, November 6, 2010

Fannie Mae Paid Treasury $2.1 billion Dividend, Asks for $2.5 billion

The AP reported, I assume with a straight face:

Government-controlled mortgage buyer Fannie Mae is asking for $2.5 billion in additional federal aid after posting a narrower loss in the third quarter.Fannie Mae said Friday it lost $3.46 billion, or 61 cents a share, in the July-September quarter. That takes into account $2.1 billion in dividend payments to the Treasury Department.
These machinations are intended to do what?  Make Treasury look better with a $2.1 billion collection, while another account, maybe from the Fed, shells out $2.5 billion.  Politicians can manipulate and hide money.  One can ask our newest National Security Adviser.  Tom Donilon covered for Fannie Mae, while profiting immensely.

Friday, November 5, 2010

Carlyle Group Oars into Central Pacific Bank

The Carlyle Group knows Sheila Bair won't hand out $2.3 billion in cash with every bank deal.  Carlyle's recent bank deals have been with TARP recipients, those still owing Uncle Sam.  Honolulu's Central Pacific Bank follows Hampton Roads Bankshares into Carlyle's portfolio.

Carlyle and Anchorage Capital plan to invest $98 million in equity (75 cents a share) in Central Pacific, which has struggled under the weight of commercial real estate and construction loans.  While existing shareholders will take a 50% haircut, they won't be zeroed out, like BankUnited shareholders under the FDIC-Carlyle/Blackstone/Ross/Centerbridge deal. 

Carlyle's 24.9% of Central Pacific will be held where?  If it's like Hampton Roads Bankshares, look offshore.  That's where pirates roam, when they're not raiding the federal treasury.

Thursday, November 4, 2010

Carlyle's $333,000 million Management Fee for Booz Allen Hamilton

Booz Allen Hamilton's S-1/A states on page 67:

Increase to management fees paid to Carlyle of $333,000 million (see Note 19 to our consolidated financial statements for additional information regarding the management fees)
Carlyle is known for bleeding affiliates via transaction fees and management fees.

Booz Allen Holding pays TC Group an aggregate annual (management) fee of $1.0 million for such services, plus expenses. In addition, Booz Allen Holding made a one-time payment to TC Group of $20.0 million for investment banking, financial advisory and other services provided to Booz Allen Holding in connection with the acquisition.
 Another method is special dividends.  The S-1 indicated:

Special dividends in the aggregate amount of $114.9 million and $497.5 million as of July 29, 2009 and December 8, 2009.
That's over $610 million.  Dividends alone sent Carlyle into the black.   Bloomberg reported Carlyle paid $5.28 per share.  The $497.5 million dividend equaled $4.642 per share, while $114.9 million represented a dividend of $1.087 per share.  That's $5.73 per share, or  45 cents profit per share, prior to any IPO.

This is courtesy of Uncle Sam, the source of 98% of Booz's revenue.  Carlyle loves the federal wallet.  Through Booz's vast swath of government advisory services, Carlyle has a ringside seat to future federal check writing.  They aren't ready to kill the goose laying the golden egg.

I found another oddity on page II-3.

On May 15, 2008, we sold 10,000 shares of common stock to Carlyle Partners V US, L.P. for aggregate consideration of $10.00

The IPO will pluck but a few feathers.

At the middle of the offer range, Booz Allen would be valued at about 37 times earnings 

Investors should read the prospectus to see how much Carlyle profited pre-IPO.

Disclosure:  A note on page 53 did not have the million after the $330,000 increase in Carlyle's $1 million management fee.

Bayh Related Medical Innovation Funds

Susan Bayh, wife of Senator Evan Bayh, saw three of her firms benefit from Uncle Sam's latest PPACA largess.  Recipients of medical innovation grants include:

Dyax--nearly $1.5 million

Virtually all the federal funding was for 2009, with less than $90,000 for current year expenses.  That's a sweet cash injection.  Senator Bayh wrote in a post election op-ed:

We also overreached by focusing on health care rather than job creation during a severe recession. It was a noble aspiration, but $1 trillion in new spending and a major entitlement expansion are best attempted when the Treasury is flush and the economy strong, hardly our situation today. 
 Will Evan encourage his wife to return the money. at least until the Treasury is flush?

Update 1-23-11:  The Obama administration will establish the National Center for Advancing Translational Sciences, a federal research center for drug discoveries.  This comes atop the $1 billion in medical innovation grants recently distributed.  President George W. Bush took on drug company liability.  The Obama team took on a portion of retiree health insurance via ERRP and now will help subsidize research costs.  

Wednesday, November 3, 2010

Uncle Sam's $1 billion Health Giveaway

Health & Human Services revealed recipients of PPACA's latest cash bonanza, medical discovery grants and tax credits.  Like the $5 billion early retiree reinsurance program (ERRP), thousands of companies were approved in a short time frame.

One recipient is Quest Diagnostics, with ties to Gail Wilensky, former Medicare Chief, and Nancy-Ann DeParle, White House Health Czar.  Quest got roughly $490,000 for two projects.  However, Quest has an equity investment in SomaLogic, which raked in $1.9 million.  Over 75% of the funding was for work done in 2009, i.e., already expended.  Nearly $2.5 million for Quest affiliated projects?  Not bad for a day's work.  Might Gail send Nancy a thank you card?

A flummoxed President Obama need not ponder why $6 billion in corporate healthcare juice didn't impact election returns.  Virtually no voters knew of the programs.  Instead, the public was bombarded with inflammatory nonsense.  Funny, I saw no ad citing 51 million Americans without health insurance.  No candidate framed health reform as a seismic shift of responsibility from employers to the individual

While individuals bear more, even going without, corporations line up for goodies.  Will Republicans call for repeal of these corporate giveaways?  My bet, Reds stay mum. The uninsured don't vote.  None of them.

Monday, November 1, 2010

Carlyle Group's Yashili: Hong Kong Gags on IPO

Yashili International Holdings' IPO performed below expectations, raising $348 million vs. $458 million.  The shortfall continued after the public offering, as shares dropped 12% on the Hong Kong exchange.

Yashili performed like the tainted milk it once sold.  The Carlyle Group invested in Yashili during the toxic ingredient scandal. 

Carlyle owned 853.6 million shares in Yashili as of Oct. 20, according to data compiled by Bloomberg.
The problem was systemic in China, given 22 dairies sold toxic milk, sickening 300,000 children and killing six infants. Is Yashili's Hong Kong rejection due to poisonous ingredients or its toxic PEU partner?