Saturday, June 4, 2011

Commerce PEU Odor

President Obama nominated John Bryson, a private equity underwriter (PEU), as Secretary of Commerce.  Bryson is Senior Advisor at KKR, a PEU founded by Henry Kravis, a former buyout specialist at Bear Stearns.   John Bryson is one of 30 people in the Senior Advisor slot at KKR, a description of which follows:

The responsibilities of senior advisors include serving on the boards of our portfolio companies, helping us evaluate individual investment opportunities and assisting portfolio companies with operational matters. These individuals include former chief executive officers, chief financial officers and chairmen of Fortune 500 companies, as well as other individuals who have held leading positions in major corporations and public agencies worldwide. Several senior advisors also participate on our portfolio management committee, which monitors the performance of our private equity investments.

While significantly growing assets under management, PEU's milk affiliates via management fees and special dividends.  They frequently offshore jobs and profits.   KKR's most recent 10-K shows the firm with 69 Cayman Islands subsidiaries.

KKR grew from $31 million under management in 1976 to nearly $50 billion..

The George W. Bush years were good to PEU's

The new millennium brought the return of bedbugs and massive expansion of PEU's.   Both suck blood. Take KKR's ownership of HCA, the giant for-profit hospital company.  KKR acquired HCA in 2006.  The highly levered deal added $1.5 billion in interest expense.  They took $4.25 billion in special dividends before HCA's IPO.  After profiting from the sale of stock, PEU's bled HCA for another $181 million for termination of the management agreement.

PEU's have their eye on healthcare and public infrastructure.  KKR has a $515 million infrastructure fund, with none of the money yet invested.  How will John Bryson help his ilk profit as Commerce Secretary?  Stay tuned.

Update 6-5-11:  Bryson has been called a green energy nut.  Obama promotes green industry as saving America's economy.  Might it also help the Cayman Islands, given Carlyle Renewable Energy Coinvestment II (CAYMAN), L.P.?