Wednesday, June 22, 2011

PEU's High Finance with HCA

A former Bloomberg reporter contacted me in regard to private equity underwriters (PEU's) and health care.  HCA came up, including Bain Capital and KKR's dividend bleeding.  The PEU pair, along with founding Frist family members, stuck HCA for $4.25 billion in dividends/distributions prior to taking the company public. 

Bloomberg's current report on HCA's capital structure reveals:

Total assets -- $23.8 billion
Total liabilities -- $34.6 billion
Shareholder equity -- negative $10.8 billion

Who lends to a homeowner who owes more on the house than its value?  What Wall Street firm would float that deal?  Here's the crew that packaged and marketed $3 billion in debt in November 2010.  It financed HCA's payola to owners.. 

Bank of America Merrill Lynch
Barclays Capital
Citigroup Global Markets Inc
Credit Suisse
Deutsche Bank Securities Inc
Goldman Sachs
JP Morgan
Morgan Stanley
Wells Fargo Securities LLC

This exact same group handled HCA's independent public offering in March 2011.  Did double deal fees, from the debt offering and IPO, help Wall Street avert their eyes to HCA's burgeoning debt load?  Here's who got IPO proceeds:

Hercules Holding II LLC, an affiliate of Bain Capital, certain HCA directors and executives
It could be summed:  "HCA floats debt for owner's dividend.  Register rings a second time for for owners and executives in IPO."  It's greed junkie heaven.  All in a "God's work" day. 

What can the average citizen learn from this?  If your house is underwater, find a realtor to borrow from.  Pocket half the borrowing.  Then use the realtor to sell the house in stages, while pushing back payment obligations.  It's the PEU way.