Saturday, November 26, 2011

Policy Making PEU Billionaires

NYT reported:

Over the past 30 years, as the gap between wealthy and poor grew ever wider, total philanthropic giving almost tripled, In an age of widening partisanship and plummeting trust in government, this outpouring of philanthropy has produced a distinct breed of philanthropist: The policy-making billionaire.
The Times piece went on to mention Carlyle Group co-founder William Conway.  Private equity underwriter (PEU) Conway is a well know tax hater. 

William E. Conway Jr., a founder of the Carlyle Group investment company, is planning to give away $1 billion of his personal fortune, and is said to be considering how his money can aid in financing major infrastructure projects
Note:  Conway's PEU firm has a $1.15 billion infrastructure fund, itching to invest.

In keeping with the anti-government spirit of the times, the new philanthropists  share a disdain for established politics and an impatience with the slow churn of old-fashioned policy making.
Billionaires shed that disdain when they visited Capital Hill to keep their preferred status regarding "carried interest" taxation.  Carlyle's Conway leads a virtual nonprofit organization, paying a mere 1% in taxes on its $9 billion in net income over the last five years.

Also, PEU's saddle affiliates with dramatically increased interest expense and new management fees, often taking away tax liability for years.  It's a business model that "starves the beast." 

“As corporate citizens of the world, it is our responsibility — our duty — to serve the communities where we do business, by helping to improve, for example, the quality of citizens’ education, employment, health care, safety, and overall daily life, plus future prospects.” 
Conway announced his planned $1 billion donation in late September.  It came on the heels of Carlyle's strong arming of Brintons, a British carpet maker.  Carlyle dropped the pension fund, cut UK jobs and closed plants. Those moves dimmed the future prospects of many workers.  It also shifted retirement responsibility to a public, i.e. government entity.

Did Brintons employees get first dibs at Conway's $1 billion?  Hardly.

The very loftiness of (the above) ambitions raises a significant question: Can even the very wealthiest philanthropists finance public services on the scale necessary to achieve social change — that is, on the scale of government itself?

Instead of seeking to supplant what government does, philanthropists can finance advocacy to change it.
Kaching!  It's back to Carlyle's distinctive competency, influence peddling.  PEU money finances politicians.  It's used to lobby for preferred tax and regulatory status, as well as steer chunks of Uncle Sam's trillion dollar budget to affiliates.

Carlyle kaching is used to settle legal investigations and fund attorneys offering laughable defenses (in the case of LifeCare Hospitals' 25 patient deaths after Hurricane Katrina and SemGroup's bankruptcy).

The Times piece sprayed perfume over the PEU stench.

Future Suggests Government Gives & Gives

Chicago Tribune reported on proposed tax breaks for two large Illinois employers, Sears and the CME Group:

CME Group, parent of the Chicago Board of Trade and Chicago Mercantile Exchange, has threatened to leave the state in protest of a temporary increase to the state's corporate income tax rate. The proposal (new tax break) would tax income from just 27.54 percent of electronic transactions on local exchanges, costing the state an estimated $100 million a year.
Ironically, CME is looking at a government sponsored insurance system in the aftermath of MF Global's implosion.

Under discussion is the feasibility of a government-sponsored insurance fund modeled after the Securities Investors Protection Corporation (SIPC). Another option is an industry-sponsored bailout fund

The program would insure customer funds in the case of a broker default, but would not cover outright theft of customer money, as in the case of Jon Corzine's MF Global.

CME Group offered $250 million toward MF Global customer losses, then upped it to $550 million.  Their news release stated:

Our primary concerns are the protection of our customers at CME Clearing and the integrity of all futures markets.

Money is fungible and CME Group faces a crisis of existence, but I wonder how long government insurance programs can cover losses and not participate on the upside?

As an aside, will Jon Corzine ever see time behind bars?  The normal course of events is a multimillion dollar settlement with no admission of guilt.  Those executing the move include Columbia/HCA's Rick Scott, now Florida Governor and Carlyle's co-founder threesome of Rubenstein, Conway and D'Aniello, PEU billionaires with ready access to Red or Blue politicians.

CME dramatically increased its lobbying in 2007 as the financial world darkened.  2008 brought the failure of Carlyle Capital Corporation, Bear Sterns, and Lehman Brothers:

CME's political donations seem to fund the winning team.

Don't forget Jackie Clegg-Dodd, wife of Senator Chris Dodd of Dodd-Frank fame, sits on CME's board.  Will $3 million a year in lobbying and political donations buy CME a government-sponsored insurance fund?  Stay tuned, more shit is on the way.

Friday, November 25, 2011

JP Morgan PEU Does Chinese JV

WSJ reported:

JP Morgan Asset Management, an arm of U.S. bank JP Morgan (JPM), has received permission from the Beijing city government to create a US$1 billion RMB fund under the new Qualified Foreign Limited Partner program

The fund will be named the JPM China Private Equity Fund.

The Private Equity Group is a bottom-up, opportunistic investor in all private equity investment types, stages of business development, industry sectors and geographical locations, and during all market environments.

JP Morgan joins other "bottom feeding" PEU funds in China, including The Carlyle Group, Blackstone, TPG Capital and the Infinity Group

JPM China is a joint venture with the Beijing city government.  This brings to mind a statement from an ex-Bloomberg reporter:

I can't tell if the PE guys are being insincere when they talk about China or they are actually stupid. There is no way that the Chinese govt would let American firms come in and strip cashout of Chinese companies the way they've been allowed to in the US! I imagine the Chinese welcome the PE guys because they see it as another way (through PE orchestrated mergers) to get hold of more American technology and companies and jobs.
A decade of US job shedding to China will continue courtesy of bankster and tax avoider JP Morgan.  Morgan joins Carlyle in helping America's greatest future enemy, at least that's the view of a Carlyle Group Managing Director :

"China does view financial power as an exercise of power in a way that the United States does not. The United States only exercises financial power through its corporations.”
I'll take that as an admission of America's Government-Corporate Monstrosity, Eisenhower's Military-Industrial Complex on steroids.

Update 12-19-20:  Chinese bank pairs up with PEUs.

Carlyle Affiliate's Tear Gas in Tahir Square

Ahramonline reported:

Egyptian security forces are digging deeper into their budget with each volley of increasingly fatal US-made tear gas they launch at demonstrators.

The human cost of the violent crackdown in central Cairo is increasingly clear -- among the 39 fatalities reported to date, several are said to have died of asphyxiation caused by tear gas.
The article cites Combined Systems Inc., an American tear gas provider financed by The Carlyle Group.  Carlyle provided debt financing for Point Lookout Capital Partners' purchase of CSI in 2005. 

CSI produces its ‘riot control devices’ under its law enforcement brand name, Combined Tactical Systems (CTS)

Uncle Sam provided $1.7 million in "toxicological agents" -- "including tear gases and riot control agents" -- to Egypt in 2010.  It's not clear how much came from CSI/CTS.

Gas manufacturer CTS has been linked with the 'non-lethal' weapons used by Israeli forces that have been unleashed on Palestinian protesters, reportedly causing several deaths due to asphyxiation.

I noted Carlyle's link to CSI during the 2009 G20 meeting in Pittsburgh, where U.S. authorities implemented new crowd control and dispersant measures.

Point Lookout might pay attention to Carlyle's back door takeovers of Mrs. Fields and Brintons.  Carlyle Group co-founder David Rubenstein does debtor repossession in addition to hostile takeovers.  30% annual returns must be made...

Update 1-30-12:  CSI's product line is being used by U.S. Homeland Security to clear Occupy camps across the U.S.   Flashbangs, smoke, tear gas and bean bags. It sounds like money to The Carlyle Group's Combined Systems Inc.

Update 6-3-15:  Carlyle, Hillary Clinton and Bill Clinton intersected in Egypt according to an IBT Times investigation.

Update 6-6-20:  Streetwear retailer Supreme is under fire for its connections to The Carlyle Group, given Carlyle's history in war making and oppressing peaceful protesters.  The article stated "including ownership of Combined Tactical Systems, a company that “specializes in the manufacture of military and police equipment such as tear gas canisters, flash grenades, breaching munitions (rubber bullets), and handcuffs.”

Thursday, November 24, 2011

Carlyle to Offer Saudi IPO

Reuters reported:

Private equity investor Carlyle Group plans to sell its its investment in Saudi Arabia's General Lighting Co through an initial public share offer in Riyadh in 2013 and is now close to doing its second deal in the kingdom, sources familiar with the matter said.
Carlyle bought 30% of General Lighting in March 2010, making it an 18 month hold before leaking IPO plans.  It's the age of monetization for private equity underwriters (PEUs).

Carlyle Group is "on the cusp of acquiring a 42-percent stake in a family-owned Saudi food products company within the next two weeks."  That would beat their "end of the year" promise.

Update 3-18-14:  The 2013 IPO for General Lighting turned into a 2014 sale to Philips.

Does WSJ Know the Half of It?

WSJ discounted the impact of Olivier Sarkozy on global financial markets.  Olivier warned of a Eurozone collapse within three months.  When traders thought the message came from half-brother Nicholas Sarkozy, the French President, markets panicked.

Olivier Sarkozy works for the Carlyle Group, by the way. So I suppose his opinions do matter, at least more than, say, if Bill Clinton’s loose-cannon half brother, Roger, had been quoted, last-name-only, making drastic predictions in the 1990s.

The Carlyle Group is infamous for their political connections, Red and Blue.  Olivier's access to the global power structure, the very group that attends Bill's Clinton Global Initiative every year, is a huge bonus for Carlyle.  Implying he is a mere cut above doltish Roger Clinton is ignorance or a script.  The WSJ would have to say which characterization fits, because the Roger label is laughable.  Does the journal really know the half of it?

Wednesday, November 23, 2011

Carlyle Lobbyist Does Land Deal with British PM

Channel Four News reported on a land deal between lobbyist Lord Charlington and British Prime Minister David Cameron.

Intriguing details have emerged about this transaction that raise questions over how much the public should know about the financial dealings of the prime minister.

In 2001, Mr Cameron paid £650,000 for his constituency home - a purchase aided by around £150,000 in parliamentary expenses. When Mr Cameron bought this home, he also acquired a patch of land up the lane. This was separated from the main house by a driveway and garages belonging to a cottage opposite.

From inspection of Land Registry documents, Channel 4 News found that in November last year, Conservative peer and Tory donor Lord Chadlington, who owns a large manor house nearby, bought the cottage for £715,000, thereby taking ownership of the driveway and garages which ran across the prime minister's land.

Eight months later, in July this year, Lord Chadlington sold the prime minister the driveway and garages together with a large field which he owned at the back of Mr Cameron's constituency home for £137,500.

Charlington lobbies on behalf of the London Stock Exchange, Associated British Foods and The Carlyle Group.  Sir Alistair Graham, former chairman of the Committee of Standards in Public Life, offered:

"I would've thought he would've wanted to have done that as quickly as possible, particularly given his public comments about lobbying…If you’re doing a private deal affecting your personal interests with one of the head of the largest lobbying firms in this country then of course you should register that in your MP’s list of interests as quickly as possible."
Public comments are for mass consumption, not an ethical guide.  Take fellow private equity underwriter Mitt Romney, formerly of Bain Capital.  This week he talked tough on China stealing American jobs.  How many jobs did Bain affiliates send to China, both under Mitt and afterwards?  The Carlyle Group sent many.

The Government-Corporate Monstrosity is Eisenhower's Military-Industrial Complex on steroids. Elitist insiders work all sides of the triangle, lobbying, government appointments and corporations with ample funding. 

Tuesday, November 22, 2011

Brintons Backdoored by Carlyle (Before Mrs. Fields)

The Telegraph finally sniffed The Carlyle Group's "purchase" of Brintons, a British carpet maker and found it PEU worthy.  It reported:

Rather than buying the family's equity stake, Carlyle bought the company's debt (at a discount to its face value, no doubt). Once they had acquired the debt Carlyle then used a controversial pre-pack administration to seize control – placing the carpet-maker into administration, then buying it straight back. 
Carlyle used debt holdings to take over Brintons, a strategy recently used on Mrs. Fields.  In the move, Carlyle dumped Brintons' pension, closed factories and cut jobs, all to "save the company."

The descendants of the founding Brinton family accused Carlyle of breaking a string of promises to gain control.

Carlyle doesn't promise.  It offers "puffery," at least that's Carlyle's defense when challenged in court.

Don't worry, descendents can buy back the firm in two years for double Carlyle's takeover costs and after a huge dividend bleed.  It's a PEU world, where greed matters.

Update 11-29-11:  Black Cab hired an ex-Brinton's director.

Monday, November 21, 2011

Carlyle Launches New Churchill

WSJ reported The Carlyle Group's "acquisition of the management team of debt provider Churchill Financial LLC from private-equity firm Olympus Partners".

Carlyle is getting a 13-person team and "fee income and a platform to build upon," said a person familiar with the deal. The team will continue to manage a $1.25 billion collateralized loan obligation, the equity of which is owned by Churchill Financial Group, which remains a portfolio company of Olympus.
Here's Fortune's take:

Rob Morris of Olympus:  "We were not selling the equity. This was basically a process to outsource the admin function... once we received a multiple step upgrade on ratings from agencies in September the reinvestment period on the CLO effectively was locked in, so this was the next move to let the team go build another lending business while our fully invested CLO stayed managed at a lower cost by the same team."

Think of Carlyle's deal as launching New CLO Coke, with Coca CLO Classic remaining, only old Coke has ingredients from Bear Stearns.

As an aside, everyone wants to be Churchill nowadays.  Carlyle can claim the Limited Liability Corp version.

Sunday, November 20, 2011

Forstmann Little Founder Passes

The AP reported:

Theodore J. Forstmann, a longtime Wall Street financier who was a major player during the wave of corporate takeovers in the 1980s, including the battle for RJR Nabisco in 1988, died Sunday at the age of 71. 
Forstmann later criticized leveraged buyout deals, just as LBO firms were renamed private equity

Forstmann eventually became a big critic of the industry he helped create. In the late 1980s, he lit into rivals for the risky way they financed their acquisitions. They would borrow money from investors in junk bonds. Those bonds are IOUs issued by the riskiest companies.

Later, he complained that there were simply too many people in the takeover business. The result: Buyout firms were paying sky-high prices for their targets to beat competitors, and so might have trouble wringing profits out of the deals.

He turned out right again — but maybe not in the way he imagined. In the tech mania of the late 1990s, Forstmann himself ended up overpaying for two firms — XO Communications and McLeodUSA. Both eventually filed for bankruptcy.

In 1988, Forstmann made clear his distaste for dealmaking greased by junk bonds. The AP quoted him as saying, "Today's financial age has become a period of unbridled excess with accepted risk soaring out of proportion to possible reward.

"Every week, with ever-increasing levels of irresponsibility, many billions of dollars in American assets are being saddled with debt that has virtually no chance of being repaid," he said.

I wonder what Forstmann thought of the first decade of the 21st century?  It put the '80's to shame. 

Saturday, November 19, 2011

Here's to You, Mrs. Rubenstein

The Guardian reported:

Alice Rogoff (Rubenstein), the publisher of Alaska Dispatch who is married to one of America's wealthiest men, Carlyle Group co-founder David Rubenstein, told the conference that she had learned Guggenheim Partners was planning a fund "worth billions". She added that it might concentrate first on building a privately funded icebreaker, which could then be leased to the US coastguard.
Private equity underwriters (PEUs) love Uncle Sam's checkbook.

Another PEU, William Reilly sits on ConocoPhillips board.  ConocoPhillips has Arctic drilling plans, which Reilly kept on track as a conflicted Co-chair of Obama's Oil Spew Commission. 

I envision an update to the theme song from The Graduate, renamed for Mrs. Rubenstein:

Koo-koo-ka-choo, Mrs. Rubenstein,
Heaven holds a place for PEUs who PPP
We'd like you to help yourself to federal funds.
Guggenheim, Carlyle and company, they all want to take in their quest for 30% annual returns.

One of the richest men in America couldn't keep Mrs. Rubenstein's Alaska House open, even after asking for $600,000 from the state of Alaska.  It remains to be seen how much Guggenheim seeks from the state or the feds for its Arctic investments:

The Guggenheim Partners website posted a link to an Alaska Dispatch story about the fund, but a company spokesman refused to provide any specific details.
Refused to provide, that's the PEU way.

Update 9-17-17:  When President Obama dined with Mrs. Rubenstein in 2015 Guggenheim's Chief Investment Officer joined them.

Carlyle Group Backdoors Mrs. Fields

The Carlyle Group and Z Capital will gain control of Mrs. Fields in a debt for equity swap.  The company has both Mrs. Fields and TCBY yogurt franchises.  Founder Debbie Fields sold her company to private equity underwriter Capricorn Holdings in 1996.  This will be Mrs. Fields second PEU bankruptcy in three years.

David Rubenstein strategized "back door" takeovers in the 2008 financial crisis.  It took three years for Mrs. Fields to fall.  How many tasty corporate morsels will Rubenstein down via debt holdings?  Time will tell.

Thursday, November 17, 2011

Fed to Go PEU?

President Obama is reportedly considering Jerome (Jay) Powell for appointment to the Federal Reserve Board.  Powell, as a private equity underwriter, spent eight years with The Carlyle Group before starting his own investment company.  Is Jay's firm a virtual nonprofit, like Carlyle?

It won't be Powell's first time at the board table, having served on the Board of Directors of Dr Pepper/Seven Up Bottling Group, Panolam Industries International and Rexnord Corporation.  He's well aware of the global game of finance, perfectly suited for the Fed.

Friday, November 11, 2011

PEU's Want to Be Left Alone

Carlyle Group co-founder David Rubenstein said at the AVCJ Private Equity Forum:

"We need to make sure that government is leaving the industry alone," said Rubenstein.
That means keeping PEU's preferred tax status and even a name change, long advised by Rubenstein.

Reuters reported the corporate tax rate on private equity firms is half that of non-investment companies and citizens.  Over a five year period The Carlyle Group paid 1% in annual taxes.  I didn't realize citizens only had to pay 2%.

The  most politically connected PEU pays a mere 1%.   That shows what influence billions can buy. 

Update 11-25-11:  They also plan to help China equal the U.S. in financial power, which happens to be a threat, at least in one Carlyle Group Managing Director's eyes.

Wednesday, November 9, 2011

Carlyle Explains White House DeParle's PEU Phenomena

The Carlyle Group's revised S-1 states:

"a portion of the carried interest that the company receives is due to (former) employees and Directors."
There's another interesting fact:

In order to better align the interests of our senior Carlyle professionals and the other individuals who manage our carry funds with our own interests and with those of the investors in these funds, such individuals are allocated directly a portion of the carried interest in our carry funds. Prior to the reorganization, the level of such allocations vary by fund, but generally are at least 50% of the carried interests in the fund.
While Nancy Ann DeParle worked for CCMP Capital Partners, not Carlyle, she received CCMP associated distributions while President Obama's Health Czar/Deputy Chief of Staff.

Morgan Stanley Pays Carlyle TGI Premium

The Carlyle Group sold 5 million shares of Triumph Group (TGI) via a secondary offering.  The prospectus showed a maximum price of $54.50 and proceeds of $272.5 million.  Morgan Stanley went $1.35 million better:

Morgan Stanley & Co. LLC has agreed to purchase 5,000,000 shares of common stock from the selling stockholders at a price of $54.77 per share, resulting in $273,850,000 aggregate proceeds to the selling stockholders.
The extra proceeds could go toward repaying Carlyle's $35 million tab with the state of Texas, taken long before Carlyle sold Vought Aircraft Industries to Triumph.

Vought happens to be Governor Rick Perry's jobs MVP.  For $35 million Vought cut 35 jobs vs. adding 3,000.  That's $1 million Rick Perry paid per job eliminated.  As politicians are taught to lie boldly, the Governor and Presidential hopeful said Vought created 26,000 new jobs.  That claim is as patently laughable as Perry's Presidential run.

Enough disturbing history, why would Morgan Stanley pay The Carlyle Group a premium?

A different Morgan (JP) is one of three underwriters for Carlyle's IPO.  For those interested, Carlyle's revised S-1 hit the SEC website.  The omissions can be as good as the revelations.

Tuesday, November 8, 2011

Dynegy Holdings and Four Subsidiaries Declare Bankruptcy

SEC filings show:

On November 7, 2011, Dynegy Holdings, LLC (“DH”) and four of its wholly-owned subsidiaries, Dynegy Northeast Generation, Inc., Hudson Power, L.L.C., Dynegy Danskammer, L.L.C. (“Danskammer”) and Dynegy Roseton, L.L.C. (“Roseton”) (collectively, the “Debtor Entities”), filed voluntary petitions for relief under Chapter 11 of the United States Bankruptcy Code (the “Bankruptcy Code”) in the United States Bankruptcy Court for the Southern District of New York, Poughkeepsie Division (the “Chapter 11 Cases”).  Dynegy Inc. (“Dynegy”) and its subsidiaries, other than the five Debtor Entities, did not file voluntary petitions for relief and are not debtors under chapter 11 of the Bankruptcy Code and, consequently, will continue to operate their businesses in the ordinary course.

The Chapter 11 Cases were filed in accordance with a Restructuring Support Agreement (the “Support Agreement”), dated November 7, 2011, among Dynegy, DH and certain holders (the “Consenting Noteholders”) of an aggregate in excess of $1.4 billion of DH’s $3,370.3 million aggregate principal amount of outstanding unsecured notes and debentures comprised of: 8.75% senior unsecured notes due February 15, 2012, 7.5% senior unsecured notes due June 1, 2015, 8.375% senior unsecured notes due May 1, 2016, 7.75% senior unsecured notes due June 1, 2019, 7.125% senior debentures due May 15, 2018 and 7.625% senior debentures due October 15, 2026 (collectively, the “Old Notes”). The Debtor Entities’ proposed financial restructuring (the “Restructuring”), as outlined in the Support Agreement and the restructuring term sheet attached thereto (the “Term Sheet”), has the support of the Consenting Noteholders.
It seems Dynegy Holdings and four subsidiaries needed protection on off balance sheet transactions, five of which are listed in the filing.  Capital games continue via the use of LLC's and financial manipulation.  It's a PEU move. 

Monday, November 7, 2011

Vought Cash-In: Carlyle's Next Round

WSJ reported:

Triumph Group said 5 million of its common shares are being offered by investment fund and other entities associated with The Carlyle Group. Upon completion of the offering, Carlyle will own approximately 9.5% of Triumph's stock. The company, which had 49.1 shares outstanding as of Nov. 1, will not receive any of the proceeds. The stock was down 3.9% at $54.76 after hours. 

Triumph made the announcement via press release.  MarketWatch picked up the story after the close of trading.

I'm waiting for an SEC filing on the matter.   Might Carlyle use a portion of their $250 million in proceeds to refund Texas taxpayers for reneging on employment promises made by Vought Aircraft Industries, later acquired by Triumph?

Governor (and Presidential hopeful) Rick Perry's hairspray can't hold together his ridiculously inflated job-impact numbers, promised under Carlyle ownership.

As a virtual nonprofit,  Carlyle takes money from governments.  It rarely pays.

Update 11-8-11:  The prospectus is not on the SEC's website.  It must be obtained from Morgan Stanley & Co. LLC, Attn:  Prospectus Department, 180 Varick Street, 2nd Floor, New York, NY 10014, telephone:  (866) 718-1649 or by emailing

Update 11-9-11:  The prospectus made it to the SEC website. There was no mention of making Texas, much less making Texas taxpayers whole.

Sunday, November 6, 2011

Hong Kong Hot for PEUs

WSJ reported private equity underwriters would gather en masse for the Asian Venture Capital Journal's Private Equity and Venture Forum in Hong Kong.

The list of keynote speakers is pretty impressive: Mr. Coulter; John Connaughton, managing director of Bain Capital; Howard Marks, chairman of Oaktree; Christopher Flowers, chairman of J C Flowers & Co; Henry Kravis, co-chairman of Kohlberg Kravis Roberts & Co.; David Rubenstein, managing director of The Carlyle Group; and Providence Private Equity CEO Jonathan Nelson.

Nick Bloy, managing director at Malaysia-based private-equity company Navis Capital Partners. “So understandably, practically every private-equity investor that one might wish to meet, or who wishes to meet you, is at the AVCJ Forum.”

Who wants to meet Christopher Flowers who helped turn MF Global from a staid investment banker into a dice roller, now bankrupt?  How about Henry Kravis, who siphoned $4.25 billion from HCA in special dividends before HCA's IPO?  Would they line up to meet David Rubenstein, co-founder of the virtual nonprofit Carlyle Group, which distributed nearly $15 billion to investors in 2011?

Recall China's the new financial threat, according to The Carlyle Group's Frances A. Finelli.  PEUs are their trainers in future financial terror.  Despite this fact, there will be no drone missile attack in Hong Kong. 

PEUs own politicians giving orders on who to summarily execute.  Captive militaries and homeland securities would rush to protect this crowd.

Yahoo to Become PEU-Hoo?

Reuters reported a mix of private equity underwriters and tech giants could pull a threesome with Yahoo! 

Other private equity firms interested in Yahoo include KKR, TPG Capital and Carlyle Group. Sources would not confirm if any of them had signed the confidentiality agreement, though a second person familiar with the situation said those three firms and Providence are "among the hottest firms" involved in the process. The New York Times reported late Thursday night that TPG had indeed signed the agreement.

Strategic parties including Alibaba, Microsoft Corp and Google, have also taken part in the still-developing discussions surrounding Yahoo, sources have said.

Private equity firms have indicated a willingness to commit around $1 billion in equity as part of a transaction, according to several people familiar with the matter.
Goldman Sachs is running the "comprehensive strategic review."  Why not sell to a virtual nonprofit like The Carlyle Group, whose charitable mission is greed?  Give a shout out for PEU-Hoo in our PEUniverse.

Friday, November 4, 2011

Carlyle Distributes Nearly $15 Billion to Investors in 2011

FT let the PEU out of the bag with their story on KKR's plummeting economic net income.  Private equity underwriters try to soften the blow of asset write downs with news about distributions to investors.  FT stated:

While KKR has returned $5bn to investors this year, it still lags behind another rival, Carlyle, which has returned almost three times as much to its limited partners year to date. Selling out of investments has become critical both in determining the attitude of limited partners in funds and in influencing dividends paid to public shareholders.

Carlyle's IPO, a major spurt in their Profitgasm, may be reigned in by plummeting asset values.  Carlyle's "Great Cash-In" may come to an end.

Recall Carlyle is a virtual nonprofit organization, at least they confessed to this status in their S-1.

Thursday, November 3, 2011

Morgan Keegan Price Discounted by $1 Billion

What a difference a few months and MF Global's bankruptcy made to Morgan Keegan's sale price. suggested a $1.5 billion bid in July.    SF Gate pegged the bids at $550 million:

Buyout firms circling Regions Financial Corp.'s Morgan Keegan brokerage unit lowered bids by at least $200 million after financing markets deteriorated and MF Global Holdings Ltd. filed for bankruptcy, according to people with direct knowledge of the process.

Thomas H. Lee Partners LP and Jeffrey Greenberg's Aquiline Capital Partners LLC submitted the highest offer at about $750 million, the people said, asking not to be named because the talks are private. The group topped a joint bid from Carlyle Group LP and Blackstone Group LP, according to the people, who said previous offers valued the unit at more than $1 billion.

PEU's, like Carlyle and company, love heavily discounted distressed assets.  The problem is Carlyle's looming IPO, which faces the same investor headwinds as Morgan Keegan.   

Morgan Keegan's owner planned a $250 million dividend bleed before divesting the firm. That's but one PEU move

Update 12-11-11:  Still no sign of a buyer for Morgan Keegan

Wednesday, November 2, 2011

Dunkin' Update: PEU Management Fees & Secondary Offering

The Carlyle Group, Bain Capital and Thomas H. Lee Partners charged Dunkin' Brands $14.7 million to terminate their management fee arrangement.  That's $4.9 million per private equity underwriter (PEU).  Carlyle's chunk is historically tax free, until it hits their partners/investors as "carried interest," effectively taxed as capital gains.  

PEU Dunkin's initial public offering in July 2011 covered 25.5 million shares.  Round two is for 22 million shares.

Private equity firms Bain Capital Partners, Carlyle Group and Thomas H Lee Partners are the sellers in the secondary offering, which will reduce their stakes from 24.9% each to an expected 19% each after the sale, according to Dealogic. 
It should give PEUs free shares by making up their original investment, yet they still own 58% of the company.  Goldman Sachs, an underwriter of the first Dunkin' IPO, failed to make the cut for round #2.  PEUs don't appreciate a sell recommendation as they near a secondary offering.

Tuesday, November 1, 2011

NASA & Space Florida Doling Out Cash

In 2008 Candidate Obama ran on pulling government work back from contractors.  In 2009 President Obama issued a five part strategy on contracting reform.  Point five dealt with what should be contracted, citing inherently governmental activities.  A Sutherland legal alert stated:

Clarify Permissible Outsourcing. The memorandum notes that “the line between inherently governmental activities that should not be outsourced and commercial activities that may be subject to private sector competition has been blurred and inadequately defined.” It therefore directs OMB to give guidance to agencies in this area to establish “clear rules” and avoid situations, which it notes may now exist, where “contractors may be performing inherently governmental functions.” The clear import of the memorandum is to limit outsourcing to private contractors. Thus, this new guidance will have significant consequences for the range of service contractors that have emerged in recent years.

In sum, this important Obama memorandum is probably just the first, opening effort of a full-fledged drive by the Administration to fulfill its campaign commitment to reform government contracting.
Obama shuttered NASA, preferring private contractors develop the next generation of space flight.  MSNBC had an odd report on space privatization machinations at Kennedy Space Center.

It said Boeing would lease a former Space Shuttle hangar for 15 years.  The story noted Boeing wouldn't pay NASA rent, but is negotiating a deal with Space Florida.  NASA turned over the facility to Space Florida for how much?   NASA's press release didn't say.

Boeing indicated it would lease the hangar should it win the bid for its CST-100 capsules, a replacement for the Space Shuttle.  If Boeing doesn't win, there's no lease.  Boeing added that it would locate its Commercial Crew headquarters in Florida, adding political pressure for Boeing to get the NASA contract.

Uncle Sam will fund R & D via a new national space lab.  NASA will pay a nonprofit $15 million in annual management fees to run the lab. 

That's in addition to providing cheap rent via Space Florida.  The state of Florida will pony up direct cash for companies using NASA's old facilities.  SpaceX got $7 million.  How much will Boeing get to replace the Shuttle?  How much is any direct subsidy for the CST-100 and how much is indirect?  The rocket booster system, known as the Space Launch System has a potential lifetime cost of $38 billion, according to NASA's internal documents.

That kind of money launches people, sometimes in unethical directions.