Vail to Hear PEU Infomercial

Vail Daily reported on a presentation by Carlyle Group co-founder David Rubenstein to be held later today:

Today, there are almost 3,000 private equity firms holding over $1 billion in assets. The top 10 firms in the U.S. hold assets of about $1 trillion. Over 7.5 million Americans are employed by companies owned (at least in part) by these firms, and they indirectly affect millions more people. That’s because almost 25 percent of the money they raise comes from government pensions, endowments and public foundations.

Our economy has been built in large part on a private equity model. But does it work?

The private equity model became ubiquitous during the George W. Bush and Barack Obama presidencies.  Private equity underwriters (PEU's) were a miniscule part of the economy prior to these two presidents.  One business reporter personally faced the PEU monster and wrote of its devastating impact:

There are very few people out there who will talk and write honestly about private equity. I know from personal experience that the financial press is so eager to break news on "deals" that reporters (who are increasingly compensated on the number of "market moving stories" they write) can't afford to be critical of Carlyle, KKR and Blackstone, and risk losing access to people at those firms.

I have seen so many people -- particularly those in their 50s - 70s -- taken apart by what has happened in their industry as greed has hollowed out the economy. These are people took pride in their jobs and held themselves to this invisible standard that we all just took for granted, but is being wiped out.

As for Carlyle co-founder David Rubenstein:

The Carlyle Group scares me more than anything I've ever seen on Wall Street. It seems to exist to corrupt politicians and it's hard to know who they even represent.

I watched a video interview of (David) Rubenstein and his arrogance is really beyond tolerance. He was going on about the debt ceiling problem and how there would need to be cuts in services and higher taxes. When the reporter asked him about tax on carried interest he turned really disdainful and said that this "only" amounted to $22 billion over some number of years and this was not serious money. Boy, nothing like everybody doing their small part to save the country from oblivion!

If the U.S. economy is the Titanic, PEU's and their political sponsors will get the lifeboats.  The rest of us are sunk.

Mehlman to Head Up PECKER Group

Dealbook reported:

Kenneth B. Mehlman has helped guide the investment giant into becoming more open as the firm transformed from a secretive partnership to a publicly traded company.  Now he is assuming a top role at the private equity industry’s lobbying group.

Mehlman's first task may involve settling a longstanding collusion case involving major private equity underwriters (PEU's).

Eight firms stand accused of agreeing from 2004 through 2008 not to “jump” deals signed by the others, Kosman writes, which collusion is claimed to have depressed buyout prices. The PE firms have repeatedly tried to get the 2007 suit thrown out.  

The eight firms are a who's who of PEU's:

The PE firms in the suit making its way through federal court in Boston include KKR & Co. (KKR), Blackstone Group (BX), Bain Capital, Carlyle Group (CG), and Goldman Sachs Capital Partners (GS).

Mehlman has the skills and connections to deliver a settlement where over $1 billion changes hands and no PEU's go to jail.  Ken served both sides of the Government-Corporate Monstrosity, Eisenhower's Military-Industrial Complex on trillions in federal steroids. 

Bright Christmas for Carlyle Group

WSJ reported on Carlyle's Merry Christmas:

Amid a slow-down in the private equity investment pace in one of Europe’s fastest growing economies, Carlyle Group has eked out an exit for a Turkish hospital chain it backed in 2009.  The firm agreed to sell a 40% stake in Medical Park

The Medical Park sale tops a month full of international exits for Carlyle Group, coming a week after the surprisingly lively Hong Kong debut of Fu Shou Yuan International Group, an operator of funeral facilities and cemeteries.

It also follows the initial public offering in Milan of Moncler SpA, the upscale coat maker backed by Carlyle and Eurazeo, and a tender sale of Chimney Co., a Japanese pub-restaurant operator, which relisted on the Tokyo Stock Exchange last year.

Carlyle had a number of Santa's over the years, ranging from Texas Governor Rick Perry to FDIC Chair Sheila Bair.  Here's hoping your Christmas is as profitable as Carlyle's!

PEU Holiday Chuckles

NYT Dealbook helped spread the Carlyle message:

It’s a reprise of a mockumentary the firm made two years ago, when the three billionaires imagined themselves in far more humble circumstances. Like that video, this one was produced by SKDKnickerbocker, a communications firm known for its political advertising offerings.

Private equity underwriters (PEU's) are but one side of the Government-Corporate Monstrosity (GCM), Eisenhower's Military-Industrial Complex on trillions in federal steroids.

That includes PPACA, where Carlyle is in the lead to buy Johnson & Johnson's ortho clinical diagnostic unit for $4 billion.  PEU KKR added billions in healthcare costs via its ownership of giant hospital chain HCA.

Like the Carlyle "yuk it up" video, it's dark comedy time in America.  Greed sells with the help of the NYT.

Update 12-19-19:  PEU Blackstone did its own funny video with founder Stephen Schwarzman as the dunking Mr. Stone. 

The PEU American Way

American Way magazine reported on New YorkCity's hosting an outdoor cold weather Super Bowl:

The facilities are first-rate — and ticket prices reflect that. For the Super Bowl, high-end customers will pay $2,600 per ticket for about 9,000 premium seats — more than twice the price of a premium seat at last year’s Super Bowl in New Orleans. But Tisch points out that until the recent sports building boom, “New York was woefully underserved in terms of state-of-the-art facilities.” The increased prices simply reflect the economics of the area. “Many corporations, hedge funds, private-equity companies and families that can support the economics of private suites and clubs are in the tri-state region,” he says, referring to New York, New Jersey and Connecticut.

PEU seats aren't out in the cold.  They're protected from the elements.

Carlyle Group Invests in Discover Exploration: Offshore Drilling in New Zealand, Africa

FT reported:

The Carlyle Group, a US-listed private equity group is to pay $200m for a majority stake in Discover Exploration, a venture launched in March by former Cove executives Michael Blaha, John Craven and Michael Nolan.

Discover Exploration holds an interest in two deepwater licenses offshore New Zealand.  Drilling began two weeks ago via the ultra-deepwater drillship Noble Bob Douglas.  Discover also holds "exploration licences in the Comoros, a former French colony between northern Mozambique and Madagascar."

Nothing Beyond Reach of Government Corporate Monstrosity

 

U.S. Intelligence claims nothing is beyond their reach via an octopus centered logo.  The octopus symbol was once used to characterize corporate greed.  Greed and power combine in America's Government-Corporate Monstrosity (GCM), President Eisenhower's Military-Industrial Complex (MIC) on $ trillions in federal steroids. 

The GCM gorged on government juice for several decades, long enough to have a bad case of "Roid Rage."  Anyone pointing out inconvenient facts or truths will find themselves smack in the reach of U.S. branded global intelligence, piss colored and pissed off.

Carlyle's Cov-Light PEU Financing

Carlyle Group co-founder Bill Conway echoed fellow co-founder David Rubenstein's assessment that conditions are similar to those before the Fall 2008 financial crisis in that valuations are high and debt is cheap and easy. 

Bill Conway, Carlyle Group LP (CG:US)’s co-chief executive officer, said the financing environment for leveraged buyouts is as accommodating as it was immediately preceding the 2008 U.S. financial crisis. 

“Every deal that’s getting done today is cov-light,” Conway said today at Goldman Sachs Group Inc.’s financial-services conference in New York, referring to loans that have few covenants, or restrictive terms. “In the United States, they’ll lend us more than we’ll borrow. The lessons of the past have been forgotten.”

Repeat them they will, given the greed and leverage boys will exercise their urges.  How long before our leaders say things like:

"Wall Street got drunk."-President George W. Bush who ushered in the golden age of private equity underwriters (PEU's)
 
"I analogise it to sex. You realise there were certain things you shouldn't do, but the urge is there, and you can't resist."-Carlyle Group co-founder David Rubenstein on access to cheap and covenant light credit.

Your guess is as good as mine, but the same factors are in play.

The Rubenstein PEU Fascination

Forbes interviewed Carlyle Group co-founder David Rubenstein, one of the most public faces in private equity underwriting (PEU).  They found five fascinating things about Rubenstein:

Number 1: Sub-Saharan Africa and Other Emerging Opportunities

When you have a young population combined with enormous minerals extraction opportunities and a growing consumer market, you also have enormous potential opportunity.

It sounds like the place for a huge PEU profitgasm.  Recall that Carlyle mostly buys and sells companies for huge profits.  Some of those companies are in the energy space and others in consumer goods/services.  Carlyle and its ilk hollowed out America's middle class during the President George W. Bush years and Africans are supposed to trust the latest group of predatory white PEU men looking to profitably trade local companies?   

Number 2: Private Equity Investing: Now and the Future

As for investing in private equity now, David says it’s a wonderful time to sell since company valuations are so high, but a tougher time to invest for the same reason.  He is bullish, naturally, on private equity, and believes that more investors will have an opportunity to invest in private equity funds. David believes that in future years, investors may even be able to access private equity funds in their company 401ks.

High valuations echo 2007-2008, the run up to the financial crisis. Remember Rubenstein is the consummate PEU salesman and Forbes gave him free promo space.  No matter what's going on it's the perfect time for high net worth individuals and sovereign wealth funds to invest with Carlyle.

Everything distinctive about private equity, that supposedly contributed to Carlyle's incredible 30% annual returns on equity, will have disappeared when the SEC allows individuals to stock their retirement funds with PEU investments.  Investors who believe in Carlyle can become unit-holders today, have no say on anything and sit at the foot of the master's table waiting for crumbs to fall.  

Number 3: About the Fed and Future Taper Tantrums

We’re in uncharted waters and no one really knows what will happen when the Fed pulls back its bond buying program – even the Fed.

The Carlyle Group feasted off low interest financing, thanks to the Fed.  Carlyle executed  numerous liquidity recaps, i.e. loaded affiliates with more debt in order to pay themselves (sponsors) huge dividends.  If interest rates go up many of these debt instruments would likely explode, long after Carlyle monetized the affiliate for a multiple of their original investment (2 to 10 times).

Number 4: The Importance of Patriotic Philanthropy

While many may feel that the Federal government already takes too much of our money, David points out that it just doesn’t have the money to make the necessary renovations to our national treasures and symbols, like the National Mall in Washington, DC. He thinks that everyone can participate in patriotic philanthropy in some way and help preserve our beloved historical sites.

Rubenstein saved hundreds of millions in taxes from Carlyle's being a virtual nonprofit, and paying preferred carried interest tax rates on PEU income.  The Carlyle Group located in Washington, D.C. for the very purpose of being close to Uncle Sam's wallet, currently spending $13 trillion per year.

PEU's want lower corporate taxes and the D.C. crowd seems determined to comply.  Rubenstein knows his banks wouldn't fund the annual budget deficits our federal government runs.  He also knows the Fed will.  Carlyle will suckle for as long as possible on the federal teat by rotating in and out of companies services the government funds (which leads to his next fascinating statement).

Number 5: Making the Case for Higher Education

“Over the course of history, education produces people who are better citizens,” David said. “We should want people who are better educated.”

Knowledge and wisdom are characteristic of people who are better citizens.  The people have been repeatedly lied to by our political and business leaders.  Better citizens learned "eliminating nonexistent weapons of mass destruction opened up new markets to Western goods or gave American branded multinationals access to our oil."

Rubenstein wants citizens to believe "his greed is good" and "crony capitalism is free market capitalism."  I hope many in our league of humanity know better.  That includes Africa and 401(k) holders.

BankUnited Update: FDIC Subsidy Nearly $6 Billion

Bloomberg reported on the huge public subsidy given by the FDIC to private equity underwriters  (PEU's) on BankUnited. 

It (FDIC) would reimburse BankUnited for 80 percent of the first $4 billion in losses and 95 percent of all additional losses. The FDIC also provided $2.2 billion in cash. By selling to Kanas’s group, the FDIC expected to lose $4.9 billion on the bank—which was still $1.5 billion less than it estimated it would spend if it had to liquidate it. The agency says its losses have grown to $5.9 billion.

What's an extra $1 billion in subsidy for The Carlyle Group and company?  The Carlyle Group, Blackstone and Wilbur Ross put up $900 million in new capital vs. $5.9 billion in FDIC funds.  PEU owners took the bank public the next year. 

Carlyle Group's Planned Cash-Ins

Seeking Alpha identified Carlyle's efforts to cash in on two affiliates, PQ Corp and CVC:

Sources tell Reuters Carlyle (CG) is preparing to either sell specialty chemical maker PQ Corp. for up to $3B (after factoring debt), or take it public.  Carlyle paid $1.5B to acquire PQ in '07. Since then, the company has been merged with industry peer INEOS Silicas, and has shed its engineered glass products busines (Potters Industries).   PQ is estimated to have annual EBITDA of $300M.Carlyle will reportedly talk with banks next week to select IPO underwriters for PQ, but will simultaneously continue exploring a sale.

"If they thought the moment for an IPO last year was unfavorable [last year], maybe now things are just as bad, or even worse, which will probably have quite an impact on the demand," says analyst Rodolfo Amstalden of Carlyle Group's (CG) plan to revive the offering of Brazilian travel agency CVC Brasil Operadora e Agencia de Viagens SA.  The offering will try and raise up to $418M and would be just the 10th this year in Brazil, which is the world's worst-performing major stock market in 2013.  Hurting the IPOs prospects even more - its purpose is to allow Carlyle (a 63% owner) and other investors to cash out, rather than the company raising money.  The 2014 World Cup and 2016 Olympics can't come fast enough for the slumping economy and market.

Any S-1's would provide information on Carlyle's management fee and dividend bleeding of both companies under PEU ownership. Any sales to fellow private equity underwriters would keep this information under wraps. 

PEU Rubenstein Handles Hillary with Kid Gloves

Politico reported:

Missing from the litany of questions from the Carlyle Group’s David Rubenstein was one about the former secretary of state’s (Hillary Clinton's) view of the Obama administration’s nuclear-freeze deal with Iran, an issue that’s dominated international headlines.

“She’s very smart and she’s very cautious,” said Rubenstein. “She wasn’t going to say anything that was going to make news.”

His goal, he said, was to “give the crowd a good time” with a mix of personal stories, humor and anecdotes about her life.

The well-heeled crowd at the event at the Metropolitan Museum of Art in Manhattan for the Richard C. Holbrooke Forum was a mixture of long-time Clinton supporters — Vernon Jordan, former White House chief of staff William Daley, investor Steve Rattner, CNN’s Christiane Amanpour and former World Bank head Jim Wolfensohn — and foreign policy elite.

Plus, he added, “I’m not a journalist; I’m a businessman.”

The Carlyle Group co-founder is a private equity underwriter (PEU), who hired Hillary Clinton to speak at Carlyle's investor meeting (not the unitholder version).

Hillary is the Blue side of Red and Blue love PEU.  So is Vernon Jordan (Lazard), Jim Wolfensohn (Wolfensohn & Company), William Daley (Evercore, JP Morgan). 

Carlyle's Public Investor Day Beats Veterans Day

WaPo reported on The Carlyle Group's investor conference, which occurred on Veterans' Day, 11-11-13.  Rather than beat a drum to honor those who served, Carlyle offered a pair of Beats to unitholders and investment house analysts:

To help ensure that the Carlyle Group’s tune was heard loud and clear, each attendee at the District-based private equity firm’s recent investor conference was given a pair of Beats by Dr. Dre earphones. The button-down Carlyle recently made a $500 million investment in Dr. Dre, which garnered attention from the financial world because it was a step in a different direction for the firm, which made its name in the defense and aerospace industries. For seven hours, Carlyle’s top brass, including co-founders David Rubenstein, Bill Conway and Dan D’Aniello, walked investors as well as stock analysts through the fine print of Carlyle’s business. Goldman Sachs analysts liked what they heard, upgrading their rating from “neutral” to “buy” with a price target of $36.

In today's economy Beats earphones are considered an "affordable luxury." How many earphones, headphones and speakers can Carlyle's co-founders purchase with their roughly $3 billion net worth?   Carlyle's troika rose 41 spots on the Forbes 400 Richest People in America, going from #250 in 2012 to #209 in 2013.