Friday, January 30, 2015

BP to Join Chevron & ConocoPhillips in Gulf of Mexico

BP announced it would sell part of its Gulf of Mexico operations to Chevron. The AP reported:

BP is selling part of its stake in an emerging oil-producing region in the Gulf of Mexico to Chevron, and the two companies, along with Conoco Phillips, will work to develop the fields together.

Terms of the deal were not disclosed. The joint-development agreement is a way for the companies to try to reduce the cost and risk of exploring and developing large, complex fields in the Gulf’s deep waters at a time of low oil prices.

For BP, it allows the company to move some of its recent discoveries closer to production as it continues to work to settle claims resulting from its 2010 oil spill in the Gulf.
ConocoPhillips board member William K. Reilly co-chaired President Obama's Oil Spill Commission.  A ConocoPhillips SEC filing stated:

Mr. Reilly elected to take a leave of absence from his position as a Director of ConocoPhillips while serving as co-chair of the National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling (the Commission). Following deliberations, the Commission issued its final report on January 11, 2011. On January 12, 2011, Mr. Reilly returned from his leave of absence and resumed active service as a Director of ConocoPhillips. As a consequence of his leave of absence, Mr. Reilly received no compensation during the period from July 2010 through December 2010.
Yet, Mr. Reilly held onto his $2 million in ConocoPhillips stock during the BP oil spew investigation.   Below is a picture of Reilly's ConocoPhillips board pay.

It's interesting to look at history and how a decision can lead to personal profit.

Wednesday, January 28, 2015

Nonprofit Gamers Issue Shell Notes

Bloomberg reported:

Leon Black’s Apollo Global Management LLC, Carlyle Group LP and a unit of Credit Suisse Group AG have all taken steps in the past two months to create CLOs now that they may be able to refinance after the rules take effect in December 2016 without having to comply with the new regulations, according to three people with knowledge of the matter. The firms are trying to avoid a requirement to hold a stake in the funds they manage.

Private equity firms have long been virtual nonprofits.  They package securitized debt mostly untaxed

Apollo raised a $786 million CLO on Jan. 23 that created two sets of bonds. The first set was sold to investors, while the second hasn’t yet been funded and would be used to refinance or reprice the deal in the future, said one of the people, who asked not to be identified because the information isn’t public. By assigning the shell notes an identification number and dating them now, the New York-based money manager is seeking the option to redo the deal without making it subject to the regulations. Morgan Stanley managed the offering. 
 Shell notes are the latest way the greed and leverage boys game the system.  It's a PEU world.

Tuesday, January 27, 2015

Carlyle Oiled?

Bloomberg reported:

The $3.8 (private equity) trillion industry is entering the later stages of a selling cycle that, since 2012, has earned its members the most profit ever. They’re now under pressure to put a record $1.2 trillion in new money to work -- $150 billion of which is parked at Blackstone, Carlyle, Apollo and KKR & Co. -- while supporting their energy holdings amid oil’s decline. 

Oil’s 58 percent tumble since June has rippled through markets, erasing $15.1 billion from the portfolios of more than a dozen private equity firms, according to data compiled by Bloomberg on 28 publicly traded energy producers. 

Carlyle Group LP is expected to lead the decline with a 73 percent drop, driven by its energy holdings, and Apollo Global Management LLC is expected to report a 63 percent drop in earnings. Blackstone Group LP, the most diversified of the buyout firms, should be least affected, with an estimated 32 percent slide. 

How might Carlyle's historic 30% annual return on equity be impacted?  It could simply become a marketing line for co-founders.

Sunday, January 25, 2015

Davos Flags Future

USA Today offered five highlights from the World Economic Forum (WEF) in Davos, Switzerland.  They are:

1.  EU's monetary stimulus (economic tampering)
2.  Ukraine (global government tampering)
3.  CEO & global leader behind the scenes discussions (efforts to produce economic tampering and global tampering that accrues to the individual's advantage)
4.  Death of Saudi King Abdullah
5.  The lack of progress in gender parity at Davos (expect the same or worse from this crowd on economic parity)

FT reported the price for global business leaders to attend WEF will rise 20% next year:

Strategic partners will have to pay SFr600,000 ($680,526) annually to send five people to the Davos conference, the 2015 edition of which concluded on Saturday. 

Most executives said that coming to Davos, even at the higher price, was less costly than flying to meet far-flung clients, who instead come to Switzerland for an intense few days of meetings.
How many middle class jobs will be eliminated to fund the $113,400 annual increase over 120 companies, which totals $13.6 million?  Using $40,000 annual income as the benchmark WEF's price increase could eliminate 340 middle class jobs next year.

Private equity is virtually a nation unto itself and it plans to fund more infrastructure projects.  Ventures Africa reported on Davos:

David M. Rubenstein, Co-Founder and Co-Chief Executive Officer, Carlyle Group, USA, said that since governments and banks are no longer funding infrastructure investments as much as they did in the past, more and more infrastructure projects will be funded by private equity. “Right now the US seems the greatest place in the world in which to invest,” he said. However, he cautioned that economic growth there is leaving many behind, especially in middle- and lower-income groups.

It's by design in our global PEU nation.  (PEU is short for private equity underwriter, my pet name for the greed/leverage boys.)

Update 1-26-15:  Haaretz did a beautiful job describing the various Davos menWaPo gave a different take but essentially said "Davos men" will don whatever stripes necessary to benefit themselves.

Update 1-27-15:  Nonprofit Quarterly saw through Davos' front stage behavior in their insightful piece.

Update 2-13-15:  Pew Research conducted a poll on who or what is to blame for inequality? People in our survey identify many culprits, but the top offender is government. Across the 44 nations polled, a median of 29% say their government’s economic policies are the most important reason for the wealth gap

Saturday, January 24, 2015

The Week's Soundtrack: Ruling

My fantasy had Lorde crashing the World Economic Forum meeting in Switzerland.  I envisioned Lorde on state with Carlyle's David Rubenstein and Blackstone's Stephen Schwarzman singing backup for Royals:

But everybody's like
Diamonds on your timepiece 
Jet planes 
Tigers on a gold leash 

We don't care, we aren't caught up in your greed affair

Half a world away American Royal Jeb Bush and two time loser Mitt Romney met.     

"Many of the contributors and elected officials they are courting hope to stave off a collision between the two that could imperil the party’s chances in a general election."

One can stave off a collision with collusion, which leads to the next song, based on the melody for "Cruel to be Kind.".  It's a duet of "Collude to be King" in the right measure.

Jeb is aiming, yet again for the middle class, decimated by the business practices of private equity underwriters (PEU's)?

The weak economic growth that much of the western industrialised world is currently experiencing suggests that an economic system that hollows out the middle class will struggle to grow.

How many will recall the role Mitt's and Jeb's employers/sponsors had in dismantling America's middle class?  The Rubenstein's and Schwarzman's played a clear role in the world discussed at Davos.  A former business reporter wrote me in July 2011:

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.
Which leads us to our last song for the week, "Wipeout."

Update 1-27-15:  Washington's Blog ran an excellent piece on the decimation of the middle class. 

Thursday, January 22, 2015

Albany - Corrupt Yet Again

WaPo reported:

Federal agents on Thursday arrested powerful New York Assembly Speaker Sheldon Silver (D) on federal corruption charges, stemming from payments he received from two New York City law firms.

Silver is charged with five counts of fraud and conspiracy, according to court documents filed Wednesday. Prosecutors allege he used his position to take more than $6 million in bribes and kickbacks.

“The show-me-the-money culture of Albany has been perpetuated and promoted at the very top of the political food chain. And as the charges also show, the greedy art of secret self-reward was practiced with particular cleverness and cynicism by the Speaker himself,” Bharara said. “Politicians are supposed to be on the people’s payroll, not on secret retainer to wealthy special interests they do favors for. 

Five years ago The Carlyle Group settled with the New York Attorney General for $20 million for paying agents to land state pension fund investments.  That settlement (and promise to behave better) stated:

The announcement arises from a two-year, ongoing investigation into corruption involving the New York State Comptroller’s Office and the Fund. The charges to date allege a complex criminal scheme involving numerous individuals operating at the highest political and governmental levels under former Comptroller Alan Hevesi, in which the New York state pension fund was used as a piggy bank for the Comptroller’s chief political aide and a favor bank for political allies and other friends

Cuomo and Carlyle co-founder David Rubenstein can chuckle over old times at the World Economic Forum in Davos.  What favors are being banked betwixt and between the jet set in Davos?  It's where deals get done.

Wednesday, January 21, 2015

Private Jetting Davos Gives Lip Service to Inequality

Dealbook reported:

David Rubenstein, co-founder and co-chief executive of the Carlyle Group
Bullish on: the United States dollar, China, investing in Japan.
Oil prices: “Will stay low for a while.”
Concerned about: European banks holding Russian debt. “They could struggle again if Russia can’t pay off that debt.”
Other thoughts on energy: Renewables will take a hit from the oil price decline.
Regulation: He’s not complaining as it has been a major boon for his business, including its foray into lending.
Unintended consequence of regulation: Most creative minds in finance don’t go to banks anymore. “They go to hedge funds and private equity where they are more adequately rewarded.”

CNBC gave the following Davos update:

Inequality was a major topic on Wednesday, the first formal day of the WEF.

"We have a big problem in the United States," David Rubenstein, co-founder of private equity heavyweight Carlyle Group, said during a panel discussion on economic growth.
"If our GDP growth is 3.5 percent, that sounds great—corporate profits are terrific, stock prices are high—but what about the people left behind?" asked Rubenstein, himself a billionaire. 

Former Clinton Treasury Secretary Larry Summers told CNBC on Wednesday that middle-class incomes have not kept pace with the economic recovery.
Growth needs to be equally distributed, Summers said, "so we have a 'race to the top' rather than 'race to the bottom' when it comes to questions like taxation and regulation." 

"The middle class has to increase its wealth and we have to get better jobs, and it's going to have to be done, among other ways, through education," Blackstone Group head Stephen Schwarzman said on CNBC.

"We all have different views as to what level is the most important for education," the billionaire private equity boss added. "I think you have to start at the beginning, and you also can take enormous steps that can take people of very low income and get them to perform at very high levels." 

PEUs Rubenstein and Schwarzman made out like bandits after Gramm-Leach-Bliley, ushered in by one Larry Summers. Private equity has been all about paying fewer people, offering little to no raises and requiring them to do more.  Consider this from a former business reporter in July 2011:

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. 
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!

Rubenstein left countless behind, as did Schwarzman.  Their words rise from the abyss of greed they've created and nurtured over the last thirty years.  The system produced that for which it was designed. PEU lamentations ring hollow, especially at Davos with its 1,700 private jets.

Tuesday, January 20, 2015

New PEU Growth Talk at Davos

I'll offer a different description of David Rubenstein's Davos talk.

How are private equity underwriters betting on commodities (like energy) with cheap debt (growing cheaper by the day) and public pension fund money (looking for huge returns), while taking advantage of persistent unemployment to keep wages low?  

That's my take on Rubenstein's PEU talk. 

Monday, January 19, 2015

Davos 2015: The U.S. Contingent

The World Economic Forum, held annually in Davos, Switzerland, published a short list of world leaders expected to attend this week's gathering of billionaires and those executing their political will.  The list showed the following attendees from the United States:

John Kerry, Secretary of State
Al Gore, Generation Investment Management
Mary Barra, GM CEO
Melissa Mayer, Yahoo President and CEO
Eric Schmidt, Google Executive Chairman

A second list showed Commerce Secretary Penny Pritsker and a smattering of U.S. Congressmen attending Davos.

Other notables include U.S. Trade Czar Michael Froman and USAID's Rajiv Shah.  They'll attend an event with an expected 1,700 private jets.

I'll peruse the speaker list for private equity underwriters (PEU's). The Carlyle Group's David Rubenstein usually appears on a PEU panel and often interviews one of his peers.  I'll report what I find.

Update 1-20-15:  The Guardian reported Obama is ready to push the Froman negotiated Trans Pacific partnership.  Are there enough Congressmen in Davos to swing the tide Obama's way?

Update 1-24-15:  U.S. Treasury Chief Lew showed up in Davos.

Update 1-29-24:  Shah is now head of the Rockefeller Foundation and was recently interviewed on The David Rubenstein show.

Sunday, January 18, 2015

Carlyle Loves Public Education Money

Pensions&Investments reported NGP Energy Capital Management closed on a new energy fund with $5.3 billion in commitments

Carlyle Group owns 55% of NGP's revenue and was due a fee from NGP for any new limited partner that invested in the fund.

State teacher pension funds ensuring Carlyle's new fees include Virginia, Kentucky, Pennsylvania, Louisiana, Ohio and New Hampshire.   The Carlyle Group loves public education money, directly or indirectly.

While PEU Carlyle grows fatter public schools deal with increasingly impoverished youth.  It's a byproduct of the race to the lowest global common denominator for worker pay, taxes and actual enforcement of laws/regulations.

Friday, January 16, 2015

Condi "Informs" the Public

The NYT reported:

White House officials favor two primary tactics when they want to kill a news article, Condoleezza Rice, the former national security adviser, testified Thursday: They can essentially confirm the report by arguing that it is too important to national security to be published, or they can say that the reporter has it wrong.
Politicians try to bury the story or lie.   This is the same Condi Rice who lectured the Middle East that democracy requires a growing middle class, the very group decimated under two terms of President George W. Bush, followed by two terms of President Barack H. Obama. 

The Obama administration has persuaded reporters to delay publishing the existence of a drone base in Saudi Arabia, the name of a country in which a drone strike against an American citizen was being considered, the fact that a diplomat arrested in Pakistan was a C.I.A. officer and that an American businessman was working for the agency when he disappeared in Iran.
 The rewards for burying illicit activities and lying are significant.  Condi Rice sits on numerous corporate boards and storied companies hired her consulting firm. 

Frankly, if Condi Rice's lips are moving she could be lying.  That's what her record shows and the Government-Corporate Monstrosity clearly approves.

Thursday, January 15, 2015

Patients Die from Practice Saline

The FDA warned health care facilities not to use fake medicines on actual patients as "practice medicines" killed one person and sickened others.  The question is how fake IV solutions were distributed to hospitals such that personnel saw them as real saline products?  The deadly products were intended only to be used in simulations.  There are many unanswered questions.  It remains to be seen if the FDA fills in the blanks.

Wednesday, January 14, 2015

Carlyle Commits £660m to UK's North Sea

The HeraldScotland reported:

Big tax break signaled for oil industry as taskforce established to help save jobs. 

The beleaguered oil and gas industry is set to receive a significant boost today with a £660m investment in the North Sea sector from the Carlyle Group, a US-based global asset management company. 

The announcement is being made to coincide with David Cameron's last visit to Washington before the General Election and is the largest deal among a number to be announced, totaling more than £1.1bn, which will create 1700 new jobs across the UK. It comes as Alistair Carmichael, the Scottish Secretary, signaled the industry would get a major tax break in the Budget. 

This is pure Carlyle which loves to buy stressed assets at a deep discount, garner major tax breaks and do deals with crony politicians, like David Cameron and Barack Obama.  In reference to the major tax breaks Carmichael stated:

"These are extraordinary times. Government will have to come forward with measures that are suitable for the times."

These are PEU times and the deals government gives them are truly extraordinary.  Ask Sheila Bair what the FDIC gave Carlyle et al to save BankUnited.  

Tuesday, January 13, 2015

Carlyle Ship Runs Aground reported:

Seaspan Corporation reports the MOL Express, a 4,600 TEU container vessel went aground in Tateyama Harbour, Japan on January 11, 2015.

There were no reported crew injuries and all preliminary reports indicate the hull is in a stable condition, and no environmental damage has occurred. Seaspan and MOL, with the assistance of salvage experts, are working on refloating the vessel and restoring it to its original condition. All parties involved are working closely with the appropriate authorities.

The vessel is currently on charter to MOL, is managed by Seaspan Corporation, and is owned by Greater China Intermodal Investments LLC, a joint-venture between the Seaspan Corporation, the Carlyle Group, and affiliates of the Washington family and Tiger Group Investments.
The ship's track can be seen below:

Potential Candidate Jeb: Calling for Dough

Bloomberg reported:

Jeb Bush's allies are setting a fundraising goal of $100 million in the first three months of this year—including a whopping $25 million haul in Florida—in an effort to winnow the potential Republican presidential primary field with an audacious display of financial strength.

The targets were confirmed by multiple Republican sources involved in finance meetings with Bush's team. They requested anonymity to discuss internal deliberations. One said the point is to persuade some establishment candidates to stay on the sidelines in the 2016 race.

The attempt to intimidate the wide-open field with a shock-and-awe fundraising machine echoes the strategy Bush's brother, former President George W. Bush, used to win the White House in 2000.
Jeb's team approached several private equity underwriters (PEU's) for donations:

Bush visited with financial backers from KKR and Bridgewater Associates, a pair of New York-based investment firms, and held a fundraiser Wednesday in Greenwich, Conn. 
Republican Ken Mehlman works for Henry Kravis' KKR, where his bio states:

Mr. Mehlman spent a dozen years in national politics and government service, including as 62nd Chairman of the Republican National Committee and Campaign Manager of President Bush's 2004 re-election campaign as well as in high level positions in Congress and the White House.
Jeb resigned from his board positions when he announced he would explore running for the Presidency.  Bush served on the boards of Tenet Healthcare, Rayonier Inc., Empower Software Solutions and CorMatrix Cardiovascular Inc.  The article did not mention Bush's board positions with CNL Bankshares or Angelica Corporation.  Are they in the past like his board slot with Swisher Corporation?

The timing of his resignation is interesting.  Will Bush's board compensation be reported later this year in corporate proxy statements?

It remains to be seen if Jeb's 2014 board haul will become public information.  If not, that leaves 2013 as the last year such information would be available.  

While the orchestration has begun Jeb hasn't decided what to do with his other ventures:

“Bush was reviewing other businesses in which he is principal partner or owner,” the Post reported, citing an aide. They include consulting firm Jeb Bush & Associates and business advisory group Britton Hill Partnership.

Jeb invited comparisons to the party's 2012 nominee, former Massachusetts Governor Mitt Romney, by expanding his private equity portfolio this year, including a new fund in November, BH Global Aviation, that raised $61 million in September, mostly from foreign investors.

BH is short for Britton Hill, Jeb's PEU.  It runs in the family as son George P. founded both Pennybacker Capital and St. Augustine Capital Partners, LLC.

Britton Hill's first investments have been tied to the exploitation of shale oil and gas in the U.S., a booming area for private equity."  Falling oil prices have hurt shale oil and gas exploration.  How might it impact Britton Hill's investments?

Brother Neil Bush was appointed to the board of Escalera Resources, a natural gas and crude oil exploration company.  Their press release stated:

Escalera Resources Co. is pleased to announce the appointment of Mr. Neil Bush to the Company's Board of Directors. 

Mr. Neil Bush is the son of President and Mrs. George H.W. Bush.  Mr. Bush has been involved in both the energy industry and international business development for three decades. He began his career in 1980 with Amoco Production Company (now BP) in Denver, Colorado. Later in the 1980's he formed two independent E&P companies that explored for oil in various locations, both domestically (Wyoming, Colorado, California, and Michigan) and internationally (Argentina).

For the last 15 years, Mr. Bush has been engaged in a variety of international development activities with a focus on China and the Middle East.  He first visited China in 1976, following his father's service as U.S. Chief Liaison Officer in Beijing.  Currently, Mr. Bush has varied business interests in Hong Kong, Singapore and China, including ties to companies active in oil and gas exploration and exploitation, real estate development and property management.
How long before Britton Hill, De Soto Partners or Escalera run short of cash in a declining oil price environment?  Surely, Jeb's advisors are running the numbers.  In addition to political fundraising Jeb could be making capital calls.

Update 1-19-15:  WaPo reported on Jeb's term on the board of InnoVida, a period when company executives committed fraud.

Update 8-31-15:  Bloomberg reported Jeb facilitated a $236 million deal for Carnival Cruise Lines to house displaced people after Hurricane Katrina.  Bush also steered Florida public retirement investments to Lehman Brothers where he later landed a consultant job paying $1.3 million per year.

Sunday, January 11, 2015

Winning Only PEU Option

Jesse's Crossroads Cafe offered a commentary on Generation Me:

The lack of  empathy amongst America's privileged, and thereby largely the leadership, class makes for a disturbing tolerance for pain and misery and injustice in others.

It's easy to lie, cheat and steal when the world is beneath oneself, i.e. worthy of disgust.  Science Daily reported:

"When people feel disgusted, they tend to remove themselves from a situation. The instinct is to protect oneself. People become focused on 'self' and they're less likely to think about other people. Small cheating starts to occur: If I'm disgusted and more focused on myself and I need to lie a little bit to gain a small advantage, I'll do that. That's the underlying mechanism."
Enter Governor Bob McDonnell, who saw plenty of politicians from both parties feeding at the influence trough.  The Virginia Governor did not execute as well as the Clintons, who use their foundation to pay friends huge amounts, then claim accounting errors when funds are not properly spent or tracked.  McDonnell did not have someone watching his back like New Jersey Governor Chris Christie who was gifted a Cowboy playoff weekend, private jet ride, seats in owner Jerry Jones luxury box and hugs from Jones' himself.

The AP reported sixty four of America's Ivy League youth have the "me focus":

Dartmouth College has charged 64 students accused of cheating in a sports ethics class with violating the Ivy League school's honor code.
These sixty four have a future in American sports, politics or Wall Street where garnering the prize is all that matters.  Alfie Kohn wrote:

Setting kids against one another in contests leads to less trust, less accurate communication, less sensitivity, less likelihood of helping people in need, and less capacity to imagine how things look from someone else’s point of view.

These kids grow into adults, where corporate and social structures rely on competition to "motivate and reward" people.

The central message taught by all forms of competition can be summarized in a sentence:  “Other people are potential obstacles to my success.”

I.e., other people disgust me and must be put down by any means possible.   Consider the words of the Dartmouth professor who discovered the cheating:

"I think honor no longer is something that has a lot of resonance in society, and I suppose in some ways it’s not surprising that students would want to trade the nebulous notion of honor with what they perceive as some sort of advantage in professional advancement."

The children have learned from their adult role models.  Ethics be damned.  Winning is all that matters.  If we have too many Generation Me's there may be no Generation Us.

Update 5-30-15:  Someone else noticed the distorting nature of competition and rewards.  .  

WBH Energy Partners LLC in Chapter 11 Bankruptcy

Reuters reported:

WBH Energy, one of many tiny shale oil and gas producers in Texas, has filed for bankruptcy protection, becoming what may be the first U.S. oil company to do so since crude prices started tumbling six months ago. 
The privately held company, based in Austin, has leases in the Barnett Combo Play of the Fort Worth Basin, which mainly produces gas.
Natural gas prices followed crude oil's decline:

The Texas Comptroller of Public Accounts website shows the following governing body members for WBH Energy Partners LLC, all from Austin, Texas:

David R. Henderson
Herodutus Resources
Jacob Warnock
Joseph Warnock
Rand Winfrey
There appear to be two sister companies with the WBH name and registered agent Joe Warnock.  They are WBH Energy GP, LLC and WBH Energy, LP.  Only WBH Energy Partners LLC declared bankruptcy.  It remains to be seen if the bankruptcy spreads to the GP or LP versions of WBH or governing board Herodotus Resources, also owned by David R. Henderson. 

WSJ reported the impact of falling oil prices on The Carlyle Group's fourth quarter:

Falling oil and natural-gas prices took a bite out of Carlyle Group LP’s fourth-quarter performance, showing buyout firms’ vulnerability to the downdraft after big investments in the sector.

The Washington-based private-equity firm said Friday that its older energy funds, primarily those managed by former partner Riverstone Energy Holdings LLC, fell 17% during the quarter, and 12% on the year. Its newer energy funds, which include those it manages as well as its stake in funds run by its new oil-patch partner NGP, lost 8% on the quarter and 13% in all of 2014.

Those losses helped drag down the overall value of funds in which Carlyle and its shareholders earn a slice of the profits.  The firm’s so-called carry funds gained only 1% during the fourth quarter
Carlyle's mortgage backed security fund, Carlyle Capital Corporation, imploded six months before the fall 2008 meltdown.  Carlyle lost Semgroup to bankruptcy in 2008 and Stallion Oilfield Services in 2009.

The PEU boys, ever the salesmen, suggest now is the perfect time for energy investing.   Investor Place stated:

Carlyle is heavily invested in a number of small producers.
BidnessETC added:

Shares of companies like USA Compression Partners LP (NYSE:USAC) and Northern Blizzard Resources, a Calgary-based company. Both companies have lost 32% and 50%, respectively, of their share value during the fourth quarter (for Carlyle and Riverstone).

The joint stake of 10% in SandRidge Energy Inc. (NYSE:SD) held by Carlyle and Riverstone has tumbled 82% in value since June last year.
Ironically, several recent refinery fires might stop the steady drop in gasoline prices.  One happened over the weekend at Carlyle's Philadelphia Energy Solutions refinery.
It remains to be seen if WBH Energy is a harbinger of wider financial pain and if bankruptcies spread to the PEU sector. If the past is a predictor Carlyle's Limited partners in the energy space can expect capital calls.  Generally, where there's smoke there is fire.

The bankruptcy filing can be viewed at the link below:

WBH Chapter Filing

Thursday, January 8, 2015

Carlyle's Absurd Legal Position: Yet Again

The Carlyle Group's lawyers will seemingly argue anything to avoid responsibility.  Carlyle's LifeCare Hospitals said 25 patients deaths post Hurricane Katrina were the federal government's responsibility as soon as FEMA teams began setting up teams in the region.  After highly leveraged mortgage backed security Carlyle Capital Corporation imploded, co-founders said, "We're Carlyle, but not that Carlyle." 

The latest involves Mountain Water, the target of government appropriation in an eminent domain action.  Carlyle argued that it does not own Mountain Water and that it is merely an upstream equity owner.  Here's the exchange:

Judge:  "Then, it would go on up a line to you, right?"

Carlyle's lawyer stumbled in response, but eventually agreed:  "It certainly, I'm not going to deny, it's sort of. Yeah, I mean, that's right. It's like any other corporate structure."

Other interesting legal positions came when Carlyle affiliate Synagro bribed the wife of Rep. John Conyers in a Detroit sewage sludge processing deal, while SemGroup imploded from bad energy hedging.  Like any other corporate structure where Carlyle wants to avoid any liability or responsibility. 

Tuesday, January 6, 2015

Cowboy Christie vs. Boy Scout McDonnell

To my surprise I watched New Jersey Governor Chris Christie jump up and down in Jerry Jones private box during last weekend's Dallas Cowboys playoff game with the Detroit Lions.  I thought what is Christie doing there?  Business Insider reported:

"Governor Christie attended the game last night as a guest of Jerry Jones, who provided both the ticket and transportation at no expense to New Jersey taxpayers," Roberts said.

Flying Gov. Christie and his family via private plane to Dallas and the seats within the owners' luxury box on the 50 yard line may have cost Jones' tens of thousands of dollars.

Jones is a major investor in a company that secured a contract to operate an observatory at the new One World Trade Center. The lofty business deal with the Port Authority of New York and New Jersey, an agency administered by the two neighboring states, is expected to produce approximately $875 million in revenue over the next 15 years. 
I pondered the difference between Christie and Virginia Governor Bob McDonnell, just sentenced to two years prison (with two more years of probation) for corruption, accepting "gifts from friends" like the New Jersey governor.  Business Insider links to a New Jersey Executive Order (from the Governor)giving the impression that it states:

The governor "may accept gifts, favors, services, gratuities, meals, lodging or travel expenses from relatives or personal friends that are paid for with personal funds."

I found no such language in the executive order.  However, the order establishes an Advisory Panel to assist the Governor with ethical decisions.  Did Governor Christie or his staff submit the Cowboys junket for review?  If so, what was their decision?