Saturday, April 11, 2015

Platinum Equity Bankrupts ex-Carlyle Affiliate

Crain's reported the prepackaged bankruptcy of Chassix Holdings, an affiliate of Platinum Equity, a private equity underwriter (PEU).:

Chassix was born leveraged in April 2013, when Platinum Equity formed it by merging Wixom-based Diversified Machine Inc. and SMW Automotive Inc. of Troy. Gores acquired Diversified Machine through his equity firm from The Carlyle Group in December 2011
How bad is Chassix's balance sheet?

The bondholders represent about $525 million in creditor claims of its $556.7 million in total debt. Chassix has $34.3 million in assets, according to a court filing.

Here's the plan to de-bloat Chassix:

The bankruptcy petition is believed to be the first filed by a company owned by Gores, a billionaire who also owns the Detroit Pistons. The company said an agreement among Platinum, the bondholders and Chassix’s largest customers calls for “comprehensive restructuring and recapitalization” and will slash the bond debt load via a debt-for-equity swap
It would be ironic if Carlyle got back in via a back door debt for equity swap, a strategy commonly employed by the politically connected PEU.  As for other classic PEU features consider bankruptcy language:
Payments to the Debtors’ prepetition private equity sponsor, Platinum Equity Advisors LLC (“Platinum Equity”), may be comprised of balances including, but not limited to (i) management fees; (ii) travel and business-related expense reimbursements incurred by Platinum Equity; and (iii) other direct or indirect costs incurred by Platinum Equity which were paid by the Debtors during the applicable timeframe.
What's beyond those limits?  Special dividends and distributios, frequently funded by borrowings:  Carlyle added $225 million in debt on its watch, siphoning off $80 million for its coffers.  That didn't make the filing.

This next paragraph shows PEU's dicing the ownership issue:

Each of the Debtors is indirectly and ultimately owned by Platinum Equity Advisors, LLC, the Debtors’ prepetition private equity sponsor, and certain affiliated entities and investment funds. However, the response to SOFA 21(b) was limited only to each Debtor’s direct parent entity, which maintains 100% equity interest in the related Debtor, in addition to all current officers and directors.
This how Carlyle claimed it does not own Mountain Water or the imploded Carlyle Capital Corporation.  Whatever's needed to maintain their image and good name.