Monday, May 30, 2016

Billionaire Dalio to Get Millions from Connecticut Taxpayers

Politicians cater to the greed and leverage boys which is why the state of Connecticut will give Ray Dalio's Bridgewater Associates $22 million in economic development funds to retain or create jobs.  Dalio earned $1.4 billion from Bridgewater in 2015.

In 2004 the state of Texas gave The Carlyle Group's Vought Aircraft $35 million to create 3,000 jobs by 2010.  Carlyle cut 35 jobs during the performance period and paid a pittance back to taxpayers before monetizing Vought.  Republican Rick Perry provided Carlyle with free public capital for six years.

A Democratic Governor in Connecticut will give billionaire Dalio his public subsidy.  As I've written many times "politicians red and blue love PEU."

—more precisely, an accurate understanding of reality—
is the essential foundation for producing good outcomes.
Politicians produce good outcomes for their sponsors like Ray Dalio.

Sunday, May 22, 2016

Bair & Rubenstein Reunite at Washington College

FDIC Chair Sheila Bair gifted BankUnited to The Carlyle Group and a smattering of private equity underwriters during the financial crisis.  Carlyle co-founder David Rubenstein returned the favor by serving as the graduation speaker for Washington College, where Bair currently serves as President. 

As a bonus for speaking Rubenstein received an honorary doctorate of laws.  Shoreman Rubenstein's manipulation of the law enabled him to become and remain a multi-billionaire.   Sheila surely helped.  It's Carlyle Nation!

Thursday, May 19, 2016

Carlyle Sells Connecticut Rest Stops

The Carlyle Group will exit its interstate rest area investment with the state of Connecticut by selling its stake in Project Service LLC to a European infrastructure fund for $105 million.  Carlyle refurbished 20 rest stops in Interstate 95, 396 and the Merritt Parkway under a deal struck in 2009.  At the time officials overlooked prior bad behavior by Carlyle in their state.

The lease term was 35 years. Carlyle will take their profits and run after 7 years, one fifth of their initial commitment.  It's not clear how much Carlyle pulled out of Project Service via management fees, dividends and special distributions.  Did they pull a liquidity recap, known as debt for dividend, during their ownership.  The PEU boys have numerous ways to profit from financial jiggering, but they're best at milking the public.

Sunday, May 15, 2016

Skybridge Capital's Hedge Fund Gathering Aided by Politicians

Skybridge Capital's Alternative Conference (SALT) began in 2009 with 350 people in attendance.  Seven years later 1,800 leaders from over 40 countries attended SALT. 

Fox News Charlie Gasparino informed viewers of the valuable content they received.  Gasparino said:

"The average Fox viewer gets insight into some of the biggest thought leaders in politics and business and that is rare, cause that's how the markets work these days."
Gary Kaminsky called it "the intersection of everything."

Liz Claman called it the "Superbowl of hedge funds." 

All but one of the images shown came from Skybridge Capital's promotional sites for the 2016 SALT Conference.  I took the liberty of adding "All you need is a pinch" next to David Rubenstein's fingers.

The American branded Government-Corporate Monstrosity grew exponentially via Uncle Sam's multi-trillion $ wallet.  As Charlie Gasparino eloquently stated:  "That's how markets work these days."  It's truly bipartisan.

Carlyle's Rubenstein Speaks at SALT Conference

Carlyle Group co-founder David Rubenstein spoke from Las Vegas, the city of high rollers, last week.  TopNews reported:

In his opening remarks, David Rubenstein, co-founder of the Carlyle Group said that the it is important for the hedge fund industry and private-equity companies to explain what they do good to the community.
Private equity underwriters enjoyed an extra decade of preferred taxation via carried interest.  This came courtesy of both Red and Blue political parties.

The conference was attended by celebrity guests Will Smith and Kobe Bryant, former New York Mayor Michael Bloomberg and former Treasury secretaries Robert Rubin and Lawrence Summers as well as a popular rock band, the Killers.
How grateful are the highly paid greed and leverage boys?

There is a general feeling in the industry that the government is to blame for the troubles of the industry.
Skybridge Capital promoted their annual Alternatives Conference with:

The SALT 2016 Conference will take place from Tuesday, May 10th – Friday, May 13th at the Bellagio in Las Vegas, Nevada.

The SkyBridge Alternatives (SALT) Conference is committed to facilitating balanced discussions and debates on macro-economic trends, geo-political events and alternative investment opportunities for the year ahead. With over 1,800 thought leaders, public policy officials, business professionals, investors and money managers from over 42 countries and 6 continents, the SALT Conference provides an unmatched opportunity for attendees from around the world to connect with global leaders and network with industry peers.

Past featured speakers have included President George W. Bush, President Bill Clinton, President Nicholas Sarkozy, Prime Minister Ehud Barak, Prime Minister Tony Blair, Prime Minister George Papandreou, Vice President Al Gore, Governor Mitt Romney, General David Petraeus, General Colin Powell, the Honorable Gordon Brown, Leon Panetta, Timothy Geithner, T. Boone Pickens, Sam Zell, Jamie Dinan, Dan Loeb, John Paulson, Paul Singer, David Tepper, Al Pacino, Kevin Spacey, Magic Johnson and Francis Ford Coppola.
Note the members of both of America's corrupt political parties.  Many of the political figures listed above have or held a private equity job as managing director or special advisor.  They count on insider access for information that will steer their next profitgasm adventure.

It's odd that Mr. Rubenstein would be a speaker given Carlyle's abysmal performance in the hedge fund arena.  Investors have been fleeing from a number of Carlyle Group affiliated hedge funds.

Our hedge fund partnerships had outstanding redemption requests for $3.1 billion in the aggregate as of the beginning of the first quarter of 2016.
In the 1920's that would be known as a bank run.  Before the SALT crew can convince the wider community of their "good work", they need to show results to investors.  The conference symbolically closed on Friday the 13th in Sin City.  Enough said.

Update:  ValueWalk has the transcript of Rubenstein's Bloomberg interview at SALT.  The reporter gave Rubenstein choice in the first question, Trump or hedge funds?  That's the kind of hard hitting business questioning that got us back to the Gilded Age.  FinAlternatives did a story on Rubenstein's interviewing of Former Treasury Chiefs Bob Rubin and Larry Summers.

Update 5-22-16:  Market Realist summarized Rubenstein's SALT appearances.

Thursday, May 12, 2016

Carlyle Group Earnings Call Revealing

Carlyle Group co-founder David Rubenstein offered the following take on Carlyle's performance in Q1 2016:

We raised a gross amount of $2.2 billion in the first quarter, however approximately half of our previously disclosed hedged fund redemptions were returned to investors during the first quarter and those outflows countered a majority of our gross inflows.
Details showed hedge fund redemptions countered all but $100 million of the $2,2 billion funds raised figure.

The fund raising environment remains favorable for alternative investment firms and investors continue to respond positively to our offerings.
This is why Carlyle and its PEU brethren returned to excessive fees while telling investors to expect lower returnsNakedCapitalism reported:

Private equity investors are getting a dose of the new normal as the hottest fund managers again demand general partner-friendly terms and fees that investors have not seen since the pre-crisis go-go fundraising days.

Some managers are again charging “premium carry” similar to 2007 vintage funds and are eliminating terms from their current funds that are designed to protect limited partners, such as preferred returns, also called hurdle rates, and clawbacks
Pensions+Investments reported:

Meanwhile, private equity returns that had been an average of 15% historically are down to 12%, Mr. Rubenstein said: “I suspect that is where returns will stay.”
Rubenstein spoke to Carlyle's catering to the wealthiest of the wealthy in the Q1earnings call:  
High net worth people who have their own family offices. I would say today everybody wealthy seems to have their family office in the old days everybody wanted to have their son grow up or the daughter grow up to be President of United States, now everybody wants to have their son or daughter have a family office, everybody wants a family office. And so there are plenty of family offices out there and you take the wealth around the world everybody who seems to have a net worth of about $300 million or more has a family office. And so these people are investing very significantly as endowments are in alternative private equity. And so we are working very hard with these family offices and all of the family office conferences and so forth. the last I’d say the first quarter of 2016 and for the last 12 months our biggest second category has really been high net worth individuals...
So we continue to see this and one other trend that I would mention is it’s not just high net worth in the Western world of the United States and I’d say Europe it is all over the world, increasingly the wealth in the emerging markets is winding its way into the family offices or the kind of other things that I mentioned. And so it’s a very important part of our fund raising operation now.
It's a PEU world created in part by Mr. Rubenstein and The Carlyle Group.  We'll see if elected officials give the PEU boys another decade of preferred taxation via the carried interest loophole.

Update 5-15-16:  The Fort Wayne Journal Gazette picked up a Bloomberg piece on family offices.

Monday, May 2, 2016

Eight Years Later Carlyle Faces Trial for CCC Implosion

The Carlyle Group's infamous co-founders and public board of directors are involved in legal matters from the spring 2008 failure of Carlyle Capital Corporation.  Carlyle's 2015 10-K filing stated:

Carlyle Capital Corporation Limited (“CCC”) was a fund sponsored by the Partnership that invested in AAA-rated residential mortgage backed securities on a highly leveraged basis. In March of 2008, amidst turmoil throughout the mortgage markets and money markets, CCC filed for insolvency protection in Guernsey

The Guernsey liquidators who took control of CCC in March 2008 filed a suit on July 7, 2010 against the Partnership, certain of its affiliates and the former directors of CCC in the Royal Court of Guernsey seeking $1.0 billion in damages in a case styled Carlyle Capital Corporation Limited v. Conway et al. 

The Guernsey liquidators allege that the Partnership and the CCC board of directors were negligent, grossly negligent or willfully mismanaged the CCC investment program and breached certain fiduciary duties allegedly owed to CCC and its shareholders. The liquidators further allege (among other things) that the directors and the Partnership put the interests of the Partnership ahead of the interests of CCC and its shareholders and gave priority to preserving and enhancing the Partnership’s reputation and its “brand” over the best interests of CCC. 

On July 24, 2013, plaintiffs filed an amended complaint, which contained further detail in support of the existing claims but no new defendants or claims. On December 20, 2013, defendants filed a defense to the amended complaint and on June 30, 2014 plaintiffs filed their reply. In September 2015, the liquidators served expert reports. Expert witness reports for defendants were served during the first week of February 2016. The Court has set a pretrial conference for early April 2016 and trial is scheduled for June 2016.

Will the trial occur as planned?  What business reporting organizations, FT, WSJ or Bloomberg, plan to cover the trial?  It will be interesting to see given how Carlyle's co-founders prize their good name.

Update 7-18-16:  According to WSJ the trial has begun.

Update 12-8-16:  A Dutch billionaire is backing the suit against Carlyle.  He lost big on CCC and appears to want payback.

Update 3-5-21:   The Court found not guilty of any financial crimes regarding its handling of CCC.

Sunday, May 1, 2016

Weekend Finds Two Carlyle Deals in Jeopardy

The future of two Carlyle Group deals got considerably cloudier over the weekend. WSJ broke the big news regarding the merger breakup between Halliburton and Baker Hughes.  Regulatory hurdles had The Carlyle Group and Halliburton in talks.  The Baker Hughes - Halliburton split doesn't mean Carlyle won't buy part of Halliburton, especially if the deal's failure means Halliburton owes Baker Hughes $3.5 billion in breakup fees.  That could be the impetus for an asset spinoff to Carlyle.

Other news came from The Courier Mail where Carlyle bid for Greencross, an Australian pet company.  Greencross' stock price rose enough to make the Carlyle bid irrelevant. 

DeParle Profits Personally Post Health Reform

White House health reformer Nancy-Ann Deparle made millions from for-profit healthcare companies prior to her appointment by President Barack Obama.  Three years after her White House resignation DeParle is back to same.  Board seats with hospital giant HCA and drug retailer CVS produced ample cash and significant stock positions worth nearly $1.8 million.  That does not include any pay or proceeds from Consonance Capital, her health care focused private equity underwriter (PEU).

Update 5-3-16:  ZeroHedge reported "Obamacare did not reform health care system; it merely transformed it to subsidize favored constituents."  Yup.

Update 2-19-21:  Nancy Ann Deparle had a banner payday after Consonance Capital sold Enclara Healthcare to Humana in 2020.  Enclara is "one of the nation's largest hospice and benefit management providers."  Yet, Humana intends to spin off Kindred Hospice as it prefers a partnership model for end of life care.

Carlyle Group's 2015 Paltry Tax Rate: Half of 1%

The Carlyle Group reported total revenues over $3 billion and net income of $402.2 million.  From that Carlyle's provision for income taxes for 2015 was $2.1 million.  That's an effective tax rate of half of 1%, 0.52% to be exact.

A decade of trips to Capital Hill and the White House paid off for Carlyle's David Rubenstein.  In an age of privilege not everyone is the same.