Sunday, December 30, 2018

Blackstone's Schwarzman Offers Magic Words on Leveraged Loans

Blackstone co-founder Stephen Schwarzman rewrote history on leveraged loans.  Blackstone purchased GSO Capital Partners in March 2008 before the fall financial crisis.Blackstone's leveraged loan portfolio has grown

Blackstone's 10-K  for FY 2018 calls into question Schwarman's assertion the firm had almost no losses from leveraged loans.

Blackstone's SEC filing stated "Leveraged loan prices dropped from an average of 94.4% at the end of 2007 to 62.3% at year-end 2008, reaching new lows."  The filing also noted:

Government intervention in the U.S., Europe and Asia continued in the fourth quarter and to date in 2009. Several financial and other institutions required government support in the form of guarantees or capital injections. Additionally, banks which have received Troubled Assets Relief Program (“TARP”) funds from the U.S. government are being encouraged to lend. Further, a stimulus package to be implemented in the U.S. in 2009 is intended to reverse the weak economic trends, including unemployment rate and a decline in consumer spending. 

Blackstone’s businesses are materially affected by conditions in the financial markets and economic conditions in the United States, Western Europe, Asia and to some extent elsewhere in the world. 
The situation will return when the greed and leverage boys no longer trust another to make good on their debts.  Blackstone's Credit AUM went from $138.1 billion for Q4 2017 to $130.6 billion for Q3 2018.  Has that process begun?

Friday, December 28, 2018

Apple Promotes PEU Supreme

Carlyle Group affiliate Supreme was front and center in Apple's holiday commercial.  I took the liberty of adding Carlyle's logo to the image.  Private equity underwriter (PEU) Carlyle purchased a 50% stake in Supreme, the cool street skater retailer.  Pitchbook noted Carlyle's $500 million investment occurred in the midst of numerous PEU retail bankruptcies.  Toys 'R Us imploded after being saddled with massive PEU debt. 

I'm sure the greed and leverage boys are grateful for the Supreme promotion.  How many hipster Supreme fans have grandparents in nursing homes?  They may want to review Carlyle's handling of ManorCare before they decide to enrich Supreme's owner any further. 

Sunday, December 9, 2018

Carlyle Trying to Rebuy Standard Aero from Veritas Capital

The Carlyle Group is one of three final bidders for Standard Aero, a company Carlyle owned from 2004 to 2007.  Carlyle sold Standard Aero and Landmark Aviation to Dubai Aerospace without a peep from Senator Chuck Schumer, a vocal opponent of the 2006 sale of U.S. port operations to Dubai Ports World.  That deal fell apart under public scrutiny.

Standard Aero's enterprise value grew tremendously the last fourteen years.  Moelis advised Dubai Aerospace on its 2015 sale of Standard Aero to Veritas Capital.  Former Congressman Eric Cantor joined Moelis in September 2014 and the firm touted his skills in advising international deals.

Standard Aero could be the latest air related company round tripped by Carlyle.  The Carlyle Group owned Vought Aircraft Industries and Landmark Aviation more than once.

Update 12-17-18:  SeekingAlpha picked up this story.

Update 4-7-19:  On April 5th Carlyle confirmed it had closed on Standard Aero.  Reuters noticed Carlyle round tripping Standard Aero in a more than $5 billion deal including debt.  Moody's cited leverage of mid 7x for the $5.31 billion deal.

Monday, December 3, 2018

Lux et Veritas: Carlyle Co-founder David Rubenstein to Speak at IU Graduation

Inside Indiana Business reported:

Indiana University Bloomington graduates will be addressed by the co-founder of one of the largest private equity firms in the country next month. Carlyle Group co-executive chairman David Rubenstein will speak at winter commencement in Simon Skjodt Assembly Hall.

"Indiana University is extremely pleased to welcome such a highly accomplished individual to campus to deliver our winter commencement address, and we look forward to him sharing his insights into business, education, philanthropy and leadership with our newest graduates", said IU President Michael McRobbie.  Winter commencement is set for 10 am December 15.
Rubenstein's ManorCare shunned an economic development offer from Indiana, instead accepting a $30 million package in September 2008 from Toledo/the state of Ohio to remain in the area.

Kentucky, Indiana, and Tennessee had offered generous incentives to entice HCR ManorCare to leave Toledo. 
Might David Rubenstein recap Carlyle's abysmal handling of ManorCare?   WaPo recently chronicled the negative impact of Carlyle's PEU ownership of the giant nursing home chain.  President George W. Bush's administration approved Carlyle's buyout of ManorCare in December 2007.  W. served on the board of Carlyle affiliate CaterAir from 1990-1994.

W.'s father served as paid advisor to Carlyle from 1998 to 2003.  Former President George H.W. Bush lent his credibility and reputation to Carlyle's Asia funds for a fee.  Bush senior retired "shortly after serving as the main draw at a dinner in Moscow to woo investors."  That's one benefit of Poppy's no gloating policy for Russian President Gorbachev.  He could return to sell The Carlyle Group to Russian investors.

Carlyle's ManorCare ownership harmed patient care, despite assurances from board member Gail Wilensky.  Wilensky directed the Medicare and Medicaid programs from 1990 to 1992 and served in the White House as a senior health and welfare adviser to President George H.W. Bush.

Indiana should be relieved that Carlyle kept ManorCare in Ohio for a $30 million subsidy.  Truth and light is Indiana University's motto.  The Carlyle Group has historically been at odds with both

Update 1-5-19:  Indiana Daily Student questioned Rubenstein's selection for graduation speaker. 

Thursday, November 1, 2018

Rubenstein Rehabs Founder Milk 'em on Bloomberg

Carlyle Group co-founder David Rubenstein hosted convicted junk bond king Michael Milk 'em, the founder of "modern capital markets."

In April 1990, after four years of investigation and prosecution, Milken agreed to plead guilty to six charges of criminal violation of securities laws — technical violations, as opposed to the original 98-count indictment that charged him with conspiracy and insider trading — and to pay a $600 million fine. He paid an additional $500 million to Drexel's private investors who lost money when the firm was shuttered and then liquidated, also in 1990, in part as a result of Milken's wrongdoing. 

"You were willing to commit only crimes that were unlikely to be detected," U.S. District Judge Kimba Wood told him in November 1990 at his sentencing hearing. "When a man of your power in the financial world . . . repeatedly conspires to violate, and violates, securities and tax business in order to achieve more power and wealth for himself . . . a significant prison term is required." 
His ten year prison sentence was reduced to two years.  That was when financial criminals actually went to jail for short periods of time. 

On the Rubenstein show Milk 'em offered large doses of horse excrement.

"When things started coming from Japan in the 60's and 70's everyone said they were junk.  It's junk.  And all of a sudden we felt by the 80's the quality of their products and cars was better.  Everything coming out of China was junk.  The American public did not understand they were talking about themselves."  
Notice the "junk" frame which he used to distract from his junk bond crimes.  He then employed the classic move of blaming the victim, the self hating American people who might dare stand up to unethical billionaires like Rubenstein and himself.

Since the American people considered themselves junk, who came to the rescue?  Milk 'em could've cited the American hero who helped the Japanese manage for quality, Dr. W. Edwards Deming.  Nope.  Dr. Deming lambasted the corporate flippers of the world who used other people's money.  Corporate America turned to Dr. Deming in the 80's for lessons on quality.

The world's quality guru, Dr. W. Edwards Deming, spoke in 1984 about an economy without takeovers, without leveraged buyouts (LBO firms).  LBO morphed into private equity before exploding the last decade.  Greed is their constancy of purpose.
The Carlyle Group was established in 1984.  However, Milk 'em offered a different balm for the American people who rated themselves as junk.  It turns out he was their hero.

"60 million jobs have been created by non-investment grade companies  in the latter third of the twentieth century minus jobs being created by investment grade companies.
Why doesn't Milk 'em cite huge job creation for the first fifteen years of the twenty first century?  Because modern capital structure prioritized massive interest costs over worker pay/benefit increases in company income statements.  It also drove down company tax burdens.  The LBO/PEU boys are happy to pay interest but not raises or taxes.  

To restore hope to America Milk 'em is creating the Center for the American Dream.  This is but the latest move in the Milk 'em Pardon Game.  Greed is good and billionaire President Donald Trump is just the man to remove any lingering stench from Michael Milk 'em.  

Both the Red and Blue political teams sold their souls to the greed/leverage boys in the 1990's.  Members of both political squads endorse the rehabbing of Micheal Milk 'em.  It's one thing our horrific leaders can do on a bi-partisan basis.

I think the American Dream, which is so unique, is a chance to succeed based on your ability, your willing to work hard, your knowledge, your insight - which is one of the most valuable qualities. Now I can't tell you how depressed I am that 26% of Americans under 30 think they will live a better life than their parents.   A long time ago it was 90% of Americans.  Why do they feel that way?
Milk 'em is back to blaming the victims of an economy rigged to reward the rich and politically connected.  The twenty first century rewarded the Rubensteins and Milkens, not the average American worker.

LBO-PEU killed the American dream and loaded the U.S. economy with trillions in junk debt.  A downturn will bankrupt many highly leveraged firms.  Micheal Milken could look in the mirror and see what his creation wrought.  That's not part of the PEU plan.

Update 11-2-18:  Republican Senator Ben Sasse cited loneliness as the problem for Americans, a slight variation on Milken's junking of the average citizen.  Sasse once worked for consultant McKinsey.  Did McKinsey come up with the junk and loneliness frames for use against the average citizen?

Update 9-28-21:  Milken got mention as a bad guy in 2010 for rumor mongering and naked short selling.

Saturday, October 13, 2018

PEU Boys Going to Riyadh Ritz (Crown Prince's Contracted Prison)

The greed and leverage boys will join Saudi Crown Prince Mohammed bin Salman (MBS) for his Vision 2030 meeting the end of October.  Vision 2030 will be held at the Riyadh Ritz Carlton, the site where numerous members of the Royal family were imprisoned in a "corruption investigation."

The Vision 2030 meeting has been called "Davos in the Desert."  The real 2018 Davos ended with a Vision 2030 luncheon sponsored by Saudi Arabia.  It coincided with the release of Saudi Prince Alwaleed bin Talal, widely known in the West for his investment acumen.

Who's November 2017 jail cell will TPG's David Bonderman occupy?  Will Blackstone's Stephen Schwarzman commit as much as more as the Saudi Prince Alwaleed bin Talal's settlement with MBS?  Will Peter Thiel's Palantir protect the power hungry players willing to use violence to shutter critics?  Did Palantir protect the Turkish Saudi Embassy, the site of Washington Post journalist Jamal Khashoggi's disappearance and likely murder? 

How much U. S. taxpayer money can Treasury Secretary Steven Mnuchin send the Prince's way?  Mnuchin knows how to torment and torture mortgage holders.   Will he and the Crown Prince coach each other on ways to inflict physical and emotional torture?

KKR's David Petraeus knows how to harm and spy on masses of people.  Surely, KKR can profit from Saudi Arabia's oppression of their people and neighbors.

The greed and leverage boys expect one thing, outsized returns and this requires outsized influence.  I don't think PEUs care about optics from going to the event.  In the PEU world the more distressed the investment,  the better the returns.

Update 10-19-18:  Many PEU boys dropped plans to attend the Saudi event.

Update 10-21-18:  U.S. Intelligence has evidence of Crown Prince's involvement in Saudi journalist's execution.

Update 12-4-18:  U.S. Senators heard evidence of the Crown Prince's ordering the murder of a Saudi journalist.

Update 12-28-18:  Consulting giant McKinsey abandoned a Saudi partner who is yet to be released from the Crown Prince's abusive shakedown.

Update 10-24-19:  Davos in Desert is back in full swing. The Khashoggi killing is old news and Prince Mohammed bin Salman, the man behind the murder, has money to dangle.

Update 10-9-21:   The Khashoggi murder is such old news that the man behind the execution is being promoted for his public service by Crown Prince bin Salman.  Further evidence that Khashoggi's brutal killing is in the rear view mirror came from bin Salman led Saudi Public Investment Fund's purchase of Newcastle United. 

Update 3-4-22:  The Crown Prince of Thuggery said:

 "If that's the way we did things, Khashoggi would not even be among the top 1,000 people on the list. If you're going to go for another operation like that, for another person, it's got to be professional and it's got to be one of the top 1,000."

Reminds me of the rapist whose defense is "the woman was too ugly to attack."  Their arrogance is beyond belief.

Update 12-6-22:   The U.S. court case against the Crown Prince was dismissed under the guise of sovereign immunity, something the Prince did not have at the time of the execution.  The judge said his hands were tied by the Biden administration's recommendation to the court.  Thugs win. 

Update 10-21-23:  Davos in the Desert starts this coming week.  It's theme is "The New Compass."  The Israel-Gaza war may impact who actually attends.  The theme is meant to capture "the essence of a new global world that is rediscovering its bearings in the realm of investment." Translation:  Do as the Crown Prince says and you will be paid handsomely.

Thursday, October 4, 2018

Middle East Forgives Rubenstein for Carlyle Capital Corporation

PRNewswire ran a piece on Carlyle Co-founder David Rubenstein:

ABANA, the preeminent US organization for finance professionals and institutions with interest in the Middle East and North Africa, honored David M. Rubenstein, Co-Founder and Co-Executive Chairman of The Carlyle Group,

Khaldoon Khalifa Al Mubarak, Group Chief Executive Officer and Managing Director of Abu Dhabi's Mubadala Investment Company, said: "It was my pleasure to introduce David Rubenstein as he received the 2018 ABANA Achievement Award. David's work, spanning several decades, has helped develop the investment and asset management industry across the MENA region, with Carlyle as one of the most established investment partners for many regional institutions."
Mubadala purchased a $1.35 billion chunk of Carlyle in 2007 adding another $500 million in 2010.   Past winners of the award included Kuwait's Bader al Sa'ad and Saudi Prince Alaweed bin Talal. 

FT reported in November 2009 of Kuwait investor anger over the collapse of Carlyle Capital Corporation.

A prominent Kuwaiti conglomerate is suing the Carlyle Group in a local court, alleging that the US private equity firm misrepresented the safety of its affiliate, Carlyle Capital Corp, a public debt fund that collapsed in March 2008.

CCC became one of the first casualties of the financial crisis, because of its high leverage, which made it highly sensitive to small moves in prices. Its investors lost all their money.  

The implosion of CCC has damaged Carlyle’s reputation in the Middle East, where the affiliate raised most of its funding, according to people familiar with the matter. It is a personal setback for Carlyle’s co-founder and chief fundraiser, David Rubenstein, a frequent visitor to the Gulf. “Arab money made Carlyle what it is,” said the head of the investment bank of one major financial institution in Dubai. 

All is forgiven.  David Rubenstein is once again legend in the Middle East.  His silence over the detention of Saudi Prince Alaweed bin Talal likely helped.   Truly inspiring.

Update 10-9-21:   Rubenstein moderated a panel at the "Davos in the Desert" in January 2021.  The Khashoggi murder is such old news that the man behind the execution is being promoted for his public service by Crown Prince bin Salman.  Further evidence that Khashoggi's brutal killing is in the rear view mirror came from bin Salman led Saudi Public Investment Fund's purchase of Newcastle United.

Monday, October 1, 2018

CHS Settles HMA Kickback Case with Feds for $262 million

The Justice Department settled a fraudulent billing case with Community Health System's HMA for $262 million. 

Between 2009 and 2012, two former HMA hospitals, Lancaster Regional Medical Center and Heart of Lancaster Medical Center in Pennsylvania, billed federal health care programs for services referred to the hospitals by individual physicians and physician groups.  According to the government, HMA compensated these physicians and physician groups through complex kickback arrangements in exchange for a patient referral stream. In one instance, HMA bought two businesses from a physician group for grossly inflated amounts.  HMA also paid that same physician group under a contract that was styled as payment for services that were never performed or that neither party ever had any intention of performing. In another instance, HMA paid a local surgeon exorbitantly more than the fair market value of his services.  According to the government, these arrangements were intentionally structured to disguise payments which were, in actuality, payments for patient referrals, not for legitimate services
President Obama appointed White House Health Reformer Nancy Ann Deparle in March 2009.  Her for-profit health care credentials included serving on the board of Legacy Hospital Parnters, which is incestuously related to Community Health Systems (CHS) through Chairman Denny Shelton.  Community Health Systems bought HMA in 2014 after buying Shelton's Triad Hospitals in 2008.

Greed drives unethical behavior, in healthcare as in finance.   Australians have awakened to this fact.

A royal commission this year, the country's highest form of public inquiry, has exposed widespread wrongdoing in the industry.  It released an interim report on Friday, condemning an industry which it said valued profit over people.  The Australian government called the report a "scathing" assessment.  "[The report] shines a very bright light on the poor behaviour of our financial sector," Treasurer Josh Frydenberg said.  "Australians expect and deserve better."
Former Medicare Chiefs consistently arise from the for-profit healthcare industry and return to their swampy roots afterwards.    Former Medicare Chief Gail Wilensky sold nursing home giant Manorcare to The Carlyle Group as a board member.  Wilensky set up a structure that would prevent patients being harmed by Manorcare's PEU ownership.  It did not prevent Carlyle from bleeding the company for well over $6 billion in cash before completely bankrupting it. 

Nancy Ann Deparle returned to her PEU roots with Consonance Capital after designing greed focused PPACA.  Just days ago Bloomberg reported:

A new federal watchdog report warns that privately run Medicare health plans used by millions of older Americans may be improperly denying patients medical care.

Federal auditors have found “widespread and persistent problems related to denials of care and payment in Medicare Advantage,” the privately administered plans that insure more than 20 million people, according to the report from the Health and Human Services Office of Inspector General.
For-profit healthcare companies have internal incentive programs which distort behavior, as in the case of HMA.

According to the Justice Department, HMA, beginning in 2008, defrauded government healthcare programs like Medicare and Medicaid by illegally pressuring and inducing doctors into increasing the number of emergency department patient admissions.  Those admissions were made without regard to whether the they were medically necessary, prosecutors said.
PPACA instituted a complex series of pay for performance initiatives, HAC, HRRP, VBP, VM, MIPS, APM, MACRA, which drive similar bad behavior.  Reward/punishment systems distort behavior to achieve the reward and/or avoid the negative.

Roughly 30% of corporate executives cheated by backdating stock options to maximize their executive compensation.  President Obama once said "if pay for performance works," without sharing vast research that it causes major distortions by causing people to focus on the reward, not the quality of their work.  Many like executives at HMA will cheat to garner the prize.

The government settlement absolves CHS of any criminal charges:

Health Management Associates, which Community Health acquired in 2014, agreed to pay the sum to resolve criminal and civil claims as part of a deal in which a subsidiary also agreed to plead guilty to conspiring to commit healthcare fraud.
White collar criminals have their company's pay fines for unethical and illegal behavior.  Jail time is reserved for street urchins, not the landed gentry. 

Update 10-1-18:  Davita settled with the Justice Department for $270 million for overcharging Medicare via Medicare Advantage plans.  Health reformer Deparle was on the Davita board when President Obama tapped her.

Saturday, September 22, 2018

Popeulism Bono Style

Columnist Fareed Zakaria wrote:

I wanted to understand Europe’s populism. So I talked to Bono. 
Economist Andy Xie wrote:

The world needs a new generation of policymakers who don’t hobnob with billionaire speculators and who understand workers’ concerns. Unfortunately, the change will not come smoothly. Political turmoil in the West is very much about this. A heavy price has to be paid to bring about the change
In 2008, Beijing and Washington pumped in massive amounts of money to bail out speculators in the name of saving the economy and helping workers. The reality is that they used workers’ money to enrich parasites. 
Parasites include private equity underwriters (PEU) who buy companies, load them with debt, milk them for cash and flip them for huge returns.  Bono is a PEU with Elevation Partners, co-founding the firm in 2005.  Bono hobnobs with fellow rich speculators at the World Economic Forum in Davos, Switzerland.

Private equity underwrites get preferred carried interest taxation.  Loading up affiliates with debt reduces their tax burden as do various tax avoidance schemes.

Irish Bono may be familiar with this one.

The double Irish with a Dutch sandwich is a tax avoidance technique employed by certain large corporations, involving the use of a combination of Irish and Dutch subsidiary companies to shift profits to low or no tax jurisdictions. The scheme involves sending profits first through one Irish company, then to a Dutch company, and finally to a second Irish company headquartered in a tax haven. This technique has made it possible for certain corporations to reduce their overall corporate tax rates dramatically.

The double Irish with a Dutch sandwich is generally considered to be a very aggressive tax planning strategy. It is, however, famously used by some of the world's largest corporations, such as Google, Apple and Microsoft. In 2014, it came under heavy scrutiny, especially from the United States and the European Union, when it was discovered that this technique facilitated the transfer of several billion dollars annually tax-free to tax havens.
Workers with stagnant wages are tired of executives and boards getting outsized compensation off their backs.  How do workers at Elevation Partners affiliates feel about their PEU owners?

Elevation made huge returns on its Facebook stake when the company went public in 2012.  April 2015 found Bono with a new private equity appointment:

U2 frontman Bono has accepted the role of special adviser to a new $3 billion growth fund currently raised by equity fund investor David Bonderman's TPG Capital.

Fareed Zacharia lobbed softball questions at Carlyle Group co-founder David Rubenstein.  Fareed is part of system that maintains the current political and power structure.   He should talk to real Europeans/Americans and ask why seven times to get at root causes of citizen dismay.  He might arrive in the same place as Andy Xie.

Update 9-24-18:  Elevation narrowly missed out on Pandora which announced a $3.5 billion sale to Sirius-XM.

Update 9-24-18:  Christopher Hedges wrote "economic elites and organized groups representing business interests have substantial independent impacts on U.S. government policy, while mass-based interest groups and average citizens have little or no independent influence.  Irish born Bono has far more influence on U.S. government policy than American citizens.  "Elites, who sacrifice nothing for society and are not held accountable for their criminal behavior, live in a “stateless archipelago.” They are empowered to pillage the nation, amass obscene wealth and wield unchecked political and legal control.  Bono is an elite and Zacharia an enabler.

Update 9-26-18:   The Guardian noted the outsized influence of the super rich, i.e. the greed and leverage boys.  Some researchers have concluded that wealthy people and business interests have 15 times the political efficacy of the rest of the population. Most people are unhappy with the status quo, and do not think it’s fair that wealthier people have disproportionate political influence.

Update 9-28-18:  Billionaire David Rubenstein recently lobbed softball questions to Jeff Bezos, the world's richest man. 

Update 9-6-23:  Elevation Partners website states:

 In 2015, Bono (an Elevation Co-Founder and Managing Director) joined TPG Growth as a Special Partner. In 2016 Bono co-founded The Rise Fund, a global social impact fund which invests in seven sectors aligned with the UN Sustainable Development Goals.

Update 10-25-23:  A Bono, Bezos, Gates company intended to revolutionize trucking may be going under.  Convoy will "shut down core business operations immediately while some staff would be retained to wind down operations and for potential future strategic options."

Friday, September 21, 2018

Carlyle Group Sniffing Airplane Parts Maker Esterline

Dealreporter stated The Carlyle Group is one potential buyer for Esterline.  Esterline supplies airline parts.  It's 2017 Annual Report noted:

Our products are used on the majority of active and in-production U.S. military aircraft and on every Boeing commercial aircraft platform manufactured in the past 75 years.
Do Carlyle's politically connected founders know war is in our future?  If so, Esterline could be a wise investment.

Boeing may not be thrilled about Carlyle buying a key supplier after affiliate Vought Aircraft Industries' South Carolina operation gunked up 787 Dreamliner production as Conde Nast reported in 2009.

But Boeing didn’t realize that the Carlyle Group, which had acquired Vought in 2000, was starving it of resources while making a few cosmetic improvements to attract potential buyers—a once-common private equity tactic. By early 2006, Vought was facing a severe “liquidity crisis” and nearly went bankrupt, chief executive Elmer Doty told analysts. It couldn’t afford the new plants, employee training, and fuselage design and assembly and had to “reconstitute” its engineering department. “We are among the riskiest, if not the riskiest” of the Dreamliner suppliers, Doty acknowledged.
Mr. Elmer L. Doty remains with Carlyle and could advise Esterline on how much cash Carlyle plans to bleed from the company if it is the successful bidder.

Wednesday, September 12, 2018

Greedy Carlyle to Buy Compassionate Sedgwick

The Carlyle Group will buy Sedgwick for $6.7 billion from fellow private equity underwriter KKR,  KKR bought Sedgwick for $2.4 billion in 2014.  The deal will close later this year.  Sedgwick's website lists the following claims management services:

workers’ compensation, liability, property, disability and absence management

KKR referred to Sedgwick's "delivering high quality technology-driven insurance solutions to clients and consumers around the globe."  I'm pretty sure high quality technology-driven claims management service is not compassionate, especially under the ownership of Carlyle.

Update 9-16-18:  Moody's indicated in December 2017 Sedgwick was highly levered, almost 8x debt to EBITDA, under KKR.  Carlyle has hundreds of companies that can send new business to Sedgwick.  

Update 6-9-24:  Carlyle will once again try to flip Sedgwick.

Monday, September 3, 2018

DeParle's Consonance Capital Sold KEPRO

While Americans struggled to pay for healthcare or went without White House Health Reformer Nancy Ann DeParle grew her wealth substantially.  She serves on HCA and CVS's board of directors and holds 14,662 HCA and 11,051.CVS shares.  Her holdings are worth $2.8 million at Friday's market close.  However DeParle also makes big money from privately held companies.

Nancy-Ann DeParle is a Partner and Co-Founder of Consonance Capital Partners. Prior to CCP, she was Assistant to the President and Deputy Chief of Staff for Policy in the Obama White House from 2011-2013, and served as Counselor to the President and Director of the White House Office of Health Reform from 2009-2011.
In 2014 Consonance Capital bought KEPRO which has Pennsylvania Medical Society Peer Review Organization roots.

KEPRO works under contract to the Centers for Medicare & Medicaid Services (CMS), an agency of the U.S. Department of Health and Human Services. KEPRO is committed to continuous quality improvement by providing medical case review.
Consonance Capital flipped the company last year.

New York, NY, May 30, 2017 – Consonance Capital Partners, a leading healthcare-focused private equity firm, announced today that it has completed the sale of KEPRO. Terms of the transaction were not disclosed.
However Moody's rated the deal's debt and reported $520 million in financing:

Proceeds from the $205 million first lien term loan, $100 million second lien term loan and about $215 million in common equity will fund the leveraged buyout of the company, refinance existing debt, and pay transaction fees and expenses.
KEPRO's news section never mentioned the sale.  It had two stories in May 2017 but neither addressed Consonance Capital's sale to Apax Partners, a UK based private equity underwriter (PEU),

Apax Partners offered strong support to Sir David Walker in his review of the private equity industry in 2007.  In light of the review's findings, which identified a need for enhanced transparency and accountability within the industry, we are keen to increase the understanding of Apax Partners in particular and the private equity industry in general.
For all Apax Partners' talk of transparency advisor Cain Brothers reported:

May 30, 2017 –Consonance Capital Partners has sold KEPRO, a medical management and cost containment solutions for government and private sector clients in the healthcare sector. The buyer was not identified. No financial terms were disclosed. Leerink Partners LLC and Cain Brothers & Company LLC advised Consonance and KEPRO on the transaction.
Also in 2007 Apax Partners had an unusual Chairman resignation:

Lord John Browne, the BP chief executive who was forced to resign under a cloud over a lie he told about his private life, has quit his new role as chairman of private equity group Apax Partners.
Prior to appointing him Chairman Apax knew Lord John Browne drastically cut maintenance expenses at the Texas City Refinery which resulted in a horrific explosion that killed 15 people and injured 180,

The greed and leverage PEU boys will not save America's absurd healthcare system.  The are expressly not the tonic and anathema to continuous quality improvement, according to founder Dr. W. Edwards Deming..
The world's quality guru, Dr. W. Edwards Deming, spoke in 1984 about an economy without takeovers, without leveraged buyouts (LBO firms).  LBO morphed into private equity before exploding the last few decades.  Greed is their constancy of purpose.

Deming died in 1993 before KKR's takeover of HCA added over $15 billion in costs to America's healthcare system.  He would be horrified to learn of private equity's greed-based assault on all elements of our healthcare system. 

Nancy Ann DeParle will continue to enrich herself from the buying and selling of healthcare and healthcare companies.  The rest of us will be much worse off.

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. 

Update 11-29-22:  The Carlyle Group is merging affiliate CNSI and Kepro.  Apax Partners will exit Kepro in the deal.  They claim the combined firm will improve healthcare quality.  That remains to be seen.

Update 9-5-23:  Accentra Health CEO Todd Stottlemyer garnered a spot on Virginia Business 2023 Power List.  Carlyle can do that for their PEUple.  It helps that Governor Glenn Youngkin is a former Carlyle co-CEO and counts on Stottlemyer, who contributed $25,000 to the Youngkin campaign.  It's the PEU way.

Update 1-9-24:  Carlyle's Acentra bought  EAP Consultants, LLC (“Espyr”), a leader in workplace mental health and well-being programs.  Will they be able to undo the harms done to employee mental health by PEU ownership?

Sunday, August 26, 2018

Carlyle to PEU Primary Care

The Carlyle Group announced:

Global alternative asset manager The Carlyle Group (NASDAQ: CG) today announced that it is making a significant minority investment of up to $350 million into 1Life Healthcare, the technology and management company behind One Medical, to support the company’s growth. One Medical is the largest independently held primary care practice in the U.S. The company is working to transform health care by making high-quality primary care personal, accessible and affordable.
OneMedical's CEO told CNBC his company could save the U.S. healthcare system 10%.   His statement is likely sales talk, puffery.  Private equity ownership can add significant capital, management fees and special dividend burdens.

The Carlyle Group chose to omit ManorCare and LifeCare Holdings, both bankrupted by Carlyle, from its healthcare track record in its press release:

Carlyle’s significant experience investing in the healthcare space includes MedRisk, Albany Molecular Research, PPD, WellDyneRx, Ortho Clinical Diagnostics, Rede D'Or São Luiz, Healthscope, Qualicorp, MultiPlan, and most recently, Millicent Pharma.
Carlyle announced the formation of Millicent Pharma in May 2018 with its acquistion of Femring from Allergan. states:

Femring® (estradiol acetate vaginal ring) is an off-white, soft, flexible ring with a central core containing estradiol acetate. described its use:

Femring (estradiol) is a member of the estrogens drug class and is commonly used for Atrophic Urethritis, Atrophic Vaginitis and Postmenopausal Symptoms.
Femring's price history can be seen below:

The drug price rose 145% from 2012 until today.  It's not clear how much of the increase came as a result of Carlyle Group ownership.

Hospital giant HCA's ownership by private equity underwriters (PEU) added $15 billion in costs

PPACA's founders projected healthcare costs would rise less than 1% per year between 2010-2019.  Many of those people now work for private equity underwriters.

The greed and leverage boys will not decrease healthcare costs, whether they be hospitals, home health agencies, hospices or physician practices.

One Medical, offers concierge-style primary care, charging patients an annual fee of $149 to $199.
PEUs will distort the system to feed their insatiable need for grand returns, lying all along the way.  When challenged puffery has been their core defense     

Update 1-8-20:  One Medical is in line for an IPO as 1Life Healthcare Inc.

Monday, August 13, 2018

Carlyle CEO Owns Chunk of New Professional Fighters League

The Washingtonian reported:

Love the Caps but wish hockey were even more violent? A group of DC businessmen has just the thing for you: a new national mixed-martial-arts fighting league. Dubbed the Professional Fighters League, it debuted in June.

Davis came up with the idea for the MMA league after he saw that the hugely popular Ultimate Fighting Championship sold for $4 billion last year.  Davis approached a group of business leaders—including Wizards and Capitals owner Ted Leonsis, financier Russ Ramsey, and Carlyle Group co-CEO Glenn Youngkin—with the intent of building their own operation to capture some of the sport’s 300 million fans.
Carlyle has streetwear brand Supreme to dress its new league of street fighters.  It may get to cross sell Carlyle investments to other PFL investors.  

Update 11-25-18:   Netflix comedy show takes on Supreme and The Carlyle Group.

Monday, July 30, 2018

Obama Offers Compassion for Bribers

President Obama defended titans of industry in a South Africa speech honoring Nelson Mandela.  He said:

".... their decision to pay a bribe- are often done without malice...
These words were stated by a constitutional lawyer.  He went on:

"it’s just a rational response, they consider, to the demands of their balance sheets...."
I've read many balance sheets and not one ever made a demand.  Obama furthered the PEU class during his eight years in office.  He protected Wall Street executives from accountability for their fraudulent acts that caused the 2008 financial crisis.  For his service he has been and will be richly rewarded.

Update 9-29-18:  The greed and leverage boys hate to be caught in their mendacious acts.  They have no compassion for whistleblowers.   As President Barack Obama made life very difficult for whistleblowers.

Sunday, July 29, 2018

Carlyle Group Sued Again

FT reported:

Carlyle, the buyout group, has been accused of inducing a senior businessman to purloin secret documents from one of France’s biggest industrial companies.
Carlyle recruited the executive from the company it was trying to buy.  The lawsuit:

"accuses him (executive Carlyle hired) of downloading “a trove of competitively sensitive information” on to two USB thumb drives before he left the building. Carlyle provided “a direct financial incentive” for him to breach his duties as an employee."
It took years but Carlyle lost the condemnation lawsuit over Mountain Water.   Now the City of Missoula wants Carlyle to pay for its PEU practices:

An alleged betrayal included Carlyle infrastructure executives getting incentives to maximize the water company’s short-term profit at the expense of the city of Missoula, and to extract $11 million for shareholders by maximizing rates and minimizing maintenance.
In all, Schneider laid out a laundry list of facts produced in two trials that showed bad faith including false promises, unjust enrichment, deceit, corporate raiding and what he termed legal thuggery.
Carlyle provided incentives that caused its representatives to act in unethical ways.  It happened before with Synagro, Semgroup, Church Street Health Management, ARINC, China Fishery and Cobalt Energy.

Yet, Carlyle's co-founders meet regularly with U.S. Presidents regardless of political party.  Greed lives and unfortunately it has bipartisan support. 

Update 6-16-20:   Missoula's bad faith lawsuit against Carlyle has been delayed due to the coronavirus pandemic.  The city's attorneys say they have evidence of Carlyle Grouo fraud and malice.  If so, Carlyle will not want a public trial.  

Saturday, July 21, 2018

Carlyle's Rubenstein Says Let Good Times Roll

Billionaire Carlyle Group co-founder David Rubenstein said on CNBC on 7-18-18:

And when the economy's in good shape, people tend to be happier. Now, obviously people at the bottom of the economic totem pole are not happy. But unemployment is at a record low, and therefore you've got a lot of people working, a lot of people are making money...
CNBC Reporter Becky Quick kindly gave Mr. Rubenstein time to promote private equity underwriters (PEU) and The Carlyle Group.

Carlyle raised $17 billion for Carlyle Partners VII with an $18.5 billion hard cap in sightPitchbook reported:

Carlyle's largest-ever effort, Carlyle Partners V, brought in $13.7 billion in 2007.
Carlyle's website pegs the close in 2008.

Carlyle's $13.7 billion Carlyle Partners V closed at the end of 2008 
The bulk of PEU fundraising occurred before the September 2008 financial meltdown. What does this mean for investors today?

Rubenstein spun history with Becky Quick:

"During the Great Recession, which happened after 2006, around 2007, 2008, the industry went down, as most of the economy around the world went down. And a lot of buyout fields didn't work out as well as people thought. It was a complicated industry at the time, complicated for the economy about whether we could do the things we said we were going to do for our investors."-Rubenstein
The PEU model did not get less complicated since then.  Becky Quick commented on high prices PEUs are paying to buy companies:

"I think if you go back and you look over the last year, you see about seven times EBITDA. Now, it's closer to 12 to 13 times. So almost doubling over the last year."-Quick
Froth has returned.  Rubenstein reinforced Quick's observation:

"Deals are getting done at higher prices than they were in 2006 or '07. But because investors are willing to accept somewhat lower rates of return, it works."-Rubenstein
Carlyle investors don't take kindly to a 100% investment loss as experienced with Carlyle Capital Corporation's bankruptcy in March 2008.  

Financial crisis arrive when the big money boys no longer trust one another to pay their debts and investors fear losing principal.  That may be near.  It may be far, but it will return again.  The question is when?

Until then, totem pole toppers enjoy!

Update 7-22-18:  Institutional Investor issued a warning on PEU froth.

Update 7-31-18:  Carlyle hit the $18.5 billion hard cap, it's largest ever.  Great PEU times!

Monday, July 16, 2018

Carlyle Buys Skin Stimulation Tech Company

Private Equity News reported:

Carlyle Group LP has agreed to buy a majority stake in LPG Systems SA, a maker of skin-stimulation devices for non-surgical cosmetic and medical treatments.

LPG is positioned to take advantage of the rising demand for non-surgical, natural treatments for fat reduction, burn treatment and neuro-physical training.
The French company was founded in 1986, one year before The Carlyle Group was formed.

Private equity underwriters played a key role in the last two decades in enriching the wealthiest and keeping down worker pay/benefits.

After helping fatten up the super rich a new Carlyle affiliate can help them slim down with a HUBER 360.

Sunday, July 15, 2018

Carlyle Gives Up on Prezzo

The Carlyle Group failed in its attempt to takeover UK dining chain Prezzo.  Carlyle purchased discounted debt in Prezzo with the hopes of converting the debt into a majority equity position.  Prezzo's owner TPG Capital threatened a lawsuit and Carlyle backed away.

Carlyle used a similar strategy to takeover British carpet maker Brintons and Mrs. Fields.  The Carlyle Group lost ManorCare to creditors. 

Disruptions ahead mean opportunities for the PEU boys, at least those with cash.

Saturday, July 14, 2018

Wall Street's Big Data Flat Wrong on World Cup

The Guardian reported:

Goldman Sachs continued its unsuccessful tradition of picking Brazil as the winner (it has done so for the last three World Cups). Goldman Sachs didn’t arrive at this conclusion through instinct, but through “hours of number crunching, 200,000 probability trees, and 1 million simulations”. 

Goldman Sachs’ artificial intelligence-powered algorithms led them to conclude that “England meets Germany in the quarters, where Germany wins; and Germany meets Brazil in the final, and Brazil prevails.” What’s more, the banks stated: “For the doubters out there, this final result was cross-checked in excruciating detail by our (German) Chief Economist Jan Hatzius!
Economics may be the softest science.  Weather modeling is only mostly right in a several day window.

In recent years technology evangelists have been touting the power of data to predict the future and make important decisions about everything from the economy to employee performance. However, time and time again – from polls being wrong about Donald Trump to Brexit forecasting errors – we are reminded that data analytics has its limits. Seeing how wrong big banks were about the World Cup is a sobering reminder of how fallible even the most sophisticated statistical models are
Our world is over-weighted by the greed and leverage boys.  It's no wonder their toys filtered into corporate board rooms where executives place the highest priority on finance/capital and deride what was once human resources.  At many companies virtually all HR functions are contracted out. 

"Every theory is correct in its own world, but the problem is that the theory may not make contact with this world." - Dr. W. Edwards Deming 
Goldman Sachs and the clients they serve are directly responsible for workers going decades without reward/pay increases.  Have the big money boys created a model for another decade of the spoils going to top executives/board members while employees get increased responsibility for health care and retirement?

Update 7-15-18:  France beat Croatia 4-2 to win the World Cup. Nomura Bank predicted a France-Spain final, so it came the closest.  ING predicted France as the runner up, so it too was in the ballpark.

Sunday, July 8, 2018

Roots of Immoral PEU

The 1980.s saw the formation of many private equity underwriters.  Photographer Lauren Greenfield spent decades photographing the super wealthy.  She observed that more money is never enough for greed addicts.

“No matter how much people had, they still wanted more,” Greenfield says of her (wealthy) subjects. 
One of her subjects spoke to America's shift that produced widespread greed.

We meet Florian Homm, a hedge fund manager living in self-imposed exile in Germany to avoid extradition to the US where he has been sentenced to 225 years in jail. Smoking cigars and dripping in gold, Homm, who became known as “the antichrist of finance” for ripping off his investors for hundreds of millions of dollars, tells Greenfield that morality changed in the 80s. “The value system changed completely. It wasn’t about who you are, but about what you are worth

Morals are completely non-productive in that value system.”
The greed and leverage boys arose from this immoral swamp and their greed has been self serving.

The richest 0.1% of the world’s population has increased their combined wealth by as much as the poorest 50% – or 3.8 billion people – since 1980.

UBS published research showing that the super-rich hold the greatest concentration of wealth since the time of the Carnegies, Rockefellers and Vanderbilts at the turn of the 20th century. There are now 1,542 billionaires across the world, more than ever before. The richest 500 people alive increased their wealth by 23% last year, taking their combined fortunes to $5.3tn – more than twice the gross domestic product of the UK 

How many workers got a raise from their PEU sponsor in the last year?   While employees struggle under a low to no raise workplace

The pursuit of more money has costs and consequences to society, but also to families..  A 13 year old boy from a wealthy family told the photographer:  “Money ruins kids, money has ruined me”

Greed addicts uses their super wealth to buy inordinate influence from America's Red and Blue political parties.  Both Democratic and Republican White Houses catered to the PEU boys for nearly three decades.  PEU friendly Bill Clinton, George W. Bush and Barack Obama oversaw the growth of inequality from 1600 Pennsylvania Avenue. 

President Donald Trump looks to ramp up the wealth gap as he uses the unitary executive to help his fellow billionaires.  A presidential pardon may be on the table for junk bond king Michael Milken.  With the swipe of a pen Trump could remove the legal blemish from leveraged buyouts, which morphed into private equity.

When morals are nonproductive the legal system has little work to do.  Greed remains the prime objective, closely followed by image management.

Update 9-28-21:  Milken got mention as a bad guy in 2010 for rumor mongering and naked short selling. 

Update 3-1-22:   Young workers understand how they are judged on their productivity and the never ending drive to squeeze more out of them.  For executives and the PEU boys it is never enough.

Monday, July 2, 2018

Tom Scully's WCAS Saddles KAH with Debt, Lightens Load for Kindred Healthcare

Kindred Healthcare is no longer be a publicly traded company as of Monday morning July 2nd.  The company has been divided between two private equity underwriters (PEU), Welsh, Carson, Anderson and Stowe (WCAS) and TPG Capital.  The pair will own Kindred's long term acute care and rehab hospitals, as well as its outpatient rehab services.  This division had $3.4 billion in revenue in 2017.  The two PEUs will share Kindred at Home, the home health, hospice and community care division with Humana, a minority 40% owner.  Kindred at Home had nearly $2.6 billion in revenue in 2017. 

The PEU boys paid $810 million to purchase Kindred's equity.  Humana ponied up $800 million for 40% of the Kindred at Home (KAH).  KAH comprised 42.5% of Kindred's 2017 revenues.  That means Humana paid 98.8% of the cash purchase price for the whole company for  a mere 17% of the company's 2017 revenues. 

Why would Humana CEO Bruce Broussard be so generous with Humana's ample cash resources?   Broussard worked for WCAS affiliate U.S. Oncology for six years, serving the last two as CEO.   WCAS got Broussard his first fortune and the Humana CEO is in position to return the favor.

WCAS General Partner Tom Scully lobbies for Alston and Bird's healthcare clients.  He lobbied for U.S. Oncology and other WCAS affiliates over the years.  Former Medicare Chief and for-profit hospital point man  Tom Scully once said "health investing is as safe as it comes."   

The PEU way is to buy distressed companies, influence Uncle Sam's wallet (in this case Medicare payment for home health/hospice), conduct sponsor repackaging (by adding Curo Healthcare) and flip to a generous buyer, cash rich Humana.

Majority PEU owned Kindred at Home will soon close on the $1.4 billion Curo acquistion.  KAH/Curo will be saddled with $3 billion in debt courtesy of its new PEU owners.  Oddly, the LTAC/Rehab hospital side will have its debt load lightened by nearly 2x EBITDA.  The home care-hospice side will see leverage increase to "very high" levels.

Shouldn't Humana's $800 million in cash enable less leverage for Kindred at Home?   That's not the way this PEU ball is bouncing.  Mr. Scully will do his PEU lobbying best to ensure Kindred's various post acute care pieces make huge returns for its private equity owners.  That generally bodes ill for employees and patients.

Kindred employees in both divisions:  Prepare to be scullied by your new owners.  Greed is ugly.

Update 7-5-18:  Kindred isn't the only healthcare firm going PEU

Update 7-9-18:   ModernHealthcare reported on the PEU healthcare pattern.