Sunday, January 7, 2018

Carlyle Backdoors Bis Industries

The Carlyle Group used discounted debt to take over Australian Bis Industries.  Their press release stated:

The Carlyle Group built its position in the senior bank debt of Bis over the course of a year to become one of Bis’ largest senior secured creditors and played a key role in implementing a comprehensive restructuring. In total, senior secured creditors (including Carlyle and Värde Partners) own 96% of the shares in Bis.
Carlyle pushed out KKR by purchasing deeply discounted debt.  It turned the cheap debt into an equity position.  

The Carlyle Group struggles to hold on to ManorCare, which is way behind on paying its creditors.  Centerbridge Partners provided ManorCare a $550 million line of credit which is keeping Carlyle's ownership in place.  Carlyle partnered with Centerbridge to make a mint from BankUnited, courtesy of a multi-billion subsidy from Sheila Bair's FDIC.  

At the end of 2017 Morgan Stanley Wealth Management held no, as in zero junk bonds, the debt used to fund private equity buyouts.  Leverage is a tool that makes big money when valuations expand.  It is an equity eliminator when valuations plummet.    

The Carlyle Group just closed a $800 million CLO fund which invests in packaged corporate debt.  I expect Carlyle will take over more distressed companies via backdoor debt, as it did to Brintons' and Mrs. Fields.  The Brintons' founding family can commiserate with KKR as having been taken over from PEU Trojan debt.  

Billionaires need to make more money.  The manner does not matter.