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.