Sunday, April 28, 2019

Carlyle to Pull $1.35 Billion Out of PPD

Arabian reported:

Hellman & Friedman LLC and Carlyle Group LP are seeking to take as much as $1.35 billion of cash out of drug research company Pharmaceutical Product Development LLC. 

The firm’s private equity owners are seeking approval from some of PPD’s creditors for the dividend plan, according to people familiar with the matter. To fund the payment, PPD is mulling the sale of a risky type of junk bond called PIK toggle that allows a borrower to delay interest payments, said the people, asking not to be identified discussing a private matter. 

The plan to take cash out of PPD - one of the largest providers of outsourced clinical research whose clients have included GlaxoSmithKline Plc and Pfizer  - comes at a particularly turbulent time for the health care sector.  

In this case, the debt would be issued by PPD’s holding company, ranking it below most of PPD’s existing borrowings and one step further removed from the company’s assets, the people familiar said. 
Affordable healthcare is the public's biggest worry and has been for decades.  Private equity underwriters are ubiquitous in healthcare and have added significant costs to the system. 

Carlyle Group and Hellman & Friedman acquired PPD in 2011, in a deal valued at $3.9 billion. The Abu Dhabi Investment Authority and Singapore’s sovereign wealth fund GIC joined as minority investors in 2017 as part of a recapitalisation that valued the company at more than $9 billion
Greed lives and elected officials cater to the PEU boys and their insatiable longing for more money, power and influence. What's another $1 billion among friends?

Update 4-30-19:  Pitchbook ran a piece on the proposed $1.4 billion dividend Carlyle plans to suck out of PPD.

(PEU Report noted Carlyle's original purchase of PPD and it's strange 2017 deal.  Other PEU PPD pieces can be found here.)

Wednesday, April 24, 2019

Apollo Crammed Down CEVA Executives It Required to Buy Stock in Affiliate

Apollo Global Management LLC purchased CEVA for $1.9 billion in November 2006.  The deal required CEVA executives to invest in their private company's stock.  Bloomberg reported:

Shortly after the CEVA purchase, Apollo acquired another logistics company, EGL Inc., for $2.1 billion, doubling the debt on the books of the merged company.

Apollo says that in 2006 and 2007 managers were given the opportunity to invest since it would give them “skin in the game.”

By 2007, CEVA’s bonds had started tumbling and Apollo began buying. From 2007 to 2011, Apollo purchased CEVA bonds for an average price of 50 cents on the dollar, according to an Apollo document.
In 2013 Apollo forced a recapitalization of CEVA as the major holder of the company's debt.  The move made CEVA's nonpublic stock worthless, including company stock executives had been forced to purchase.

CEVA rolled out a new share plan in 2013 that offered managers the possibility of recouping losses -- if they gave up the right to sue. 
CEVA went public in May 2018. In November, Apollo sold its remaining stake. Taking into account management and transaction fees, the buyout firm made a profit on the deal.
To sum up, Apollo bought two companies, CEVA and EGL, and loaded them with debt.  Shortly after completing the deal investors deemed the company a poor risk and the price of its bonds cratered.  Apollo took advantage and bought back the debt at a 50% discount.  They used that debt to zero out the companies nonpublic stock.  Apollo and other debt holders received the new equity for the firm.

In 2013, when Apollo’s debt-for-equity swap rendered CEVA executives’ shares worthless, current and former managers say they were shocked.
There is nothing shocking about the PEU boys and what they will do to fulfill their ceaseless greed.  Apollo had their sticky fingers in on every side of the deal. 

Tuesday, April 23, 2019

Carlyle's AsiaSat Pipe Full of Smoke

WSJ reported:

Orbiting 22,000 miles above Earth, a fleet of American-built satellites is serving the Chinese government in ways that challenge the U.S.
TechCrunch added:

The Chinese government has been using a private company jointly owned by a U.S. investment firm and its Chinese counterpart to expand its surveillance and telecommunications capabilities using American technology,

At the center of the Journal’s reporting is a company called Asia Satellite Telecommunications (AsiaSat). It’s a satellite operating company acquired back in 2015 by U.S. private equity firm The Carlyle Group and Chinese private equity firm CITIC Group. Both Carlyle and CITIC are known for their ties to government in their respective home nations.

Carlyle pretended to be hand's off regarding uses of AsiaSat's satellites.

In statements to The Wall Street Journal, Carlyle said that AsiaSat’s equipment supports internet and phone communications for Chinese telecommunications carriers.

“It is effectively a pipe,” Carlyle said in a statement to the Journal, “and AsiaSat, because of privacy issues, doesn’t monitor or regulate the content that flows through it.”
Carlyle has long read U.S government tea leaves and profited handsomely.  The politically connected private equity underwriter (PEU) went global some time ago.  It promotes Carlyle as creating opportunities in virtually every market around the world.

Before Carlyle laid any pipe it was well aware of the market for what could flow through it

Carlyle has two managing directors on AsiaSat's board of directors. 

I'm sure they are well aware of the market opportunities available to AsiaSat from a repressive Chinese government.  Carlyle demands it as well as grand returns.  The greed and leverage boys will obfuscate when their mendacity is revealed.  It's like blowing smoke from a pipe....