Friday, January 31, 2020

Carlyle Jettisons Addison Lee

The Carlyle Group's Addison Lee effectively declared bankruptcy and will be taken over by debt holders.   Bloomberg reported:

A group of lenders to British cab operator Addison Lee agreed to a rescue package that will hand them control of the troubled firm, according to a person familiar with the situation.

Creditors will provide 45 million pounds ($59 million) of fresh funds and refinance 100 million pounds of loans, extending the maturity on the debt by seven years, according to the person who asked not to be named because it’s private.

The deal was agreed after private equity owner Carlyle Group LP, which bought Addison Lee in 2013 for about 300 million pounds, failed to find a buyer. Bloomberg News reported in August that it was considering a U.S. listing.

Portions of the company’s debt were trading at distressed levels below 30% of face value earlier in January.
The report did not say how much cash Carlyle extracted from Addison Lee via special dividends/distributions, management and deal fees prior to surrendering the company to lenders.  

Nearly a year ago Carlyle announced its desire to sell the company for £390 million.  The private equity underwriter (PEU) found no takers and had to give the firm over. 

Thursday, January 23, 2020

Carlyle Chiefs at Davos

Carlyle co-founder David Rubenstein and CEO Glenn Youngkin gave multiple interviews to business media at the World Economic Forum in Davos, Switzerland.  Both men attended the businessperson breakfast with President Donald Trump and shared their experience.

Youngkin avoided a question on resolving the conflict with Taylor Swift.  He lamented that private equity "had not done a great job of helping people understand what we really do."

Interviewers did not ask why Carlyle reneged on its lead developer role for the Corpus Christi oil port which will handle very large tanker ships.   Youngkin did not offer the reason why Carlyle exited the project, while being sued by its development partner.  Interesting Rubenstein cited the oil patch as ripe for private equity investment.

Interviews also avoided Carlyle's running refiner Philadelphia Energy Solutions into more than one bankruptcy, such that former employees do not have access to COBRA health coverage.  Sponsor Carlyle siphoned off massive funds from PES prior to the initial bankruptcy.  Youngkin did lament the lack of public understanding of the good private equity accomplishes, a meme pushed by former boss Rubenstein.

Mr. Rubenstein suggested entitlement cuts are needed due to the cost of those commitments.  He then punted on an income inequality question after saying there are over 8.500 private equity firms who own tens of thousands of companies.

He did manage to say there aren't enough rich people to pay the needed taxes, so they should get a pass

David Rubenstein went from panelist to moderator for a session on the Future of America's Foreign Policy.  He did cite his Chairmanship of the Council on Foreign Relations, another group of global tamperers intent on opening up markets to Western corporations.

Former Congresswoman Jane Harman served on the panel.  Not one interviewer asked her about the board seat at Iridium, the giant satellite company.  Harman controls over $1.2 million in Iridium stock.

All the interviewers did their jobs such that they will get to interview Mr. Rubenstein and Mr. Youngkin again.  PEU legends hit softballs galore at Davos. 

Update 2-10-20:  Davos in hindsight produced "it’s always been a bit of a mystery to me what the World Economic Forum does anyway, other than to provide a nice January Alpine break for the very powerful. After all, it’s not as if anything much seems to get done."  Plenty gets done outside the presentations as CEOs attend Davos to do deals.  

Thursday, January 16, 2020

Davos Talk: America's PEU Foreign Policy

The annual meeting of global tamperers will occur in Davos, Switzerland next week.  The World Economic Forum made life much better for the billionaire class.  Nearly 120 billionaires plan to attend.

Two WEF Directors, David Rubenstein and Al Gore, are private equity underwriters (PEU).  Both are speaking at the event.

President Donald Trump will also speak and he will be joined by his entourage, which also includes at least one billionaire.  This year's event is centered around seven themes.

I'd like a presentation on how the 119 billionaires used the World Economic Forum to grow their riches over the last two decades and how most people in our world were left out of any semblance of economic growth.

Instead the public will hear Carlyle Group co-founder David Rubenstein talk about U.S foreign policy, alongside Jane Harman and the editor of Foreign Affairs.

President Trump will speak as the Senate undertakes his impeachment for withholding military aid for Ukraine.  PEUReport ran a number of stories on Hunter Biden and Burisma, long before those became household words.  America likes foreign economies to enrich Westerners.  The game is played by both political parties.

Politicians Red and Blue love PEU, as now does Ukraine.  A special PEU meeting will occur at the Ukraine Davos House.

President Trump and President Zelensky can visit by phone or in person next week in Davos.

The world can wait for whatever Steven Mnuchin (Dune Capital) and Ukrainian counterpart Natalie Jaresko (Horizon Capital) have up their sleeve to ensure the PEU rich get richer.

Update 1-17-20:  Will selfless billionaires save us all?  I sincerely doubt it, not given their PEUinterest.  I ran across an interview between Ukrainian Prime Minister Oleksiy Honcharuk and David Rubenstein from September 2019.  More bonafides for Rubenstein to speak on America's PEU foreign policy.  Honcharuk recently offered his resignation after making comments critical of Zelensky's understanding of the economy.

Update 1-18-20:  "In the nine years since the Occupy movement forced income inequality into the mainstream discourse, there has been little to no progress on the issue despite its being ardently discussed by elites at Davos."  Why?  The 120 billionaires in attendance won't say so.

The last time the Trump administration joined a group of global tamperers in Switzerland was Bilderberg 2019.  Jared Kushner loves Swiss____?

Update 1-20-20:  The estimated cost of President Trump's speech to global tamperers is $3.4 million.   Trump joins Bill Clinton as the only U.S. Presidents to attend Davos' World Economic Forum.  Bill and Donald have much in common, as politicians Red and Blue love PEU.

Sunday, January 12, 2020

Egg Harbor City, NJ Call Missoula, MT

The Press of Atlantic City reported Egg Harbor City is seeking proposals to buy the city's water and sewer infrastructure:

Three companies are interested in purchasing the city water utility, city officials said. The city will soon receive requests for proposal, McGowan said. The companies are New Jersey American, Aqua and the Carlyle Group/VICO Infrastructure Co. partnership.

City Engineer Ryan McGowan.said there was a lack of historical investment and maintenance of the system, and a lack of financial ability for the utility system to meet current and future needs.

That would amount to a $40 million outlay or $2 million a year for 20 years. It would double your current utility budget.”
The council passed a resolution for a declaration of emergent conditions, paving the way for the sale without referendum.
Egg Harbor should call the City of Missoula, Montana to learn about their experience under The Carlyle Group's ownership of Mountain Water.  

Another Carlyle executive said the firm would lose $2.1 million in revenue that Mountain pays to its parent company in California every year if it sold the utility.

Carlyle did not put any additional capital into infrastructure in Missoula. "There was not a need to do so." 
Montana regulators sued Carlyle which flipped Mountain Water's parent without approval.  Egg Harbor City may want to dump their under-invested water utility, however the greed and leverage boys have a history of leaving damaging wakes. 

Vox offered this on the PEU model

But because of the debt companies end up owing creditors as part of a deal, they sometimes find themselves with such high interest payments that they can’t make the investments necessary to be competitive or even stay afloat. Plus, companies often take out additional loans to pay private equity investors dividends, and then they pay a fee if and when they are sold. If they can’t pay off the debt, the companies are on the hook, and their employees and customers are the ones to suffer the consequences.
Egg Harbor should explore Carlyle's cash mining ownership of ManorCare and Philadelphia Energy Solutions.  Carlyle drove both into bankruptcy. 

Carlyle recently dropped the Port of Corpus Christi as the developer of a new oil terminal on Harbor Island.  Carlyle executives gave no reason for ceasing to be exclusive developer for the project.

Egg Harbor should allow citizens to vote on the future of their water and sewer utility.  They will be footing the bills, either under city or private ownership.

Saturday, January 11, 2020

Carlyle Group Selling Spree

The Carlyle Group announced the sale of Coalfire, Sundyne, Hermes Blindados SA and is shopping Eggplant Software.   Carlyle filed for an IPO for PPD, possibly up to $1 billion

Private equity underwriters harvest affiliates when valuations are rich.  Apollo Global has mountains of cash ready to invest in a dislocation event.  Say goodbye to 2019, "Best PEU Year Ever!"

Update 5-28-20:   Carlyle inked a deal to sell Eggplant to Keysight Technologies for around €350 million (about $385 million).

Sunday, January 5, 2020

Apollo Global Puts Constellis Holdings in Default

Bloomberg reported:

Constellis Holdings LLC, a security contractor backed by Apollo Global Management Inc., is in talks with creditors on a deal to restructure its $1 billion of debt, according to people with knowledge of the discussions. The firm, which has provided some security services around the U.S. embassy complex in Iraq -- the site of anti-American protests this week -- is seeking to restructure out of court. But it’s also considering a pre-negotiated bankruptcy filing, said the people, who asked not to be identified because the matter is private

Reston, Virginia-based Constellis entered into a forbearance agreement with a group of lenders after missing a principle payment due Dec. 31 on an $872 million loan, the people said.  A representative for Apollo didn’t immediately comment. 
Apollo Global acquired Constellis in 2016 and had over three years to pull cash from it's highly levered affiliate via management/deal fees and special dividends/distributions.  Moody's reported:

Notwithstanding what appeared to have been a turn-around in the company's financial performance, with $25 million of free cash flow generated in the third quarter, Moody's noted what it believes to have been a sudden and material outflow of cash and an ensuing liquidity crunch as the cause of the default and requisite restructuring. 
Was PEU Apollo the recipient of this large cash outflow?  Apollo dominated the Constellis board and could easily have sent funds up to their employer/sponsor, like Phildadelphia Energy Solutions did to sponsor Carlyle Group prior to PES first bankruptcy.

The Carlyle-led consortium collected at least $594 million in cash distributions from PES before it collapsed, according to a Reuters review of bankruptcy filings. Carlyle paid $175 million in 2012 for its two-thirds stake in the refiner. 
Also, how much dry powder does Apollo have and why did it not put any into Constellis?  Private Equity International reported Apollo had $44 billion in dry powder, $34 billion available for private equity investments. 

Apollo would rather use its dry powder to acquire distressed companies not save the company it placed into distress.  Moody's reports showed the impact of Apollo's ownership.

03 Jan 2020 --Revenues for the twelve months ended September 30, 2019 were about $1.7 billion.

13 Nov 2019--Significant business combination activity in recent years has reduced working capital efficiency and added non-recurring costs. Operational integration proceeded sluggishly, which extended a period of high financial leverage and stretched the liquidity profile. The company's new management team has begun to achieve better results however and we expect free cash flow generation during the second half of 2019 that strengthens across 2020. Existing backlog should support low single digit percentage revenue growth in 2020. 

11 Mar 2019 -- New business opportunities are promising, enabling the pursuit of larger contracts and task awards than previously. Indeed the company's backlog grew to $5.3 billion from $4.6 billion over the first 9 months of 2018.

Three people could tell the world why Apollo placed Constellis into default.  Apollo Global founder Leon Black pulled the strings that sent Constellis into a financial plummet, yet he hides behind an "Apollo representative."  Former Senator Evan Bayh likely knows something as an Apollo Senior Advisor.  

Constellis board member John Ashcroft highlighted his aim of helping "domestic and international corporations apply the leadership principles, sound judgment, and high goals he embraced during his more than three decades of public service."

Ashcroft is the most visible of Constellis' two independent board members. I am not sure how Ashcroft qualifies as independent given TAG Holdings ownership stake in Constellis.

"TAG Holdings joins in entrepreneurial ventures with other organizations and individuals on a limited, selective basis."  John Ashcroft knows the PEU code. 

As none of these three are talking the public gets to hear from people who "ask not to be identified," likely Leon's leakers.  

Wednesday, January 1, 2020

2019's Greed Caps a PEU Decade

The greed and leverage boys had a great year which capped a magnificent decade.  At the close of 2009 who could imagine The Carlyle Group going from $88.6 billion in assets under management to $223 billion today?

2009 closed with Carlye joint venture partner Riverstone settling with the New York Attorney General for pay-to-play allegations.  Carlyle had already settled for $20 million to make similar allegations disappear.  Settlement money went to the New York State Common Retirement Fund.

Carlyle Group co-founder David Rubenstein repeatedly lobbied to keep private equity's preferred taxation.  Flashback to 2011:

I watched a video interview of (David) Rubenstein and his arrogance is really beyond tolerance. He was going on about the debt ceiling problem and how there would need to be cuts in services and higher taxes. When the reporter asked him about tax on carried interest he turned really disdainful and said that this "only" amounted to $22 billion over some number of years and this was not serious money. Boy, nothing like everybody doing their small part to save the country from oblivion!
2020 looks to supply more green for private equity underwriters (PEU).   It's been a PEU decade. The billionaire boys are a country unto themselves.