Tuesday, April 28, 2020

PEUs Behind COVID-19 Manhattan Project

WSJ reported:

A dozen of America’s top scientists and a collection of billionaires and industry titans say they have the answer to the coronavirus pandemic, and they found a backdoor to deliver their plan to the White House.

These scientists and their backers describe their work as a lockdown-era Manhattan Project, a nod to the World War II group of scientists who helped develop the atomic bomb. This time around, the scientists are marshaling brains and money to distill unorthodox ideas gleaned from around the globe.
The group includes numerous private equity underwriters (PEU).

Steve Pagliuca - Bain Capital
Jim Palotta -- Raptor Fund
Brian Sheth-  Vista Equity Partners
Peter Thiel - Founders Fund
Tom Cahill - Newpath Partners
Micheal Milken -- The Milken Institure

Consider Vista Equity Partners' roots:

Vista Equity Partners, for instance, has made billions by buying up mid-level software corporations in niche industries (like Yoga studio software) and raising prices on the small businesses that depend on it.
Vista Equity Partners had this statement on their website regarding COVID-19:

Across our portfolio, Vista companies are leveraging their technology and relationships to mitigate immediate challenges and anticipate and help solve tomorrow’s problems today. To this end, many of our companies are acting quickly to build solutions and offer free services, new applications and resources that address the COVID-19 pandemic and resulting economic and social crises.
President Trump pardoned Junk Bond King Michael Milken during his lost February.  Rather than prepare the country for a looming pandemic Trump was cheerleading Milken's clean criminal record.  Milken is the father of leveraged buyouts which got rebranded as private equity after his fraud conviction and jail sentence.

Private equity is one of the more important social forces across the West, a style of business that has been structuring our politics and our commerce since it was super-charged by men like Michael Milken and William Simon in the early 1980s.
The PEU led COVID-19 group produced a seventeen page document intended to be a blueprint for a national response.

The greed and leverage boys pulled out the stops to lobby the government for access to trillions in COVID-19 funding.   CNBC reported:

Some of the world’s largest investment firms combined to spend at least $3 million lobbying members of the Trump administration and lawmakers on a bill that was meant to give relief to those that have taken a financial hit due to the coronavirus. 

PEU boys have also served on the shadow COVID-19 task force headed by Jared Kushner.

Science, not greed, should determine our future course. 

Update 5-4-20:  When he's not saving the world from the coronavirus Peter Thiel is trying to help fellow billionaires move their private equity/hedge fund stakes.  

Update 4-19-22:  A Russian oligarch put Chelsea FC up for sale and one bidder is U.S. oligarch Bain Capital's Steve Pagliuca.  Carlyle's David Rubenstein may team up and bid for the Washington Nationals MLB team.

Monday, April 27, 2020

Smithsonian Chair Rubenstein is Earthly Optimist

The Smithsonian Institute hosted its Earth Optimism Digital Summit in honor of the 50th anniversary of Earth Day.  On Thursday April 23rd Smithsonian Board Chair David Rubenstein moderated two sessions from 12:45 pm to 1:55 pm.

I assume the sessions were taped otherwise Mr. Rubenstein has the ability to be in two places at the same time.  Does having several billion dollars allow someone to do that?

A third session occurred during that time period, one right up the Carlyle Group co-founder's alley.

The Carlyle Group is front and center in today's massive financial reset.  David Rubenstein knows what happened in China through Carlyle's many affiliates.  He is great friends with Fed Chief Jay Powell and Vice Chair Randall Quarles.  Both men worked at Carlyle earlier in their careers.

Sure the Blood and Gore group has much to offer about today's government corporate monstrosity, but David Rubenstein wrote the PEU rules at Carlyle's Pennsylvania Avenue office.  His earthly gains show it.  Is the PEU founder finally ready for carried interest taxation?  Fellow billionaire Leon Cooperman says he is.

Update 4-29-20:   Film maker Michael Moore's Plant of the Humans takes aim at "Al Gore for bolstering corporations that push flawed technologies over real solutions to the climate crisis."  Politicians Red and Blue love PEU.

Friday, April 24, 2020

Carlyle Affiliate Monetizing Taylor Swift During Pandemic

The Guardian reported:

Taylor Swift has disowned a new live album released under her name, calling it tasteless and “shameless greed” amid the coronavirus outbreak.

Swift said:  "This release is not approved by me. It looks to me like Scooter Braun and his financial backers, 23 Capital, Alex Soros and the Soros family and the Carlyle Group have seen the latest balance sheets and realised that paying $330 MILLION wasn’t exactly a wise choice and they need money.  In my opinion … Just another case of shameless greed in the time of coronavirus. So tasteless, but very transparent.”

Carlyle executives pretended to be peacemakers some months ago.  As moneymakers The Carlyle Group is solely interested in returns.  PEUs = shameless greed.

Update 4-28-20:  Showbiz 411 reported paltry sales of the new live album.  "The stream appeared last week and at first sold 7 copies. SEVEN. Then on Friday and Saturday another 26. The total is 33. THIRTY THREE. That’s it. No one bought it."   

Update 4-12-21:  Swift re-released her Fearless album.  Loyal fans are burying the old versions on Spotify.

Following Friday's midnight release of Fearless (Taylor's Version) — for which Swift re-recorded her music after failing to acquire the rights to her early albums two years ago — Swifties launched a campaign to bury the Big Machine version on Spotify.
Hopefully the unnamed investment firm can claw-back money from Ithaca and The Carlyle Group.  Taylor Swift, like the City of Missoula with Mountain Water, tried many times to buy back the rights to her music.


Wednesday, April 22, 2020

Carlyle Sells 13% of India Diagnostic Testing Affiliate

Laing Buisson reported:

The Carlyle Group has sold a 13% stake, more or less its entire stake, in Mumbai-based diagnostics company Metropolis Healthcare to raise Rs7.6bn (US$100m).  It sold 6.6m shares the range of Rs1,150-Rs1,160 per share. The floor was set at Rs1,110.  Although the company’s shares have a one-year return of almost 29%, they have slipped 36% from a peak of Rs1,992 at the start of March to Rs1,272.

Metropolis has a presence across 18 states in India with 106 laboratories. It offers 3,480 clinical laboratory tests and profiles which are used for prediction, early detection, diagnostic screening, confirmation and/or monitoring of diseases. It also offers analytical and support services to clinical research organisations for their clinical research projects.
Carlyle was in a position to solve India's COVID-19 testing problem.  Also, there is a need for strong clinical research into the deadly coronavirus.  So why did Carlyle sell its remaining shares?  In early April Reuters reported:

India is restricting the export of most diagnostic testing kits
BBC News reported India's Supreme Court ordered all COVID-19 testing be done for free.

According to the new order, issued on 13 April, the government will reimburse private labs for testing the 500 million people covered by a flagship public health insurance scheme. The rest would have to pay.
Carlyle expects governments to ensure their grand returns.   Plus the $100 million helps in a credit crunch.

The Carlyle Group is searching for a new managing director for its India investments.  It needs to replace the gentleman hired in 2018 for that position.  Carlyle India experienced two exits, one affiliate and one employee.  Are the two related?

Update 7-11-20:  Carlyle sold the rest of Metropolis for roughly $11 million.

Monday, April 20, 2020

Carlyle to Raise New $3.5 billion Credit Fund as Pioneer Offers Middle Finger

Bloomberg reported The Carlyle Group is raising $3.5 billion for a new credit opportunities fund so it can backdoor companies by buying their debt for pennies on the dollar and foreclosing.  Carlyle took over British carpet maker Brintons' and cookie retailer Mrs. Fields in such a manner.

Carlyle just tried to foreclose on Australian lender Pioneer Credit as their once amicable deal unraveled.  Pioneer terminated its plan to join The Carlyle family.  A handshake turned into a beating and the parties couldn't agree to walk away.  That's the nature of a credit opportunities fund.  Ask the Brintons' family

Another Way for Carlyle to Profit from COVID-19

Irish Times reported:

The estimated €115 million that the State will pay each month to use 19 private hospitals during the Covid-19 crisis will go to companies owned by religious orders, foreign investors, two billionaires, a vulture fund and private backers.
The Carlyle Group owns one Dublin hospital participating in this arrangement.  Carlyle also bought blood plasma software company MAK Systems in February.   60 Minutes did a piece on convalescent plasma treatment for the seriously ill coronavirus patients.  With crisis comes opportunity.

Carlyle and its PEU peers have the political chops to get a bipartisan Congress and the Federal Reserve Bank to open Uncle Sam's wallet and save their highly leveraged affiliates.  The sweet PEU deals keep coming.

Sunday, April 19, 2020

Politicians Red and Blue Love PEU

The private equity love continues in America's billionaire bailout.  Open Secrets reported:

Top lawmakers from both sides of the aisle seem to agree on one thing — small businesses backed by private equity and venture capital investment firms should be able to tap into the aid.

Congressional leaders continue to negotiate another round of $250 billion in aid to combat the economic impact of the coronavirus.

Small businesses and startups with fewer than 500 employees but controlled by large parent companies including private-equity firms are not currently eligible to get loans under the program. House Speaker Nancy Pelosi (D-Calif.) and House Minority Leader Kevin McCarthy (R-Calif.) — hailing from California and catering to Silicon Valley constituents — want to change the rules to extend support to them. 
Private equity lobbying group American Investment Council changed its name from Private Equity Growth Capital Council (PEGCC).  They did not take my recommendation of Private Equity Capital Knowledge Executed Responsibly (PECKER) as a better fit for the greed and leverage boys.

Private equity underwriters (PEU) are behind big lobbying money and political contributions.

Blackstone Group, which is lobbying for small business loan eligibility, has given over $17 million in contributions. Their CEO, megadonor Stephen Schwarzmann gave $10 million to the Senate Leadership Fund and $2.5 million to the Congressional Leadership Fund in the 2020 election cycle. Schwarzmann is a trusted adviser to President Donald Trump and gave $3 million to Trump’s super PAC in January.

Carlyle Group has contributed nearly $1.6 million to candidates, giving to candidates from both sides of the aisle including McCarthy and Pelosi. And Apollo Global Management reportedly loaned Trump’s son-in-law and senior adviser Jared Kushner’s real estate firm $184 million. 

Had private equity used their capital knowledge to invest responsibly they wouldn't be asking Uncle Sam for a bailout, not while they sit on $1.5 trillion in dry powder.  Politicians continue serving big donors to the detriment of citizens.

Update 4-25-20  Former Carlyle Managing Director David Marchick is Director of the Center for Presidential Transition.  His job is to ensure politicians Red and Blue continue to love PEU..

Update 4-20-20:  Carlyle plans to raise $3.5 billion for a new credit opportunities fund.  How will they find discounted debt to buy that hasn't been propped up by Fed Chief and former Carlyle employee Jay Powell?  

Update 11-27-21:   Trump son-in-law Jared Kushner plans to launch Affinity Partners using international money.  Middle East contacts are lukewarm on Kushner's offering despite his solving regional conflict in that part of the globe.

Update 11-28-21:  The Saudi Public Investment Fund may be ready to put big money into Jared Kushner's planned PEU, Affinity Partners.  Kushner's father in law Donald Trump gave the Saudi Crown Prince a free pass after the Kingdom executed Western journalist Jamal Khoshoggi.

Update 12-23-21:  Kushner's Affinity Partners is at $3 billion and growing.  It plans to invest in U.S. and Israeli companies seeking to grow to India, Africa, the Middle East and other parts of Asia.  The money is from international investors.  

Update 1-20-22:  Kushner's Affinity Partners hired a number of Red Team members of the Trump White House as well as some PEUs to manage the investment side.  Red Team PEU love!

Update 4-11-22:  The Saudi Public Investment Fund, controlled by Crown Prince Mohammed bin Salman, invested $2 billion in Jared Kushner's new private equity firm six months after Kushner left the White House despite the screening committee's voting unanimously against investing in Kushner's fledging Affinity Fund, citing the "inexperience" of its management, an asset management fee that "seems excessive," and the fact that due diligence found the firm's operations "unsatisfactory in all aspects." 

Update 6-14-22:  Former PEU with Pegasus Capital, now White House Climate Advisor Gina McCarthy wants social media to crackdown on people opposing green energy. 

Update 7-16-22:  American University and just hired former Carlyle Group Managing Director David Marchick as Dean of AU's business school.  

Update 3-31-23:  Kushner's Affinity Partners received $200 million each from a Qatar and UAE sovereign wealth fund.  That's on top of the $2 billion from the Saudi PIF.

Tuesday, April 14, 2020

Greed and Leverage Boys Line Up for Federal Aid

Private equity firms and hedge funds want their share of the recently passed $2 trillion rescue package.  The Federal Reserve Bank agreed to buy junk bonds, many are leveraged loans from private equity affiliates.  It turns out the big money boys are actually small businesses.

Private equity underwriters (PEU) ended 2019 with $1.5 trillion in dry powder, which is cash committed by investors.   Affiliates are supposed to send cash to their PEU sponsor via management and deal fees, special dividends/distributions (many of which are debt funded), assets sales and complete corporate flips.  They are not supposed to demand cash from their sponsor to stay afloat.

PEU boys learned long ago not to throw good money after bad.  Even though they have over $1 trillion in cash for investments they want Uncle Sam's wallet to keep their investments from tanking.

The greed and leverage boys want to keep their preferred place in U.S. society   President Trump and Congress seem happy to oblige.  Politicians Red and Blue love PEU.

Update 6-8-20:  Wolf Street has an update on how the Fed bailed out the wealthy.

Monday, April 13, 2020

Coronavirus Kills Rich and Powerful

President Trump's good friend Stanley Chera died of COVID-19 on Saturday, April 11th.  The Real Deal reported:

Stanley I. Chera, who parlayed his father’s Brooklyn department store business into one of New York real estate’s biggest retail empires, reaped huge rewards from the city’s emergence as a global shopping destination and used his wealth and connections to play kingmaker for Donald Trump, has died from complications of the coronavirus, making him the most high-profile industry casualty of the global pandemic.
As the pandemic spread rapidly in New York, Trump had advised Chera to leave the city and decamp to his summer home near Deal, N.J., a popular vacation-home destination for many moguls hailing from Chera’s Syrian Jewish community, which dominates New York retail. Chera took his advice but fell ill anyway, and was admitted to New York Presbyterian/Weill Cornell Medical Center in late March.
As founder of Crown Acquistions Chera partnered with The Carlyle Group and Kushner Companies in 2008.

Crown partnered with the Carlyle Group and Kushner Companies in a $525 million deal to acquire and reposition the retail at 666 Fifth Avenue.  
Carlyle exited in 2012 with at least a double.  Kushner Companies leased the property for 99 years to Brookfield Property Partners, which is backed by a Qatari sovereign wealth fund.  This deal bailed out Jared Kushner and his family.

Chera;s death came after President Trump's advice failed to prevent his friend from getting the coronavirus.

Sunday, April 12th CNN interviewed Dr. Anthony Fauci:

Asked if he thought lives could have been saved “if social distancing, physical distancing, stay-at-home measures had started [in the] third week of February, instead of mid-March”, Fauci said: 

“What goes into those kinds of decisions is complicated.  But you’re right. I mean, obviously, if we had, right from the very beginning, shut everything down, it may have been a little bit different. But there was a lot of pushback about shutting things down back then.

After this statement President Trump ominously retweeted a message ending“Time to  #FireFauci.”

President Trump did not kill his good friend, Stanley Chera.  A virus did, one that does not see wealth, power or political connections.  It rides on the breath of people, 25% of whom do not appear sick.

Nero fiddled, Bush strummed and Trump hunched.  

Update 4-29-22:   Insider reported "The severity of COVID-19 first struck President Donald Trump after an older, wealthy New York real-estate-developer friend got sick and was fighting for his life in the president's hometown hospital"

Saturday, April 11, 2020

Rubenstein's Hand in Coronavirus Crisis

Showbiz 411 reported:

The Kennedy Center, under David Rubenstein and Deborah Rutter, has made its worst publicity mistake ever. After receiving $25 million in the stimulus package to keep the place going, this pair dismissed the National Symphony Orchestra with one week’s notice.

On Friday, March 13th Carlyle Group co-founder David Rubenstein asked regional CEOs what they were doing to address the coronavirus with employees, shareholders and other groups they serve.   He and former Obama HHS Chief Sylvia Burwell talked about a recent Council on Foreign Relations meeting where they discussed global response to the coronavirus.  CFR published an article suggesting the Federal Reserve Bank/Treasury invest in junk bonds, most of which are issued by private equity firms.

Burwell is now President of American University and stressed their shift to employees working from home.  The National Symphony Orchestra did not have that option.

Kennedy Center will cease paying all salary and benefits to the musicians will end on April 3 and not resume until the virus scare is over and performances resume.
“This decision, from an organization with an endowment of nearly $100 million, is not only outrageous — coming after the musicians had expressed their willingness to discuss ways to accommodate the Kennedy Center during this challenging time — it is also blatantly illegal under the parties’ collective bargaining agreement. That agreement specifically requires that the Center provide six weeks’ notice before it can stop paying musicians for economic reasons,” said Ed Malaga, president of Local 161-710 of the American Federation of Musicians, in a statement.
Rubenstein confessed he tried to hire Dr. Anthony Fauci at The Carlyle Group in a USA Today column.

I tried years ago, when Tony was approaching a normal retirement age, to see whether he might want after a normal lifetime of federal service to take some of his considerable skills and knowledge to the private sector. He quickly said no — money did not motivate him, serving the country did. 

Fauci did not lobby the government to bail out his highly levered bets.  The Carlyle Group and fellow private equity underwriters (PEU) did just that.  Fed Chiefs and former Carlyle executives Jay Powell and Randall Quarles delivered for their former employer.

Rubenstein's family foundation Declaration Partners owns apartment complexes in the Washington, D. C. suburbs.  There have been no reports of his waiving rent as one New York apartment owner did for his tenants.

The Carlyle Group invested in convalescent plasma in late February via blood products software maker MAK System.  Any Carlyle Group profits from MAK Systems should be used to offset the damage Mr. Rubenstein's numerous organizations caused.

Update 4-12-20:  When asked about federal funding for the Kennedy Center President Trump said, "“David Rubenstein does a fantastic job. He’s very much involved."

Update 4-25-20:  The National Symphony Orchestra sent a letter to billionaire Rubenstein with a legal challenge to their being furloughed. The letter stated:  “In particular, we write to respond to the Kennedy Center’s position, as expressed on our call yesterday, that it unilaterally can “suspend” the parties’ entire collective bargaining agreement (“CBA”) because of “exigent circumstances” on one week’s notice. That position is baseless.”

Update 7-16-22:  Burwell just hired former Carlyle Group Managing Director David Marchick as Dean of AU's business school. 

Thursday, April 9, 2020

Fed to Buy Junk Bonds

It is necessary to save private equity underwriters to keep public pension systems from taking huge losses.  That's the rationale for the Fed's Jay Powell and Randall Quarles to buy junk bonds with highly levered public money.  Both Powell and Quarles are former Carlyle Group executives.

The move didn't come in time to save Carlyle affiliate Apex Parks, which declared bankruptcy.  Fellow PEU and Apex debt holder Cerberus Capital Management will take over Apex.

But the Fed's new program could help Neptune Energy, just downgraded by Fitch to BB.

Look for the Fed's cash to fly to junk bonds as a way of saving PEUs.  Politicians Red and Blue love PEU.

Update 4-10-20:  Moody's downgraded or changed sentiment to negative for four Carlyle affiliates:  Atotech, KL Discovery and International Design Group.  It placed Dynasty Acquistion/Standard Aero under review for downgrade.    Carlyle pulled $500 million from Atotech in 2018.  KL Discovery provides electronic-discovery services to corporations and law firms.  It's experiencing elevated leverage and tightening liquidity and could trigger debt covenants.  International Design Group produces high end lighting and furniture in Europe.  Moody's expects leverage to deteriorate to over 9.0 times EBITDA by year end..

Update 4-11-20:  Short seller Jim Chanos is outraged private equity went to Uncle Sam with hands out. 

Update 4-12-20:  Billions for the big money boys, a pittance for the little guy.  That's the American response.

Update 4-24-20:   HuffPo reported "emergency lending programs the Fed has unveiled to date are not a rescue, but a license to steal. Nobody at the Fed or Congress has placed meaningful restrictions on how the largest corporations can use their bailout money. They can funnel it to shareholders in the form of stock buybacks or dividends. They can raise executive pay, approve massive bonuses for Wall Street traders, buy up smaller competitors ― all while laying off workers, slashing salaries, offshoring jobs or otherwise running amok as corporate citizens."  This bodes well for the PEU boys.

Update 4-25-20:  FT reported on the greed and leverage boys lining up for big public money as it will be the cheapest financing they can get.  The Fed's buying junk bonds "revived the market for risky corporate debt — the bread and butter of the private equity industry — helping financial institutions to avoid mark-to-market losses." 

Update 5-19-20:  Wall Street on Parade picked up on the Carlyle connection to the top two Fed chiefs. 

Update 5-28-20:  S+P Global reported "London-based Neptune Energy announced Wednesday several delays to upstream oil and natural gas projects it is involved in in the North Sea, including with BP and Norway's Equinor, along with more spending cuts intended to weather the fall in commodity markets."  Neptune's Executive Chair said market turmoil would make the company cautious about acquisitions.  

Update 6-7-23:  Carlyle appears ready to monetize Neptune Energy for between $5 and $6 billion.

Wednesday, April 8, 2020

Kushner's "Slim Suit Crowd" Includes PEU

President Trump's son-in-law Jared Kushner accessed private equity underwriters (PEU) to help the White House's coronavirus response.  Politico reported:

The out-of-government team now includes Nat Turner, an entrepreneur and investor who co-founded New York City-based Flatiron Health, as well as David Caluori, a partner at private equity firm Welsh Carson Anderson Stowe, who is voluntarily aiding the effort with the help of a couple other Welsh Carson associates, a person familiar with the team dynamics said.
Mr. Caluori rejoined WCAS in October 2019.  Piulse 2.0 reported:

Caluori was previously a General Partner in the Healthcare Group. And he is rejoining WCAS after having previously worked at the firm for 9 years. And most recently, he worked at General Atlantic as a Principal focusing on healthcare investments. And he also worked in healthcare investment banking at Piper Jaffray and Jefferies.
Why would PEU WCAS mobilize a team to help the White House repair its hapless response to the pandemic?

One possible reason:  WCAS founder Russell Carsons sits on the board of NY Presbyterian Health System.  He chairs the board's Budget and Finance Committee.  Carson has the connections to directly contact the White House on behalf of NY Presbyterian.  Consider his political donation history for the last two elections.  It's heavily oriented to the Red Team.

This gives Carson the chops to contact the White House and suggest they do more to help New York hospitals.  As part of the request Carson could have offered Caluori and a couple other Welsh Carson associates.

Consider what NY Presbyterian's Surgical Chief of Staff wrote on March 20th.

Two days ago Dr. Smith said the hospital was entering its Iwo Jima, its Fallujah. In a previous memo he wrote:

"'Failing to plan is planning to fail'. That will not be us."
It was the Trump White House and that's why a team of WCAS PEUs were mobilized .   I'm sure Russ Carson wants NY Presbyterian Health System to get the resources they need to navigate this crisis.  The question is how the Trump team will reward their PEU help?  That can be done directly and/or indirectly to WCAS healthcare affiliates.

The Slim Suit Crowd is here. GQ reported:

The skinny suit, after all, is the standard fit for the twenty- and thirty-something class of management consultants, bankers, real estate brokers, and poor little rich sons; for those who use a combination of youth and modeling software to flatten the humanity out of everything; of those types who, more than a decade after graduation, still think the name of their alma mater belongs at the top of their resume. They are the linguistic artisans of garbage language—putting everything into “buckets”; looking at “takeaways”; asking about “value-add.”

Lord help us all.

Update 7-11-20:  Vanity Fair reported "According to news reports and a recent whistleblower complaint, Kushner’s crack squad of young private sector volunteers—hailing from venture capital, private equity and consulting firms—has been beset by crippling incompetence and political cronyism, exacerbating the federal government’s gross mismanagement of the coronavirus crisis that has killed more than 70,000 in the United States. “Americans are facing a crisis of tragic proportions and there is an urgent need for an effective, efficient and bold response,” a member of Kushner’s team said in a whistleblower report sent to the House Oversight Committee on April 8, and which was obtained by the Washington Post. “From my few weeks as a volunteer, I believe we are falling short.”According to the whistleblower, volunteers on Kushner’s team often lacked relevant qualifications to help get necessary resources to hospitals fighting the COVID crisis, with team members who didn’t have sufficient “health care, procurement, or supply-chain operations” experience assigned to help obtain and direct supplies to medical workers." 

Update 4-29-22:   Insider reported "The severity of COVID-19 first struck President Donald Trump after an older, wealthy New York real-estate-developer friend got sick and was fighting for his life in the president's hometown hospital"

Sunday, April 5, 2020

PEU Worthy: Week Old Firm "Largest Global COVID-19 Supplier Network"

Private equity underwriters (PEU) masterminded the intersection of greed and politics.  PEU worthy are the founders of Blue Flame Medical LLC.  Blue Flame was formed Monday, March 23, 2020 as a Delaware corporation.  It bills itself as the “the largest global network of Covid-19 medical suppliers.”  How can that happen in a week? 

In politics – especially if you’re at a high enough level – you are one phone call away from anybody in the world.” -- John Thomas, President

“I have relationships with a lot of people.”-- Mike Gula, CEO
Blue Flame's website had information on these two opportunists.  One is a political fundraiser:

The other is a real estate developer and communication consultant.

Blue Flame Medical is PEU worthy.  The Carlyle Group invested in COVID-19 convalescent plasma treatment after seeing what the coronavirus did to their Chinese affiliates.

Polticians Red and Blue love PEU.  Who can't get enough of the greed and leverage boys?  Our political class.  The rest of the country is sick of them.

Update 4-7-20:  Chinese medical studies show the benefit of convalescent plasma on seriously ill coronavirus patients.

Update 4-11-20:  Carlyle co-founder David Rubenstein "recounts that a number of years ago he asked Fauci whether he might want to leave government for the private sector, he responded that he didn't need the money and wanted to stay where he was."

Update 5-7-20:  WSJ reported:  "The state of California canceled a $600 million contract from a politically connected coronavirus-supply company, the largest contract the company has lost in the chaotic marketplace for masks, gloves, ventilators and other medical supplies, according to a person familiar with the matter.  Mr. Gula and his partner, John Thomas, launched Blue Flame Medical just a few days before inking a massive deal with the state of California.

Update 5-13-20:  FEMA cancelled a N95 mask order with Panthera Worldwide LLC after the military contractor repeatedly failed to deliver.  Panthera smells as bad as Blue Flame. 

Update 8-20-23:  Conman and Insane Red Team Rep. George Santos signed on as a consultant with Blue Flame Medical and stood to earn 10% on any deal he arranged.  Blue Flame's political people failed to deliver on their commitments.  That should be no surprise to the aware.

Wednesday, April 1, 2020

PEUs Lobby White House for Small Business Bailout Billions

FT reported:

Powerful groups on Wall Street are pressing the Trump administration to allow private equity-owned companies to access hundreds of billions of dollars in loan funds earmarked for US small businesses hit by the coronavirus pandemic. White House and Treasury officials have been contacted about the issue by industry lobbyists and executives from major investment firms, according to seven people who advised on the discussions, or have spoken directly with the participants. Congress last week authorised the Small Business Administration to dispense $350bn worth of rescue loans to companies with fewer than 500 workers that have been affected by the coronavirus pandemic.
 A WaPo opinion piece stated:

In the last decade, private equity firms piled vast amount of debt onto their portfolio companies to boost returns. More than 75% of deals in the sector included debt multiples greater than six times Ebitda in 2019

Carlyle Group cofounder David Rubenstein and Blackstone's Steve Schwarzman have President Trump's ear.   The greed and leverage boys benefited mightily from Trump's tax cuts.

The rapid and widening spread of the coronavirus outbreak, deteriorating global economic outlook, falling oil prices, and asset price declines are creating a severe and extensive credit shock across many sectors, regions and markets. The combined credit effects of these developments are unprecedented.--Moody's
Moody's downgraded three Carlyle Group affiliates in the last week, TurboCombuster Technology dba Paradigm Precision, NEP and NEP/NEC Holdco and URS Holdco.

Headquartered in Manchester, Connecticut, TurboCombustor Technology, Inc. (dba "Paradigm Precision") is involved with the fabrication and assembly of gas turbine engine parts for use in commercial, military and industrial applications. The company is majority-owned by entities affiliated with The Carlyle Group.  Moody's has concerns about TurboCombustor's short-dated capital structure and the ability of the company to extend and/or refinance its looming maturities given current capital market dislocations stemming from the coronavirus. An inability to extend debt maturities within the next 4 to 8 weeks would likely result in further downward rating pressure.

NEP/NCP Holdco, Inc, based in Pittsburgh, PA and owned primarily by affiliates of the Carlyle Group, provides outsourced media services necessary for the delivery of live broadcast of sports and entertainment events to television and cable networks, television content providers, and sports and entertainment producers. Its major customers include television networks such as ESPN, and key events it supports include the Super Bowl, the Olympics and sporting events such as Major League Baseball and Sky and Scottish Premier League football, as well as entertainment shows such as American Idol and The Voice.  The live events sector has been one of the sectors most significantly affected by the shock given its sensitivity to in-person attendance.

URS Holdco Inc., based in Romulus, Michigan, is a leading provider of over-the-road transportation of automobiles and vehicle logistics in the United States and Canada through its principal operating subsidiary, United Road Services, Inc.  URS Holdco Inc. is a portfolio company of The Carlyle   Group, a private equity firm.  The company's cash balance and ABL revolver availability are relatively modest. Moody's also notes the company's modest margins provide limited insulation against potentially severe drops in new deliveries in the near term and its weaker leverage profile following primarily debt-funded acquisitions is likely to deteriorate amidst continued end market pressures. 

After pulling $580 million from Neptune Energy the last two years Carlyle has that affiliate in retrenchment mode.

Carlyle won't throw good money after bad but it will gladly take Uncle Sam's to keep affiliates afloat.  The greed and leverage boys are lining up for another bailout.

Update 5-3-20:  Add  International Design Group, Atotech, KL Discovery, Forgital, Revere Power, Array Canada, and TAMKO Building Products to the downgrade and/or outlook negative group of Carlyle affiliates.  Standard Aero is under review for downgrade.  Carlyle was able to flip Sundyne in March to Warburg Pincus prior to an April Moody's downgrading

Update 5-4-20:  Add Arctic Glacier to the downgrade list as "its high financial leverage with debt/EBITDA is expected to increase to over 8.0x in fiscal 2020."

Update 5-28-20:  S+P Global reported "London-based Neptune Energy announced Wednesday several delays to upstream oil and natural gas projects it is involved in in the North Sea, including with BP and Norway's Equinor, along with more spending cuts intended to weather the fall in commodity markets."  Neptune's Executive Chair said market turmoil would make the company cautious about acquisitions.

Update 12-7-22:  Carlyle announced it is offloading TurboCombuster dba Paradigm Precision to CDR and Greenbriar.  The deal is expected to close in early 2023.

ER Doctors and Nurses Get PEU Wage/Benefit Cuts, Hospitals Closed

ProPublica reported:

Emergency room doctors and nurses many of whom are dealing with an onslaught of coronavirus patients and shortages of protective equipment — are now finding out that their compensation is getting cut.

Most ER providers in the U.S. work for staffing companies that have contracts with hospitals. Those staffing companies are losing revenue as hospitals postpone elective procedures and non-coronavirus patients avoid emergency rooms. Health insurers are processing claims more slowly as they adapt to a remote workforce.

“Despite the risks our providers are facing, and the great work being done by our teams, the economic challenges brought forth by COVID-19 have not spared our industry,” Steve Holtzclaw, the CEO of Alteon Health, one of the largest staffing companies, wrote in a memo to employees on Monday.

The memo announced that the company would be reducing hours for clinicians, cutting pay for administrative employees by 20%, and suspending 401(k) matches, bonuses and paid time off. Holtzclaw indicated that the measures were temporary but didn’t know how long they would last.
Alteon's private-equity backers are Frazier Healthcare Partners and New Mountain Capital.  Disaster capitalism is just that, even if they pretend it isn't.

Garden City Telegram reported on March 13th:

Clarissa Taton, a registered nurse at Sumner Community Hospital, said staff at the Wellington medical facility gave everything they had to every patient.  It wasn’t enough.

Management for the hospital abruptly closed the doors Thursday (March 12th), citing years of financial struggle exacerbated by a lack of support from local physicians.
The hospital posted a notice on its door late Thursday serving notice that the facility and its emergency operations were closed. Patients were directed to request medical records by leaving a message.

The 63-bed medical facility provided advanced imaging, general surgery, lab services, geriatric behavioral health, residential care, short-term rehabilitation and other forms of care.

The closing comes amid heightened concerns about the spread of the coronavirus in Kansas.
Sumner Community Hospital was owned by Rural Hospital Group Consolidated LLC.

North Carolina experienced a for-profit healthcare invasion, sponsored by private equity underwriters.  North Carolina Health News reported in August 2018:

Communities can expect even less transparency into how their health care organizations are being run and less intimate connections between the hospitals and the communities.
Philadelphia lost Hahnemann University Hospital, a 500 bed safety net hospital to PEU Paladin Healthcare Capital.  

NYT reported:

A hospital with room for nearly 500 beds has been closed for months in the center of Philadelphia, a city bracing for the spread of the coronavirus and a crush of sick patients.

But the facility will remain empty, city officials said, because they cannot accept the owner’s offer: buy the hospital or lease it for almost $1 million a month, including utilities and other costs.

“We don’t have the need to own it nor the resources to buy it. So we are done and we are moving on,” Mayor Jim Kenney told reporters on Thursday during the city’s daily briefing.
The greed and leverage boys have no shame.

Paladin's Joel Freedman received a message from one Philadelphia fanatic.  "Joel Kills" and "Free Hahnemann" were painted on Freedman's downtown property.

I expect more citizens to give the PEU boys and their political lackeys feedback as time goes on.

Update 4-9-20:  Pennsylvania government gave Cerberus Capital Management an $8 million financial injection so the PEU wouldn't close its hospital in Easton.

Update 4-14-20:  California based Alecto Healthcare closed 207 bed Fairmont Regional Medical Center in Marion, West Virginia shortly before the first coronavirus patient died in that community.   Hospital giant HCA closed the OB service at San Jose Regional Medical Center in the midst of the pandemic.

Update 4-26-20:  Cerberus Capital asked the state of Pennsylvania for $40 million or else the PEU would close its Easton hospital in three days.  Cerberus got an immediate $8 million with up to $24 million through June.  That's how the greed and leverage boys play.

Update 5-8-20:  Several lawmakers rebuked the PEU boys for cutting doctor pay during a pandemic.