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'sMoody'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.
Update 6-9-24: Carlyle plans to exit Forgital via a post summer sale process.
