FT on China Love for PEUs

FT reported:

An IVC Evidensia veterinary practice in Sweden may not appear to have much in common with a Vena Energy solar project in Taiwan, or GardaWorld security personnel at a Canadian ice-hockey game. 

But some of the capital that helps sustain all three companies comes from the same place: the People’s Republic of China. 

Private equity firms EQT, Global Infrastructure Partners and BC Partners — the immediate owners, respectively, of the three businesses — are just three among dozens of western buyout groups that Chinese state-backed investors such as the State Administration of Foreign Assets and China Investment Corporation have poured money into.

Private equity underwriters (PEU) sent countless U.S. manufacturing jobs to China over the last few decades.  Virginia Governor Glenn Youngkin did just that with The Carlyle Group (United Components and Nature's Bounty) and as recently as 2020 was monitoring rush hour traffic in Beijing.  Youngkin went from corrupting politicians to being a corrupted one, possibly one with presidential ambitions.

Rabobank's Michael Every said "The kind of mess you've got in America between Blue and Red, no country wants that (kind of polarization)."  

Every added China "never wants to repeat what happened to the U.S.  They are fully cognizant how the U.S. was de-industrialized, hollowed out.  They were the primary beneficiary of that."  Youngkin and The Carlyle Group had a role in hollowing out local U.S. economies.  

A major business reporter wrote in 2011:

I have seen so many people -- particularly those in their 50s - 70s -- taken apart by what has happened in their industry as greed has hollowed out the economy. These are people took pride in their jobs and held themselves to this invisible standard that we all just took for granted, but is being wiped out.

The Carlyle Group scares me more than anything I've ever seen on Wall Street. It seems to exist to corrupt politicians and it's hard to know who they even represent.

That same year a Carlyle's Francis Finelli warned about the dangers from our biggest enemy, China.  

Politicians Red and Blue love PEU and increasingly more one.  How will the greed and leverage boys benefit from the Debt Ceiling deal?   It will be found in the white space between the words.

Update 6-1-23:  Blackstone co-founder Stephen Schwarzman showed his China love with a scholarship program at Tshinghua University in Beijing.  Is that near where Glenn Youngkin monitored rush hour traffic at Carlyle?

Heartless PEUs Go for Peopleless AI

Over the Memorial Day weekend I ran across two stories on private equity and artificial intelligence.  

How fitting for the heartless greed and leverage boys to embrace artificial intelligence, the tool for reducing jobs on a widespread basis.  Many AI firms are directly marketing to PEUs. Altiva's website states:

Three major areas have emerged as ideal for AI assistance:

1. Back-office processes. Firms are ditching manual processes and adopting AI to complete repetitive tasks faster, more accurately, and cost-effectively. And as a result, they’re freeing back-office staff to work on more important projects.
   
2. Portfolio monitoring. Keeping an eye on portfolio companies used to be a labor-intensive activity. However, AI can do in seconds what used to take hours.
   
3. Target identification. While target selection must be performed by humans and their understanding of the nuanced interplay of several factors, firms can leverage AI to quantify and narrow down the field. This saves team members a significant amount of time.

The Carlyle Group tried AI for its investment processes and liked it so much they invested in the company.

AI firm Gemedy sued Carlyle and affiliate TwoSix Technologies for IP infringement earlier this year.

Spooool added more PEU AI pieces.  Every piece read as if they were written by AI.  News from the AI's neutron bomb future for employment highlighting the most greedy, heartless corporate owners.  

The greed and leverage boys want all the spoils and elected officials are just fine with that.

Update 11-2-23:  Microsoft replaced its 800 person news team with AI and posted a number of false and bizarre stories.  No surprise that algorithms did something contrary to the public interest of having informed citizens. 

Ken Paxton Corruption Involves PEU

Texas Attorney General Ken Paxton faces impeachment in the Texas House of Representatives.  The case involves Paxton's relationship with a major donor and an affair with a paid staff member.  Fort Worth Star Telegram reported:

At the heart of Texas Attorney General Ken Paxton’s recent troubles is that he used his office to help a political donor — Austin real estate investor Nate Paul — in exchange for allegedly helping the attorney general remodel his home and giving Paxton’s mistress a job in his company.

Seven senior members of Paxton’s staff accused their boss of accepting bribes and abusing his office. Those seven resigned while others were fired. 

Four of his former employees filed suit, arguing that Paxton and his agency improperly retaliated against them. A $3.3 million settlement was reached earlier this year.

Members of the same political team found Paxton's behavior untoward and worthy of scrutiny.  The buying and selling of influence is a major feature of private equity underwriters (PEU).  So it should be no surprise that Paxton donor Nate Paul has a private equity fund, World Class Capital Income Fund I LP. 

Paul launched the fund in 2009 with a goal of raising $10 million for private equity investments   Riverstone Wealth Management of Austin  is shown as the sales agent with an expected 5% sales fee.

A number of Nate Paul's real estate holdings under the World Class banner declared bankruptcy.  With PEU like sleight of hand Paul's Rising Tide Investments LLC bought up those failed properties.

The Real Deal reported:

Rising Tide Investments LLC — a shell company affiliated with the Austin developer’s World Class Holdings — has bought up the assets of at least five World Class entities, according to the Austin Business Journal.

I'd say Nate Paul has shown his PEU bona fides, political connections that manifest in demonstrable financial benefit, use of shell companies to limit asset and liability risk and being able to buy back his failed ventures after running them into the ground.  Sweet.

Finally some members of the Red Team are disgusted enough over the insider money funnel to take action.  I didn't expect it to happen in Texas, but here we are.

Politicians Red and Blue love PEU and increasingly, more are one.  

Update:  Lubbock Avalanche Journal has a timeline of events regarding the Paxton case.  Former President Donald Trump came to Paxton's defense suggesting the November 2022 vote was an adjudication of the charges.  Blue Team Rep. Harold Dutton Jr. agreed that he did not wish to go against the voter's wishes.  

Elections have nothing to do with investigations of potential crimes and any charges.  Many members of the House argued the process of creating the Articles of Impeachment have been unfair to the AG Paxton.

“I would like to point out that several members of this House while on the floor of this House, doing the state business, received telephone calls from general Paxton personally, threatening them with political consequences in their next election,” state Rep. Charlie Geren said.

The House voted for Articles of Impeachment against Paxton.  It passed by a wide margin. 

 

The Texas Senate will conduct the trial.  I didn't see our state stepping up in this regard but it may finally show one can't act with complete impunity.

Update 5-29-23:  Rep. Drew Darby voted for the articles of impeachment for Paxton.   Let's hope these are more than just words of oversight.

Update 5-30-23:  HuffPo ran a story on "The Golden Age of White Collar Crime".

An entrenched, unfettered class of superpredators is wreaking havoc on American society. And in the process, they've broken the only systems capable of stopping them.

Update 6-9-23:  The FBI arrested Nate Paul.

Update 8-31-23:  Paxton's staff detailed the many ways he milked Texas taxpayers to fuel his lifestyle and ego.

Paxton was in Qatar for the 2022 World Cup — a trip that does not appear in his filings or security records. Another Republican state attorney general, Sean Reyes of Utah, also attended and disclosed through a spokesman that Qatar's government paid his expenses without saying how much they were.

Paxton once bought a $600 sports coat from a hotel store while at a conference and billed it to the event's organizer.

Which brings us to:

"The corruption that has become widely tolerated throughout the various upper strata of our society is shocking in its boldness.  And even more shocking is its general acceptability, and too often downright fashionability, among our elite in business and government, and their courtiers and partisans in the various professions.   And it provides a corrosive example and temptation to the public. 

The breaking of oaths is a serious transgression, and there will be an accounting for it, if not in this world then the next.  And sadly it is the partisanship, and the willing gullibility of simple souls given over to the wiles of a skillful persuasion to anger, and willfulness, and hatred, that permits the unscrupulous to prosper."

Jesse, Repentance and Forgiveness the Wellspring of Joy, 22 December 2017

This very thing is unfolding locally.  How long will the unscrupulous prosper?

Update 9-7-23:  Ken Paxton's impeachment trial hit day three.  Witnesses claim the AG was fixated on Nate Paul.

Update 9-16-23:  Texas Reds vote for PEU sponsorship!  They acquitted Paxton on all charges.  Line 'em up boys.  We'll have the best billionaire sponsored government anywhere!  Yeeehaawwww!!!

Two PEU Dealers in Space

Ax-2 pilot John Shoffner flew a SpaceX rocket to the International Space Station. 

After Ax-2 astronauts dock at the ISS, they're expected to live and work on the station for eight days and conduct 20 experiments before returning to Earth. 

His Axiom Space bio states:

He formed Dura-Line Corporation, developing and patenting multiple processes for materials and methods for the placement of fiber optic cable during the 1980s.  

Shoffner left Dura-Line, as its CEO in 1997.

Shoffner turns out to have been a pioneer private equity underwriter, once called leveraged buyout organization (LBO).  Inc reported:

Shoffner, whose father had founded the business (Dura-Line) in 1971, wanted to reach new markets, add new products, and grow, grow, grow. He just didn't know how to get there. Stagnation is common for companies that skip strategic and operational analysis. But an even more dangerous pitfall for companies is superfast, unplanned growth. It can eat up cash flow, strain credit lines, jeopardize customer service and product quality, and sometimes kill off a business.

At Dura-Line, Shoffner and his father reached an unusual decision in 1985. The founder cashed himself out of the business through a leveraged buyout (LBO). 

Shoffner is not the first PEU in a SpaceX rocket.  Billionaire Jared Isaaman led an earlier flight.   

Forbes reported:

Isaacman, who had bootstrapped his payments company for 15 years, sold a 53.5% stake in the business to private equity firm Prospect Capital for $279 million in equity and debt.

Two private citizens ended up in space after selling their firms to the greed and leverage boys.  PEU pioneer Shoffner did so in 1985 while Isaacman cut his deal in 2014.

This may or may not be an interesting historical note given the ubiquitous nature of private equity underwriters.

Softbank Sells PEU Fortress to Mubadala

FT reported on the sale of Fortress Investment Group to Mubadala Investment Company, an Abu Dhabi sovereign wealth fund for approximately $3 billion.  Softbank purchased the private equity underwriter (PEU) in 2017 for $3.3 billion.  

Fortress was the first large private capital firm to go public, listing its shares in early 2007. It spurred a wave of similar offerings as Blackstone, KKR, Apollo and Carlyle all eventually went public.

Fortress founder Wes Edens will step down as co-CEO.

Mubadala took a 7.5% stake in Carlyle in September 2007.  A year later the Financial Crisis struck.  Mubadala added to their Carlyle Group holdings in 2011.

I hope their timing is better regarding Fortress.

Francis Suarez: Another PEU Politician

Miami Mayor Francis Suarez is considering a run for the Red Team's Presidential nomination.  Under questioning on Face the Nation Suarez spoke briefly to paid outside work.   Local news reported on a $10,000 per month consulting agreement with developer Location Ventures.

It turns out Suarez is a private equity underwriter (PEU) with DaGrosa Capital Parnters.  DaGrosa's website describes the firm:

A Miami-based private equity firm focused on making control and influential minority investments in exceptional companies located throughout the United States, Western Europe and Latin America.  

Suarez is part of the big money funnel with multiple full time jobs paying huge sums.  Each of those jobs carries professional conflicts of interest but nobody cares about that nowadays.  Well, maybe Warren Buffett cares.

Turn over a political rock and one often finds a greed and leverage boy.  Politicians Red and Blue love PEU and increasingly, more are one. 

Update:  Miami Mayor Francis Suarez once said that Sam Bankman-Fried, the now disgraced former head of FTX, embodied the “ethos of Miami.”  Is that greed and leverage?

Update 6-15-23:  PEU Suarez threw his hat into the White House ring for the Red Team.  CNN failed to report on Suariz' private equity ties.  

Update 8-16-23:  My wise friend wrote me:

In an interview with NBC News in early July, Suarez said, “I’ve done well, and I’m not going to apologize for doing well.”

“I’ve never used my position inappropriately to have any sort of financial gain.”

He commented:

Suarez exposes himself in those two lines. Number One FU I'm not going to apologize. Number two, I'd say he used it to his maximum benefit IE  like all politicians he used it appropriately for the financial gain meanwhile the cost of living is going up everywhere and placing people in increasingly desperate positions.

The PEU boys earned every bit of their outsized pay.  The common man, not so much.

Update 8-31-23:  Suarez suspended his campaign but his financial filings are revealing.

Conflicted Isaacson Interviews PEU Plunderer Author

It was a bit surreal hearing Walter Isaacson implicitly defend private equity underwriters (PEU) in his PBS interview with author Gretchen Morgenson.  A friend steered me to the interview and Isaacson's potential conflict of interest.  

Research confirmed Issacson is an Advisory Partner with Perella Weinberg Partners, an investment banking firm that assisted with numerous private equity deals, many in healthcare.  It also determined that Perella Weinberg runs at least one private equity fund, PWP Growth Equity.

 

SEC filings show five entities covering PWP Growth Equity I and PWP Growth Equity II.  These findings may or may not explain Isaacson's line of questioning.  However, they do indicate Isaacson has a conflict of interest via his role with Perella Weinberg and that was not declared for the viewing audience.  

It's just another indicator that we live in a PEU world. 

Update 5-29-23:  The PEU lobby came out hard against the book.   The greed and leverage boys know to cherry pick numbers, a charge they leveled against the author. 

Update 12-16-24:  Walter spoke on the Trump-Musk bromance on CNBC and endorsed widespread conflicts of interest.  PEUs eroded the conflict of interest space.  Trump, Musk and the TechGods blew them to smithereens.  Elon Musk will do what he did to Twitter, crappify it and lose investors big money.  Walter you might want to check out Glassdoor.  Musk's ex-Twitter (X) has: 

37% would recommend to a friend

Prior to Elon: Only bad experiences tended to be if you found an unlikely toxic manager, in that case, HR will not help you out of it. They will always side with management, despite the evidence. With Elon: No Severance, Cut off benefits mid Medical Procedures, did not honor any of what was promised to employees

Glassdoor reviews reveal Elon does not have the skills to manage an organization.  He may be an outstanding roving technical problem solver but that is not leadership.

Carlyle's Accolade Wines Going "Capital Light"

Financial Review reported:

Accolade Wines, backed by private equity giant The Carlyle Group, is planning to sell one of its most prestigious brands, House of Arras in Tasmania, while considering other asset sales as it battles high debt levels and tough times in the broader wine market.

Carlyle is now selling to meet debt obligations as it pursues a "capital light model."  Previously it sold to lock in massive gains.  

Carlyle's new CEO Harvey Schwartz said in their recent earnings call:

(Schwatrz) expects market turbulence to open low-price entry points into new investments, eventually...

The challenge will be holding on to highly levered affiliates as the market becomes more turbulent.  Retaining limited partner investors is another challenge for Carlyle's new streetfighter CEO.

Global Tamperers = Bilderberg 2023

The Bilderberg Group is meeting in Lisbon, Portugal and the published attendee list is similar to past lists.  KKR's Henry Kravis, Citadel's Ken Griffin, Palantir's Alex Karp, Founder's Fund/Thiel Capital/Mithral Capital's Peter Thiel are among the global plotters.  

It's not clear if Brian Deese is back at BlackRock after ending his stint in the Biden White House in March.  The Blue Team's Stacey Abrams is attending, I imagine to chronicle all the attendees who worked their way up the global economic chain by their bootstraps.

Carlyle Group joint venture partner Koc Holdings has Omer Koc attending.  Eric Schmidt of Hillspire LLC is in Lisbon.   Hillspire is his family office.

Bilderbergers welcome influential political candidates not on the attendee list.  Who will be spotted in Lisbon that may become dark horse Red or Blue Presidential contenders?  It's part of the Bilderberg code to anoint our future leaders.  Appropriately, US leadership is the final item on their agenda.

CalPERS Says "More PEU"

FT reported:

Calpers, the biggest US public pension plan, is considering bigger bets on private
equity despite growing fears that higher interest rates will curb the industry’s returns.

Chief executive Marcie Frost said that the $442bn-in-assets retirement fund, one of
the world’s biggest investors in private equity, will start an extensive review of its
holdings in this sector next month, adding that there is “appetite” to increase its
allocation.

“If we [the Calpers board] had conviction that we could put more money into private
equity, the appetite is there to do it from an investor perspective [and] from the
investment office’s perspective.”

CalPERS has $52 billion in private equity underwriter (PEU) investments.  

Fortune reported Kim Kardashian's SKKY Partners is raising $1 billion for their brand new PEU.

Both CalPERS and SKKY have Carlyle Group connections.  CalPERS was an early equity investor in Carlyle so it should know the PEU world from the inside.  It exited in 2013 after Carlyle went public.

SKKY Partners has former Carlyle Managing Director Jay Sammons on board.  Will CalPERS put any of its increased PEU investments into Kardashian's SKKY?  Time and actual disclosures will tell.

Carlyle's Ullman to Narrative Strategies

Politico reported:

Chris Ullman is joining Narrative Strategies as senior adviser. He was most recently a partner and director of global communications at Carlyle Group.

Ullman left Carlyle in 2019 to start his own communications firm.  That was a year before Carlyle Group Co-CEO Glenn Youngkin stepped down.  Ullman and Youngkin overlapped over seventeen years of Carlyle employment.

Ullman joins Devin O'Malley at Narrative Strategies.  O'Malley is credited with a key role in Youngkin's surprise Virginia gubernatorial victory.

Should the Red Team wish to push Glenn Youngkin for the Presidency having Chris Ullman on the inside would be helpful.  Ullman knows Youngkin's warts and how to smooth them over.   

Glenn may be skilled in absorbing large amounts of information and saying something profound.  However, he has a twenty five year record as a China and ESG loving private equity underwriter (PEU) to overcome.

Polticians Red and Blue love PEU and increasingly, more are one.  They have the Fed Chair and would love to staff the Resolute Desk at the White House.

Update 5-26-23:  Virginia Gov. Glenn Youngkin, former Carlyle Group co-CEO, is reconsidering a bid for the 2024 GOP presidential nomination.

Update 5-27-23: NYPo reported Youngkin is meeting with billionaire Red Team donors about a possible Presidential run.  If he can line up the funding Glenn could see a lane.  America's first PEU President....

Update 6-7-23:  Youngkin supporters are trying to paint the former Carlyle executive as something other than a greedy, global tamperer.  Given Glenn Youngkin's record they have their hands full.

HIG Capital and North Castle Partners Lose Jenny Craig

Financial Review reported:

Weight-loss brand Jenny Craig has begun liquidating its operations in the US after efforts to ease a cash crunch fell short.

Jenny C Holdings and affiliates filed for Chapter 7 bankruptcy on Friday in Delaware, court papers show. The move means Jenny Craig will cease operating and see its assets sold off in pieces.

The company, backed by HIG Capital, struggled to maintain enough cash in recent months as it stared down a first-lien term loan due in October 2024. It has searched for a buyer and held active discussions with lenders in an attempt to rework roughly $US250 million of debt.

The struggling diet company’s Canadian division previously commenced liquidation proceedings in Vancouver, listing about C$324 million ($242 million) owed to unsecured creditors.

The article did not mention another private equity underwriter (PEU) North Castle Partners.  

North Castle Partner's website still has information on Jenny Craig.  North Castle's narrative reads like it still has a stake in Jenny Craig.

HIG Capital scrubbed the company from its website.  It is not on the list of current or realized investments.

I was unable to find a debt rating for Jenny Craig or Jenny C Holdings so it must exist under another name.  The rating reports may shed light on how HIG and North Castle bled Jenny Craig for cash. 

PEU's tend to make back their original equity investment within the first few years between deal fees, management fees, selling real estate, special dividends/distributions and adding debt while paying a portion to the sponsor (debt for dividend).  There is no information on the mix of cash removal strategies HIG and North Castle foisted on Jenny Craig.

Jenny Craig has a rich PEU history having been owned by MidOcean Partners and ACI Capital.

Looming debt refinancing may take down many a PEU affiliate.  The greed and leverage boys refuse to use their ample dry powder on companies they've tanked.  PEUs don't throw good money after bad, even if they caused the company to falter by fattening up the liabilities side of the balance sheet.

Update:  EpsilonTheory has an excellent analysis of the failure of a different retailer Bed Bath and Beyond.  BBBY was publicly traded in contrast to Jenny Craig.  I expect there are some similarities in the way executives and owners profited handsomely and contributed to the company's decline and eventual death.

Update 5-17-23:  Jenny Craig debt holders include CION Investment Corp and Brightwood Capital Advisors.  CION's SEC filing shows a Jenny C Acquisition with interest rate Libor + 900 basis points.

Jenny Craig operations in Australia and New Zealand remain open.

PEU Apollo, Toomey, Crypto News

Apollo Global Management appointed former Red Team Senator Pat Toomey to their board of directors.  News reports indicate Apollo is backing the possible acquisition of Celsius, a bankrupt crypto lender.  

Pat Toomey joined Coinbase's Global Advisory Council for the purpose of navigating "an increasingly complex and evolving landscape in the US" and beyond.

The greed and leverage boys would love to buy dislocated crypto assets, use their government ties to bolster crypto-safety perceptions and make kajillions in profit.  It's part of the private equity underwriting (PEU) playbook.  

Politicians Red and Blue love PEU and increasingly, more are one.  Ring a bell as Pat Toomey is in the fold.

Update:  When FTX imploded the politically connected fled:

Eliora Katz, a former aide to Republican Sen. Pat Toomey, who was FTX's sole in-house lobbyist, is no longer working for the company.

The Toomey aide joined FTX while the Senator served as the leading Red Team member of the Banking Committee. 

Update 5-23-23:  Coinbase plans a "Moving America Forward" public relations campaign.  The PEU lobby is named "American Investment Council."

Update 6-5-23:  Binance's Chief Compliance Officer said in 2018:

"We are operating as a fucking unlicensed securities exchange in the USA bro.”

Make that Chief Compliance Evasion Officer...

Commanders PEU Odor Remains

The Washington Commanders will have new private equity owners if NFL owners approve the $6 billion deal.  Buyers includes Josh Harris and David Blitzer, both private equity underwriters (PEU).  Harris left Apollo Global Management in 2022 while Blitzer remains with Blackstone. 

Another member of the group purchasing the Commanders is Mitchell Rales.  Rales formed Equity Group Holdings in 1979. 

Using junk bonds, they bought a diversified line of businesses.

That makes Rales a pioneering PEU... somewhat of a founding father.  A 2003 SEC filing shows Equity Group Holdings (via three separate funds) and Mitchell Rales' stake in Danaher Corp. 

At least three new Commanders owners benefited from preferred "carried interest" taxation for decades. Josh Harris' estimated net worth is $6 billion.  David Blitzer's is nearly $2 billion and Mitchell Rales' is just over $5 billion.  Low tax rates helped them grow their monstrous fortunes.

Commanders seller Dan Snyder's net worth is nearly $5 billion.

Snyder had PEU RedZone Capital.  The Guardian reported on the football team's sale:

....multiple investigations by the league and Congress into Washington’s workplace misconduct and potential financial improprieties. The congressional investigation found Snyder played a role in a toxic culture.

The Washington Commanders created a “toxic work culture” for more than two decades, “ignoring and downplaying sexual misconduct” by men at the top levels of the organization

I found part of the RedZone Capital logo on a table hosting a Washington Commanders luncheon and used it to create the unoffical logo (pictured above).  The table image is below:

U.S. elected officials cater to the billionaire class while ignoring public opinion on many issues.  Politicians Red and Blue love PEU and increasingly, more are one.

PEU boys want your ticket and refreshment money.  They also love government handouts.  Can anyone say "new stadium deal?"  The fleecing continues.

Update:  The NFL Finance Committee noted an "unusually large number of limited partners."  It's a club deal for an NFL football club.

Update 5-14-23:  Also on the large number of limited partners list:

Mark Ein - Founder VentureHouse Group, early in his career he worked for The Carlyle Group. 

Lee Ainslie - Founder and Managing Partner of Maverick Capital.  He worked for Tiger Management.

Eric Holoman -- Managing Partner of JLC Infrastructure (MJE-Loop Capital Partners). 

Earvin Magic Johnson -- founder Magic Johnson Enterprises and JLC Infrastructure (MJE-Loop Capital Partners).

Michael Li -- Owner of The Range Group

Santo Domingo family -- Alejandro Santo Domingo is Senior Managing Director for Quadrant Capital Advisors

Michael Sapir --Chairman and CEO of ProShare Advisors, ProFund Advisors LLC, Managing Partner of ProShare Capital Management LLC  

Eric Schmidt--Google founder with family office Hillspire LLC.

Andy Snyder -- CEO of Cambridge Information Group, a family owned investment firm.

Update 5-15-23:  Joshua Harris holds over $2.2 billion in Apollo Global stock alone (35 million shares). 

Update 8-10-23:  Harris et al have brought back the Redskins name for internal team discussions.  Let's hope they don't bring back the N word for fellow owner Magic Johnson.

PEU "Loan to Own" Era

Banks have no appetite to take over businesses that welsh on their loans.  Private equity gorges that very situation.  So the hot topic is banks partnering with private equity underwriters (PEU).

US private equity giant Blackstone is negotiating a role as a party in regional-bank loans, the firm’s president Jonathan Gray said in an interview with the Financial Times.

Blackstone would potentially provide banks with firepower to lend to companies as credit becomes more scarce. Blackstone could help move loans originated by regional banks to its insurance customers.

Uber wealthy family offices (many started by PEU founders) want in on private credit.  CNBC cited the opportunity for double digit returns due to high interest rates. 

Family offices love being opportunistic on dislocation.

Like their PEU brethren.  Both  are happy to loan to own.  Backdoor takeovers (debt cramdowns) are just fine.

PEU chess plays are occurring while searing critiques hit the press and bookstores.  Don't look to elected officials or regulators for protection.  

Politicians Red and Blue love PEU and increasingly, more are one.

Update 5-23-23:  Axios reported:

Over $100 billion of U.S. corporate debt trades at distressed levels.

Update 5-28-23:  Reuters said even their peers wouldn't fund this deal: 

Private equity firms Francisco Partners and TPG Inc (TPG.O) have ended talks to acquire New Relic Inc (NEWR.N) after they failed to secure enough debt financing and could not meet the business software company's valuation expectations

Update 6-29-23:  Federal Reserve Bank staff believe a financial catastrophe is on the way.  How many PEU affiliates will sink in the financial tsunami?  Thirty seven percent of companies are in trouble.

Update 8-10-23:  Bloomberg indicated loan to own era is cranking up.  The story stated:

Oftentimes, private equity owners would prefer to cut their losses than throw more money at an underperforming business.

Where does the PEU leave the door keys?

Rubenstein at Declaration: Anchor LP or Overseer?

Financial Advisor reported in May 2018

The former White House staffer who became a leveraged-buyout legend will directly oversee Declaration Capital. He’s also funded an affiliate called Declaration Partners, which has wider ambitions.

He recruited Brian Frank, a former money manager at Michael Dell’s MSD Partners, to run the unit targeting venture, growth and family-owned businesses, areas that wouldn’t directly overlap with Carlyle, said a person with knowledge of the matter, who asked not to be identified because the plans are private. The firm may ultimately seek outside capital beyond Rubenstein’s fortune.

The staff includes Rubenstein’s daughter, Alexa Rachlin.

Crunchbase states Declaration Capital invested in five companies.  Rubenstein oversees those investments. 

It's hard to understand why his Declaration forays are not a conflict of interest within Carlyle, a politically connected private equity underwriter (PEU).  Rubenstein has been a key part of a ruling triumvirate and serves as Chairman.

Declaration Partners registered with the SEC to raise capital for its various funds.   It has 34 investments. according to CB Insights (which characterizes Declaration Partners as a family office).  Rubenstein is on video marketing Vault for Declaration Partners.

The hiring of a family member, however talented, is a common practice among billionaire insiders.  Insiders often hold multiple high paying roles within their complex, secretive organizations.  

How has Rubenstein's Declaration ties harmed Carlyle fundraising?  If Carlyle's chief fundraiser for decades is putting his money elsewhere shouldn't others do likewise?  

Five years ago the answers were not available.

Rubenstein declined to comment through a Carlyle spokesman.

If anyone remains confused about Rubenstein's actual roles with Declaration that is the intent of the greed and leverage boys.  Obfuscate for profit.

Update 5-10-23:  Jesse's Cafe Americain has a quote from 2012 that includes:

"Most of them became wealthy by being well connected and crooked. And they are creating a society in which they can commit hugely damaging economic crimes with impunity, and in which only children of the wealthy have the opportunity to become successful. That’s what I have a problem with. And I think most people agree with me."

Texas Bill's Gold Backed Digital Currencies: Pax Gold?

ZeroHedge reported:

On May 2, a Texas House committee passed a bill to create 100% reserve gold and silver-backed transactional currencies. 

Rep. Mark Dorazio (R) introduced HB4903 on March 10 and it has since garnered a bipartisan coalition of 42 cosponsors. The legislation would require the state comptroller to establish and provide for the issuance of gold and silver specie and also establish digital currencies that are 100% backed by gold and silver, and 100% redeemable in cash, gold, or silver.

There is a Paxos issued cryptocurrency backed by gold.  It's called Pax Gold.  

Carlyle Group co-founder David Rubenstein invested in Paxos through his family office Declaration Partners.  He'd love Texas legislators' help in marketing Paxos' Pax Gold.

Former Defense Chief Esper Joined Red Cell

Last year Defense News reported:

Former Defense Secretary Mark Esper has joined the Washington-based venture capital firm Red Cell Partners as a partner and chairman of its national security practice.

This is not a new development.  Former Defense Chief Chuck Hagel did likewise in 2009 when he became a private equity underwriter (PEU) with McCarthy Capital. 

Politicians Red and Blue love PEU and increasingly, more are one.

Clinton Interview: Carlyle Memory Lane

Carlyle Group co-founder David Rubenstein interviewed former President Bill Clinton and his wife Hillary, a former Senator and Secretary of State.  

Both Clintons have spoken at Carlyle's annual investor meeting (the limited partner version) for huge fees.  Carlyle paid Bill $200,000 for his 2012 speech while Hillary earned $200,000 for her 2013 talk.  Bill called private equity "good work" in an interview with Harvey Weinstein.  Yes, that Harvey Weinstein.

Clinton helped Carlyle go from a fledgling private equity underwriter (PEU) when he privatized the federal security background check service.  The Carlyle Group took a stake in USIS in October 1999.  It flipped a portion of the company in 2003 before cashing in for major profits in 2007.  

The harms from private equity have come front and center through several new books.  Both have "plunder" in the title.  Add a new article on how private equity ruined background checks.

Bill Clinton can see many things but seems blind to the evils of greed and leverage.

Politicians Red and Blue love PEU and increasingly, more are one.

Michelle Obama Juggernaut PEU

Plezi issued a press release on the company's launch.  It highlighted former First Lady Michelle Obama's involvement.  She is a co-founder and strategic partner of Plezi.   Neither the press release or Plezi's website identify the other co-founder.  

It could be Juggernaut Capital Partners founder and managing partner John Shulman.  Schulman is a graduate of the University of Virginia's McIntire School of Commerce, as am I.  Juggernaut's website states:

Founded in 2009, Juggernaut Capital Partners is a lower middle market private equity firm specializing in buyout and growth investments across the consumer and healthcare sectors.

It should be no surprise that Michelle Obama partnered with a private equity underwriter (PEU) given all the lover her husband showed the greed and leverage boys during his eight years in the White House.

Politicians Red and Blue love PEU and increasingly, more are one. 

(Quartz and NPR ran Plezi launch stories as well. )

Update 9-27-23:  This week PEU Michelle Obama garnered $741,000 in speaking fees at the Bits and Pretzels Founders Festival.  That's a juggernaut payday.

Fierce Offers Paxos Crypto Trading

Last February the world learned about Fierce via a press release:

Fierce, the first-of-its-kind fintech platform unlocking the ability for users to earn high-yield returns across all their financial assets, today announced the company’s official launch out of stealth with its app available for iOS. The news comes in tandem with the company announcing $10M in seed funding, with participation from leading institutional investors including Pendrell, AP Capital, Wheelhouse Digital Studios, Space Whale Capital and several notable angel investors.

Yesterday's Paxos press release declared:

With a customer-centric approach and a mission-driven team, Fierce has brought together industry-leading products and services including: an FDIC-insured checking account, a no-fee Debit Card, fractional stock and ETF trading with the ability to passively earn interest on shares and more. Through Paxos, Fierce will offer its customers access to trade Bitcoin (BTC) and Ethereum (ETH) on its mobile app with plans to bring additional digital assets in the future.

Carlyle Group co-founder David Rubenstein invested in cryptocurrency infrastructure company Paxos through his family office Declaration Partners.

Rubenstein is used to milking Uncle Sam's wallet, directly and indirectly.  How long before this "policy making billionaire" non-lobbyist influences Congress to just back it all?

The press release noted:

Paxos is replatforming the financial system to enable assets to instantaneously move anywhere in the world, at any time, in a trustworthy way. 

Adding to financial instability?   Former FDIC Chair and Paxos board member Sheila Bair is familiar with the dynamics of a technology enabled bank run.  It happened with Silicon Valley Bank

...a panic among customers and investors, led to massive withdrawals, and ultimately, the bank’s collapse.

Contrast that with the company founder's statement:  

“Fierce is a customer focused, feel-good finance app."

Panic reducing or panic inducing?  It won't be the first time people have been told something inaccurate regarding technology.

Paxos investor Rubenstein is a longtime oligarch wanting to accumulate more billions on this earth.  The new generation of tech oligarchs want to leave the planet while living forever.  

Fierce/Paxos may have to change their goal to "enable assets to instantaneously move anywhere in the galaxy."  Space Whale Capital would have it no other way.

Politicians Red and Blue love PEU and increasingly, more are one (private equity underwriters).  It's a feel good galaxy for the greed and leverage boys.

Update 5-7-23:  ZeroHedge reported "a Texas House committee passed a bill to create 100% reserve gold and silver-backed transactional currencies. Enactment of this legislation would create an option for people to conduct business in sound money, set the stage to undermine the Federal Reserve’s monopoly on money, and possibly create a viable alternative to a central bank digital currency (CBDC)."  David Rubenstein must be excited given his stake in Paxos Gold.  

Update 6-29-23:   Bloomberg reported:

EDX Markets, a nascent crypto exchange supported by Charles Schwab, Fidelity, and Citadel Securities, has reportedly ended its intended association with Paxos and is nearing an agreement with Anchorage Digital.

Carlyle's Earnings Call Paints Grim Picture

Carlyle Group co-founder David Rubenstein suggested things would get better after the FDIC dealt with Republic Bank.  That may not be supported by Carlyle's Q1 earnings call.

Carlyle CFO Curt Buser noted:

M&A volumes are about half of what they were just last year. IPO activity is sluggish. U.S. leveraged loans are much smaller, smaller than they have been in many, many years, and so all that activity level is depressed and it impacts our earnings, our ability to generate transaction fees, impacts performance revenues, the lower level that you see is going to impact realizations, and even at Fortitude it affects our fees there, are variable rate, and so as Fortitude does well, we make more money, but mark-to-market types of adjustments impact some of those returns and so right now, it’s at a lower level, and so that’s also impacted our thinking with respect to the current year.

..our compensation structure, we use the combination obviously of cash, carry, equity, and you’ve got to be very careful when you move the cheese. 

Carlyle CEO Harvey Schwartz added:

I like Curt’s language about the cheese - I don’t think that was a prepared remark, by the way, we probably wouldn’t have put that in a script, but I think he captured it well.  

Carlyle has time for interest rates to work their way back down, according to Buser.

...there’s no major issues in the PE space. Over half of the debt across the portfolio is fixed or hedged, and roughly 95% of the debt has maturities in 2025 or later. 

The 5% that matures sooner could produce some sphincter moments.  Will Carlyle throw good money after bad?  It's not their practice.

CEO Schwartz suggested people want access to Carlyle offerings:

I think there will be other products that we’ll also be exploring and taking advantage of, and from a private wealth standpoint, while still in its infancy in terms of where things are, a lot of the private wealth channel would love to have access to those product sets. 

There's always an angle for the greed and leverage boys.

Plunder Author Interview

Economics and Beyond with Rob Johnson:

"Brendan Ballou, talks to Rob about his forthcoming book, Plunder, about the growing harmful role of private equity in the US."

Worth the listen.  

Other revealing pieces on private equity include:

"Preying on the Dying:  Private Equity Gets Rich in Hospice Care"-CEPR

"How Private Equity Widens the Income Gap"-NPR

"Born to Die"-The American Prospect 

"Private Equity Giants Back Sinema in Q1"-Sludge

"Private Equity is Gutting American and Getting Away with It"-NYT

New books on the ravages of private equity:

"These are the Plunderers:  How Private Equity Runs--and Wrecks--America" (Simon and Schuster)

"Plunder:  Private Equity's Plan to Pillage America" by Brendan Ballou (GoodReads)

PEU Report applauds these writings as my blog has had the aim of revealing the ills of private equity underwriters (PEU) since it began in 2007.  

Update 5-6-23:  The Motley Fool did an interview with Ballou.  It's titled "Private Equity's Opaque World."

Update 6-2-23:   The American Prospect ran a piece called "Days of Plunder."

Two new books call ‘private equity’ what it actually is, but neither offers much hope for emancipation from our eternal hostile takeover.

I suggest the piece be renamed "Decades of Plunder" enabled by both Red and Blue political teams.