Carlyle Group Communications on Expired Texas Enterprise Fund Grant

Texas Governor Rick Perry proudly announced $35 million in state money for 3,000 new jobs in 2004. The Carlyle Group's Vought Aircraft Industries promised the jobs by 2009. Time's up on their commitment.

How'd they do? The Carlyle affiliate failed badly, cutting jobs instead of adding the promised 3,000. The move presaged Wall Street's rescue, where taxpayers ponied up billions, only to see banks shed jobs like used condoms. Vought cut 35 jobs between 2004 and 2009, Texas taxpayers paid the Carlyle affiliate $1 million per job lost. Below is my wish:

State of Texas
Invoice: 02-26-04

Please pay the following sum to the Texas Enterprise Fund for failure to provide the promised 3,000 jobs by 12/31/09:

$35,000,000

Payment is due in 30 days. Sincerely,

Governor Rick Perry

It should be sent. I'd love to see the response from Chris Ullman, Carlyle's newly promoted communications director.

Update: After winning the Republican primary Rick Perry read his scripted lines, "Hardworking Texans sent a simple, compelling message to Washington: Quit spending all the money!"

Carlyle's Boston Private Makes First TARP Payment

Carlyle Group affiliate Boston Private Financial Holdings paid Uncle Sam $50 million of its $154 million TARP capital injection. Boston Private caters to high net worth individuals. Thank heaven the landed gentry is beginning to recover. Maybe BPFH can pay back the remaining $104 million after Wall Street bonus season.

Mega PEU's Brutal 2009: Average 31% Loss

For the year ended June 2009 large private equity funds bled badly, losing 31.4% of investor money. This left a bad taste in investors' mouths. Smaller funds performed better. CFO reported:

The one-year performance of mega-funds is making investors wary. In a separate study in December, Preqin found that limited partners were less keen to invest in mega-size funds. Of the 100 investors surveyed, 37% said they would be avoiding mega-buyout funds after having previously invested in them, and only 9% said they would be investing in such funds this year.

The customer is a quick judge. Are "limited partners" the same professional investor Goldman Sachs CEO Lloyd Blankfein blamed in his commission testimony? Goldman packaged junk credit securities because customers demanded it. It then shorted those instruments.

Greed lives in the private equity underwriting (PEU) world. The question is what impact it has on client memory.

Virginia Port Decision: Will Carlyle Group Win?

The Daily Press reported:

Gov.-elect Bob McDonnell's incoming administration will have the final say on the composition of an independent review panel that will study whether the state should enter into a long-term operating agreement with a private operator at the Virginia Port Authority's cargo terminals, a spokeswoman said Tuesday.

The Carlyle Group is one of three bidders for Virginia's port operations. Carlyle won its first infrastructure project, refurbishing and operating 23 Connecticut highway rest stops. Will Virginia do a better job of qualifying bidders and holding them to a request for proposal? Time will tell.


Update 9-12-10: Virginia effectively stopped the bidding process for state owned ports. The Carlyle Group expressed continued interest, should Virginia Governor Bob MacDonald be receptive. Carlyle spokesman Christopher W. Ullman wrote, "If the new administration decides private investment in the port benefits the state, Carlyle will look forward to participating." They have a great setup man on the inside.

Carlyle Group Goes from Control to 1% Owner of Stallion Oilfield

The Carlyle Group and its joint venture energy partner, Riverstone Holdings, invested $30 million in Stallion Oilfield Services in 2005. That grew to $122 million in 2008. It's now down to 2%, due to Stallion's bankruptcy. Note and bridge loan holders traded $543.2 million in debt for 98% of the company's equity. Carlyle and Riverstone have warrants to buy another 1% if Stallion's enterprise value reaches $750 million.

Upstream Online reported:

Stallion is projected to have an enterprise value between $533 million and $619 million.
Secured lenders will get $25 million to cover a portion of their loans and the remaining $220.9 million of loans will be reinstated, according to the plan.

That makes Carlyle and Riverstone's 2% equity stake between $6 million and $8 million. That's got to hurt. Maybe they should change the name to Gelding Oilfield Services.

Don't worry about Carlyle, they noted distressed corporate debt as a back door method for equity ownership. How many more affiliates will Carlyle lose to debt holders? How many will they gain via debt ownership?

Carlyle Group Yuans

The Beijing Municipal Bureau of Financial Work approved the Carlyle Group's start up of yuan denominated fund. Reuter's reported:

U.S. private equity giant the Carlyle Group [CYL.UL] has signed a memorandum of understanding (MOU) with China to launch a yuan-denominated fund in Beijing.

Global private equity firms can raise yuan funds from super-rich Chinese individuals, Chinese pension funds or domestic enterprises, but these funds are off limits to non-Chinese investors because of the country's strict foreign exchange controls.

How do Carlyle executives put skin in the game? David Rubenstein, William Conway and Daniel D'Aniello don't sound the least bit Chinese. Carlyle's press release provides a clue:

The Carlyle Asia Partners RMB Fund will be entitled to preferential treatment from the Beijing Municipal Government, in accordance with its development policies for the city’s finance and equity investment industry.

Can Carlyle get their money losing clients into Chinese investments? David Rubenstein promised unhappy investors that Carlyle would help make up losses with discounted fees.

Big money influence peddling goes global. Private equity underwriters (PEU's) are the answer to all our crises, banking, pension, infrastructure, and health care.

"Speculators" Stake Out Health Care Turf

Who knew health care reform would entice the very speculators President Obama derided nearly a year ago? The Chrysler cramdown was on and Perella Weinberg didn't like Uncle Sam's terms. President Obama called them:

"a small band of speculators.... I don’t stand with those who held out when everyone else is making sacrifices.”

Perella Weinberg read the health reform tea leaves, deciding there is money to be made. It purchased Tokum Capital, a $25 million fund specializing in health care. A Perella Weinberg representative said:

“Health care is viewed as a very important space, particularly given the degree of change occurring in the sector, and high-quality managers have an opportunity to generate alpha and distinguish themselves."

More directly, there's big money to be made. I smell a PEU, private equity underwriter.

Update 1-20-10 Perella Weinberg will invest $100 million in the transportation sector.