Carlyle's Dynamic Offshore Resources to Go Public

The Carlyle Group and energy joint-venture partner Riverstone Holdings are ready to monetize Dynamic Offshore Resources.  The company commenced operations in 2008. The S-1 stated:

Dynamic Offshore Resources paid Riverstone a management fee of $1.1 million, $1.5 million and $1.5 million during the years ended December 31, 2009 and 2010 and the six months ended June 30, 2011, respectively.

Why the management fee acceleration for 2011?  Does it have anything to do with Riverstone and Carlyle's divorce?

How do investors stand to profit in the IPO?

Aggregate capital contributions to DOH were $174.0 million, $23.3 million and $28.6 million for the years ended December 31, 2008, 2009 and 2010, respectively. There were no capital contributions during the six months ended June 30, 2011.

DOH paid distributions to its limited partners in aggregate amounts of $33.0 million, $48.3 million and $12.5 million for the years ended December 31, 2009 and 2010 and the six months ended June 30, 2011, respectively.

That's $225 million in, $94 million out.  A $400 million IPO would send investors into the clear by $269 million.  That's easily a double over three years, with the potential for more if investors retain shares.

Carlyle pulled Stark's IPO due to a dire financial environment.  DOR's remains on track with an S-1 filing.  Carlyle's IPO documents are due to the SEC in September, possibly days away.  Beware the puffery.

Update 9-1-11:  Carlyle's China Forestry restarted logging operations and trading timber logs.  The company's stock is suspended while under investigation for accounting irregularities, relating to a $35 million embezzlement.  Will this resumption of operations help put this black mark behind Carlyle as their IPO marches forward?  Carlyle's DBD co-founders, want to cash in.  PEU salesmen par excellence....

Update 2-1-12:  Carlyle shelved the IPO and is selling Dynamic Offshore to SandRidge Energy for $680 million in cash and 74 million shares of SandRidge, currently trading at $8 per share.  It's nearly a four bagger for Carlyle when special dividends/distributions of $137 million are included.

Tony Hayward's PEU Life

Ex-BP CEO Tony Hayward has his life back and he's on top.  Bloomberg reported:

A year after leaving BP, he’s again at the helm of a publicly traded company. He teamed up with financier Nathaniel Rothschild, scion of the banking family, to create Vallares Plc, a shell company that raised 1.33 billion pounds ($2.15 billion) through an initial public offering on the London Stock Exchange on June 17. 

Valleres Plc focuses on the oil and gas sector.  Here's the board's take:

The Directors believe that increasing global industrialisation and urbanisation, particularly in Asia (outside Japan) and the emerging markets, is likely to lead to increased global demand for commodities. At the same time, the Directors believe that the supply of oil and gas will be constrained by insufficient investment to keep pace with this demand and by exploration and development challenges. This supply-demand dynamic is likely to generate sustained inflation in commodity prices.

Hayward stated Vallares would follow the same model as Vallar, a prior Rothschild investment:

"Vallar PLC is a proven success and it is clear that the concept applies equally well in the oil and gas sector.  Many high quality international resource assets have been acquired by family owned or private companies in the last few years. We will have the cash, access to funds and the capability to unlock value where the current owners have neither the capital nor technical expertise to develop the assets."

Rothschild weighed in on landing Hayward:

"We have assembled a high quality board, with great expertise, to build a significant London listed resources company focused on the oil and gas sector. I am delighted to be partnering with Tony Hayward, whom I have known for many years, on this exciting new venture. Together, we believe the company is well positioned to capture value in a sector with attractive fundamental supply-demand dynamics."

Nathaniel Rothschild wasn't alone in giving Tony a chance to make millions.

Hayward also serves on the board of TNK-BP International Ltd., BP’s fractious Russian joint venture. Glencore International Plc, the mining and commodities-trading company that went public in London and Hong Kong in May, raising $10.3 billion, named him its senior nonexecutive director. 

Tony landed a spot on Glencore's board on April 14, 2011.  Hayward chairs Glencore's Nominations Committee.  Here's the laugher, Hayward sits on the Environment, Health and Safety Committee.  Hayward is the second-highest paid board member (non-executive), garnering nearly 160,000 pounds per year.

And Hayward advises AEA Investors LLC, a New York-based private-equity firm that manages $5 billion in investments, and Numis Securities Ltd., a London investment bank, on energy companies.

Hayward is a partner with AEA Investors LLC, according to Glencore's IPO prospectus.  The TimesUK reported:

It remains unclear as to how much Hayward will earn at the 43-year-old private equity group, which was established to manage the fortunes of the wealth of the Rockefeller, Mellon and Harriman families.

Tony Hayward, private equity underwriter (PEU) for Robber Baron money.  That's rich, given PEU's are the new Robber Barons, Schwarzman, Rubenstein and now Hayward,

Tony also sits on MIT's Energy Advisory Board and the British Olympic Advisory Board.  He is a Fellow in the Royal Society of Edinburgh.

The landed gentry forgave Tony Hayward, as they forgave Lord John Browne and Wilbur Ross.  Who yachts in the Gulf of Mexico anyway? 

BP's Oil Spew antagonist Tony Hayward came out better than the Barney Fife-like protagonist Thad Allen.  However, each were handsomely rewarded after their respective roles.  It adds up to lots of PEU.

Update 10-8-11:  Hayward's Vallares did a deal with a Turkish oil company that has fields in Northern Iraq.   Lives sacrificed, Hayward's treasure:  It's a pattern. 

Hurricane Irene Impacts Repo Men?

“Financial crises are almost always and everywhere about short-term debt,” says Douglas Diamond of the Booth School of Business.

Combine this fact with a current disaster, Hurricane Irene.  Bloomberg reported:

Rates for borrowing and lending securities in the repurchase-agreement market rose and investors sought to extend maturities on concern power outages and closings of mass transit will keep traders home after Hurricane Irene strikes.

No traders, no repo refinancings.  A few missing traders isn't anything near the powder keg of 2008.  However, Uncle Sam did his best to refill the gunpowder barrel with $13 trillion in financial interventions.

Hurricane Irene impacted repo financing in the near term.  Combined with other shocks, things could get interesting.  IMF Chief LaGarde said European banks needed to be recapitalized.  Didn't that already happen? 

Stark IPO Landscape

Carlyle Group affiliate H.C. Stark targeted an autumn IPO.  Reuters reported a change in plans.

Recent financial market turbulence has dealt a serious setback to plans to list German specialist metals and ceramics company H.C. Starck this year, three people close to the situation said on Friday.

"A listing this year is becoming increasingly unlikely," one of the people familiar with the process told Reuters. A sale of the business remains an alternative, a second person said.

The Carlyle Group plans to go public this year, with an S-1 filing in September.  How will market turbulence impact Carlyle's IPO?  How about declining PEU marks?  Stay tuned.

America's Bio Fund

OilPrice.com reported:

On 16 August President Obama announced that the U.S. Departments of Agriculture, Energy and Navy will invest up to $510 million by 2014 in partnership with the private sector to produce advanced “drop-in” aviation and maritime biofuels for military and commercial use.

Private equity underwriters (PEU's) love Uncle Sam's premium priced business, but cheap capital drives them crazy.

The plan envisages the three federal departments to invest a total of up to $510 million, which will require substantial cost sharing from private industry, with projected matching funds of least one to one.

Lining up are the usual suspects:

Wall Street's big money boys, the Carlyle Group and Goldman Sachs, have already begun discreetly investing in biofuel production in the U.S.

This explains government's prominent role in the upcoming Clean Energy Summit, as reported by Economic Policy Journal.  Here's why private equity is interested:

The small amounts produced thus far of drop-in biofuels, the majority of which have gone to both civilian airlines and the Department of Defense for evaluation and testing have been labeled “designer” fuels, as their prices are multiples per gallon higher than traditional fossil fuel, which depending on the feedstock, have ranged between $65 and $100 per gallon.

PEU's can sense a cash trough. Navy Secretary Ray Mabus said this week

“While it’s not a competitive rate yet, simply because it’s not a big enough market, we believe that if you do create this market, which we are capable of doing, the price will be competitive with petroleum.”

Finance it and they will come. At least that's the DoD's take:

“We used the Defense Production Act, which says that if you have an industry which is vital to national security that is not existent in the United States, that the government can step in and partner with private business in order to get that sort of business up and running,” Mabus said.

The Navy, Agriculture and Energy departments are contributing about $500 million in “already-existing money,” Mabus said, to purchase materials from businesses that can help to establish the new industry. Among those potential purchases are contract proposals for 450,000 gallons of biofuels for Navy research and development. It will be one of the largest biofuel purchases made in the United States.

Navy Secretary Mabus knows PEU's. 

World PEU Fundraising

Private equity underwriters (PEU's) raked in investments for "winning" areas of the globe.  Six month fundraising figures show:

China - $10 billion (3 times 2010)

Brazil -   $3 billion  (4 times last year)

India -   $2.5 billion (up 1.5 times)

Going the opposite direction was Middle East/North Africa.  The Arab Spring wrung out billions from PEU's.  Last year's $3.4 billion faucet turned into a $91 million drip.  Was it a lack of dictator cash, nervousness amongst wealthy citizens or did the risk trade dry up?

Emerging markets PEU fundraising is the highest since the second half of 2008.  How much of that $29 billion came from capital calls?

The PEU boys from EMPEA have the funds to court the girl from IPANEMA. 

Board Member Tom Davis (Retired R-VA): Lax or Vigilant

Retired Representative Tom Davis (R-VA) is an executive conundrum.  Chris Ward's embezzlement scheme began with Davis as Chair of the National Republican Congressional Committee (NRCC).  The investigation placed no blame on a somnambulist NRCC Executive Committee, effectively the board of dirctors.  The NRCC allowed Treasurer Ward to wire money with only his signature.  Ward's pilfering began under Davis' watch.

Davis retired from the U.S. Congress after 14 years of service, landing the Director of Federal Government Affairs position at Deloitte & Touche LLP.  Oddly, a Chris Ward worked as chief executive of Deloitte's corporate finance operations in the Middle East.  That Chris Ward had no work history prior to September 2008 in his LinkedIn profile.

Davis currently sits on three boards, Agilex Technologies, The Partnership for Public Service,  and InfoZen.

Agilex Technologies, established in 2007, is a government information services contractor.  Their bio on Davis is the only one to acknowledge his NRCC role:

Congressmen Davis’ vigilant oversight of federal contracting saved millions of taxpayer dollars. He also served as the chairman for the National Republican Congressional Committee.

Davis' oversight didn't extend to the NRCC, given the five year embezzling scandal started under his Chairmanship.

Oddly, Tom Davis' Deloitte job has him advising clients "on major trends, opportunities and challenges facing the federal government, with a specific focus on technology innovation and government transformation."  Transformation is the job of Davis' second board seat. 

The Partnership for Public Service "works to revitalize our federal government by inspiring a new generation to serve and by transforming the way government works."  

Their bio on Davis shared two other roles, President and CEO of Republican Main Street Partnership and adjunct professor at George Mason University.  He's inspiring a new generation of hyper-competitive politics.

Davis' third board seat is with InfoZen, another government contractor in the information space.  InfoZen brags of two Deloitte rankings on their website.  His InfoZen bio highlights his time as a member of the Fairfax County Board of Supervisors.

How do the themes of information and transformation apply to the untold Chris Ward-Tom Davis story?  Is the Deloitte UAE Chris Ward the same man who robbed Republican coffers?  If so, what information did Ward have that encouraged power players to treat him gingerly?

Embezzler Ward was sentenced in early 2011.  Where is he incarcerated?  Does Tom Davis visit?  When will Chris Ward's criminal story be told?  Will his version call Davis lax or vigilant?

Update 8-23-11:  Another embezzler was sentenced to prison for not reporting her ill begotten gains to the IRS, tax fraud.  Will Chris Ward get similar tax treatment?