Carlyle Group's Smoking Tobacco Investment

Claren Road, a hedge fund owned by the Carlyle Group, made big money buying lowly rated state tobacco bonds, then worked deals with state finance officers to boost their value.  ProPublica reported Claren's deal with New Jersey garnered $92 million for the state and over $100 million in profits for Claren Road.

This echoes the Great Eskimo Tax Scam, which preceded Carlyle's founding.

In 1984, a law was passed allowing native corporations in Alaska—that is, Eskimo owned companies created by Congress to manage native lands—to sell their losses to businesses looking for tax write-offs. The Marriott executives, working with David Rubenstein at Shaw Pittman, discovered the Eskimo clause and vigorously bought the losses to offset gains. The adventure has become known in some quarters as the Great Eskimo Tax Scam.

More recently, a Carlyle affiliate pursued Florida "wetlands credits."  PEU's know how to wring out profit, on the backs of people.  In fact, it's an American tradition.

PEU Dry Powder in for a LeBron-like 2015

Bloomberg reported:

For The Carlyle Group and its peers, there are mounds of cash waiting to be deployed in 2015. Blackstone’s so-called dry powder stands at $42 billion, Apollo Global Management LLC’s is $34 billion and KKR’s is $18 billion. Carlyle’s is $56 billion.

Carlyle was the busiest private equity underwriter (PEU) in 2014.  It will be interesting to see how Carlyle's energy investments do in the current era of $55 a barrel oil.  Carlyle lost its mortgaged backed security fund in spring 2008 during a time of imploding real estate loans.  It rolled up Blue Wave Partners, a hedge fund that same spring, at large losses for investors.

PEU's count on valuations cycling.  They mine affiliates for cash via annual management fees, deal fees, added debt for dividends and then the final cash explosion, an IPO or sale of the firm.

It's interesting how many politicians cross back and forth from the PEU world.  Those in office understand their role of servicing the greed and leverage boys.  Dry powder must be deployed.

Thus industries must alternatively be stressed, then favored.  Carlyle and company don't like mobilizing their cash hoards on high priced assets. 

Catering to Banksters

FT reported former Fed Chief Paul Volcker's reaction to the postponement of financial reform that required banks to divest risky, illiquid investments from units that have federal backing::

“It is striking, that the world's leading investment bankers, noted for their cleverness and agility in advising clients on how to restructure companies and even industries, however complicated, apparently can't manage the orderly reorganisation of their own activities in more than five years.”

It's about the big money boys.  No one else is in the room.

Carlyle's DD Rap Jam LLC

Business Insider reported Carlyle Group co-founders David Rubenstein and Daniel D'Aniello rapped a holiday message for investors:

It takes a lot of brains to do what we do,
Looking for a way to make some dough for you.
Energy, commodity, we do it all,
So pick up the phone and give us a call.
Corporate mezzanine, private equity,
Carlyle Group is the place to be.
We’re global, we’re mobile, we’re aiming to please.
Only goal in mind: serve the LPs

Take dat unitholders...

Dodd Frank Toothless for PEU's Until 2017

BBC News reported on the sweet hand Congress and regulators continue giving taxpayer backed banks:

The new extension applies to other types of "legacy covered funds", according to a release on the Fed's website, which include "having certain relationships with a hedge fund or private equity fund".

Dodd Frank's PEU tooth may come in by mid-2017.

Carlyle, Warburg Could Have Captive Rating Agency

Reuters reported:

A private equity consortium of Carlyle Group LP and Warburg Pincus LLC is in advanced talks to acquire privately held credit rating agency DBRS Ltd for more than $500 million, according to people familiar with the matter.

After final bids were submitted this week, Carlyle and Warburg Pincus have so far prevailed in the auction for DBRS, which also attracted Canadian private equity firm Birch Hill Equity Partners Management Inc, the people said on Friday.

No exclusivity has been awarded to any bidder and the outcome could still change, the people cautioned. Carlyle and Warburg Pincus are in the lead partly because they have a global footprint that can help DBRS expand further internationally, one of the people said.

The Carlyle Group has been known to bleed affiliates for dividends by floating debt.  How might a captive rating agency help Carlyle's cause?  

Carlyle junk:  never too hot to loan.  Might this be DBRS new mantra?

This Week's Signs of Political Elder Abuse

It was a rough week for America's retired seniors.  First, PPACA architect and physician Ezekial Emanuel suggested people over age 75 should stop taking any life extending medications.  He framed it as his personal decision before talking about "population based" medicine.

“It is really about what you are doing to contributing and enriching the world.  I want people to stop focusing on just more years, focusing on quality,” Emanuel says.

Older people can die early to save other people money.  This leads to the second abuse of retirees.  Kansas Governor Sam Brownback cut funding for the Kansas state employee pension.

The governor cut state contributions to KPERS $40.7 million for the next six months, dropping the employer contribution rate to 9.5 percent from 12.1 percent.

Read more here: http://www.kansas.com/news/politics-government/article4413431.html#storylink=cpy

This reduction does not impact the pension liability, so theoretically the state of Kansas will make up the shortfall over time.  Then again, maybe not.

The third harming of retirees came from Congress and it jeopardizes any pension promise.   Congress considered and passed:

A measure that would for the first time allow the benefits of current retirees to be severely cut is set to be attached to a massive spending bill, part of an effort to save some of the nation’s most distressed pension plans.

The rule would alter 40 years of federal law and could affect millions of workers, many of them part of a shrinking corps of middle-income employees in businesses such as trucking, construction and supermarkets.

Congress included a bankster bonus feature.  Government insured banks will keep their derivatives franchises, which write and sell financial wagers.  How many bets will they make on pensions going under?  It's derivitable.

Thank heaven Congress is keeping billionaire, bankster and PEU taxes low.  America's politicians, for the most part,serve one class.  They regularly tell the rest to sod off.  For seniors that's could be an early six feet under.