Carlyle to Pull $1.35 Billion Out of PPD

Arabian Business.com reported:

Hellman & Friedman LLC and Carlyle Group LP are seeking to take as much as $1.35 billion of cash out of drug research company Pharmaceutical Product Development LLC. 

The firm’s private equity owners are seeking approval from some of PPD’s creditors for the dividend plan, according to people familiar with the matter. To fund the payment, PPD is mulling the sale of a risky type of junk bond called PIK toggle that allows a borrower to delay interest payments, said the people, asking not to be identified discussing a private matter. 

The plan to take cash out of PPD - one of the largest providers of outsourced clinical research whose clients have included GlaxoSmithKline Plc and Pfizer  - comes at a particularly turbulent time for the health care sector.  

In this case, the debt would be issued by PPD’s holding company, ranking it below most of PPD’s existing borrowings and one step further removed from the company’s assets, the people familiar said. 

Affordable healthcare is the public's biggest worry and has been for decades.  Private equity underwriters are ubiquitous in healthcare and have added significant costs to the system. 

Carlyle Group and Hellman & Friedman acquired PPD in 2011, in a deal valued at $3.9 billion. The Abu Dhabi Investment Authority and Singapore’s sovereign wealth fund GIC joined as minority investors in 2017 as part of a recapitalisation that valued the company at more than $9 billion. 

Greed lives and elected officials cater to the PEU boys and their insatiable longing for more money, power and influence. What's another $1 billion among friends?

Update 4-30-19:  Pitchbook ran a piece on the proposed $1.4 billion dividend Carlyle plans to suck out of PPD.

(PEU Report noted Carlyle's original purchase of PPD and it's strange 2017 deal.  Other PEU PPD pieces can be found here.)

Apollo Crammed Down CEVA Executives It Required to Buy Stock in Affiliate

Apollo Global Management LLC purchased CEVA for $1.9 billion in November 2006.  The deal required CEVA executives to invest in their private company's stock.  Bloomberg reported:

Shortly after the CEVA purchase, Apollo acquired another logistics company, EGL Inc., for $2.1 billion, doubling the debt on the books of the merged company.

Apollo says that in 2006 and 2007 managers were given the opportunity to invest since it would give them “skin in the game.”

By 2007, CEVA’s bonds had started tumbling and Apollo began buying. From 2007 to 2011, Apollo purchased CEVA bonds for an average price of 50 cents on the dollar, according to an Apollo document.

In 2013 Apollo forced a recapitalization of CEVA as the major holder of the company's debt.  The move made CEVA's nonpublic stock worthless, including company stock executives had been forced to purchase.

CEVA rolled out a new share plan in 2013 that offered managers the possibility of recouping losses -- if they gave up the right to sue. 

CEVA went public in May 2018. In November, Apollo sold its remaining stake. Taking into account management and transaction fees, the buyout firm made a profit on the deal.

To sum up, Apollo bought two companies, CEVA and EGL, and loaded them with debt.  Shortly after completing the deal investors deemed the company a poor risk and the price of its bonds cratered.  Apollo took advantage and bought back the debt at a 50% discount.  They used that debt to zero out the companies nonpublic stock.  Apollo and other debt holders received the new equity for the firm.

In 2013, when Apollo’s debt-for-equity swap rendered CEVA executives’ shares worthless, current and former managers say they were shocked.

There is nothing shocking about the PEU boys and what they will do to fulfill their ceaseless greed.  Apollo had their sticky fingers in on every side of the deal. 

Carlyle's AsiaSat Pipe Full of Smoke

WSJ reported:

Orbiting 22,000 miles above Earth, a fleet of American-built satellites is serving the Chinese government in ways that challenge the U.S.

TechCrunch added:

The Chinese government has been using a private company jointly owned by a U.S. investment firm and its Chinese counterpart to expand its surveillance and telecommunications capabilities using American technology,

At the center of the Journal’s reporting is a company called Asia Satellite Telecommunications (AsiaSat). It’s a satellite operating company acquired back in 2015 by U.S. private equity firm The Carlyle Group and Chinese private equity firm CITIC Group. Both Carlyle and CITIC are known for their ties to government in their respective home nations.

Carlyle pretended to be hand's off regarding uses of AsiaSat's satellites.

In statements to The Wall Street Journal, Carlyle said that AsiaSat’s equipment supports internet and phone communications for Chinese telecommunications carriers.

“It is effectively a pipe,” Carlyle said in a statement to the Journal, “and AsiaSat, because of privacy issues, doesn’t monitor or regulate the content that flows through it.”

Carlyle has long read U.S government tea leaves and profited handsomely.  The politically connected private equity underwriter (PEU) went global some time ago.  It promotes Carlyle as creating opportunities in virtually every market around the world.

Before Carlyle laid any pipe it was well aware of the market for what could flow through it. 

Carlyle has two managing directors on AsiaSat's board of directors. 

I'm sure they are well aware of the market opportunities available to AsiaSat from a repressive Chinese government.  Carlyle demands it as well as grand returns.  The greed and leverage boys will obfuscate when their mendacity is revealed.  It's like blowing smoke from a pipe....

Healthcare Nonprofits Go PEU

Over 40,000 players attended the J.P. Morgan healthcare conference for 2019.  Becker's Hospital Review reported:

Over the last decade, there has been a massive level of consolidation with hundreds of hospitals and thousands of physician practices being acquired every year. While more mergers and acquisitions will still happen, this stunning and fundamental restructuring of healthcare delivery has taken place and there is no turning back. This is likely the single biggest shift relative to how healthcare is structured in this country that will take place during our lifetime, and it barely gets mentioned.  

Private equity underwriters (PEU), great acquirers, barely get mentioned as a cancer on our economy and workplace.  Becker's noted how nonprofit hospitals act like PEUs:

Spectrum Health has a $100 million venture fund. Providence St. Joseph's Health announced a second $150 million venture capital and growth equity fund. Mayo Clinic Ventures has returned over $700 million to their organization. Jefferson Health has a 120-person innovation team focused on digital innovation and the consumer experience, partnering with companies to build solutions.

My consumer experience has been that I pay more each year for less healthcare coverage.  I've paid out of pocket for the few health services I've consumed.  Friends work for large healthcare companies, nonprofit and for-profit, and many feel abandoned by executives misplaced priorities. 

Bad managers only know how to act with data and often do so without an understanding of variation.  Thus they made decisions that waste time, money and harm people.

... the lifeline for every health and healthcare hub will be actionable data. Applied analytics is a boring term that is actually gaining traction and starting to dislodge buzzwords like big data, machine learning and artificial intelligence relative to its importance to healthcare providers.

What happens when healthcare leaders are unable to tell the difference between correlation and causation?  How much harm will they cause?

Employees did not show up in the future of healthcare.  I predict healthcare will get much worse under these PEU management practices.  Nonprofit healthcare systems have downed the language/strategies of the greed and leverage boys.  This is most concerning.  A dark future awaits. 

Update 3-27-19:  Two large government health insurers, Centene and WellCare, announced a deal today.  An activist with ALS offered "... this is how they do business—deny, deny, delay, and then people give up."  So much for platforms and big data.

Carlyle Promotes Lobbyist Stacey Dion

GovConWire reported:

Stacey Dion, a managing director of The Carlyle Group (Nasdaq: CG), has been promoted to global head of government affairs at the Washington, D.C.-based private equity firm.

In her new role, she will work with the company’s senior executives and investment professionals in efforts to drive its legislative and regulatory efforts, Carlyle said Wednesday.

Before she joined the investment firm in 2016, she was vice president of corporate public policy at Boeing (NYSE: BA).

Dion was Policy Advisor and Counsel to Republican House Leader John Boehner from 2007-2008.
That's the period of the Financial Crisis that produced TARP and multiple government programs that enriched Carlyle (BankUnited, Boston Private Financial).

Dion served as Carlyle's lobbyist since 2016.  Carlyle spent $590,000 on lobbying in 2018 and $390,000 in 2017.  Last year Dion lobbied for Carlyle on the following issues:

• Issues related to corporate tax reform (H.R. 1 - Tax Cuts and Jobs Act); issues related to Opportunity Zones; TCJA (H.R. 1) Regulations

• Issues related to infrastructure and public-private partnerships (P3s)

• Issues related to EPA administered program; H.R.8 - Water Resources Development Act of 2018, provisions related to the use of Army Corps data by non-federal interests

• H.R. 4267 - Small Business Credit Availability Act, provisions related to leverage ratio

A similar era as the Fall 2008 Financial Crisis may be nearing.  At risk is corporate junk debt issued by the likes of Carlyle and its PEU brethren.  

I'm sure GHGA Dion has many willing listeners on Capital Hill.  America's Red and Blue political teams love PEU.  Add that Fed Chair Jerome Powell and Vice Chair Randall Quarles have Carlyle Group pedigrees.  Dion, Congress and the Fed to the PEU rescue?

PEU Greed Behind Weath Inequality

Private equity underwriters (PEU) are behind the rise of financialization, debt-fueled speculation and globalization that has enriched the rich since 1984.   Bain Capital was established that very year.  Pete Peterson and Stephen Schwarzman started Blackstone in 1985.  The Carlyle Group began in 1987.  Leon Black founded Apollo in 1990 while David Bonderman started TPG in 1992.

Fox News contributor Tucker Carlson spoke on America's mercenary leaders who don't bother to understand our problems.

Romney spent the bulk of his business career at a firm called Bain Capital. Bain Capital all but invented what is now a familiar business strategy: take over an existing company for a short period of time, cut costs by firing employees, run up the debt, extract the wealth, and move on, sometimes leaving retirees without their earned pensions. Romney became fantastically rich doing this. Meanwhile, a remarkable number of those companies are now bankrupt or extinct. This is the private equity model. Our ruling class sees nothing wrong with it. It’s how they run the country.

Both of America"s political teams cater to the PEU class.  Tucker's Red Team has long served the greed and leverage boys.  The Blue Team began its PEU lean-in under President Bill Clinton.  For decades both parties grovelled to the Billionaire boys club which recently met in Davos, Switzerland.

PEUs paid ex-U.S. Presidents hefty sums for an hour long talk at their annual accredited investor meeting.  Publicly traded PEU unit holders were not invited.

Carlyle Group co-founder Daniel D'Aniello wants every citizen to have a PEU investment.  He recently said:

“You’re talking about retail investors coming into the asset class, and that could eventually occur; everybody’s working on the formula for it."  

The article called it "democratizing private equity."  That statement is patently laughable.  It's made even more so by PEUs not giving unitholders a vote, as Carlyle did after it went public..

The PEU model infected our country.  It will take strong medicine to drive that toxin away.  Neither party is able to address toxic PEUs. 

Rubenstein Reminds Davos of Dubai Ports World

CNBC interviewed Carlyle Group cofounder David Rubenstein from the World Economic Forum meeting in Davos, Switzerland.

Reporter Becky Quick referred to Rubenstein as "deeply sourced in Washington, D.C."  Later she remarked  how comfortable Fed Chair Powell felt with Rubenstein, but failed to mention Powell once worked for The Carlyle Group.

Rubenstein talked about political risk in the United States.  He said:

"Remember the famous Dubai Ports case?" 

Salesman Rubenstein knows Carlyle sold affiliates Landmark Aviation and Standard Aero to Dubai Aerospace just months after the Dubai Ports World debacle.  Fifty airports vs. six ports, which is worthy of greater outcry?  Deeply connected Rubenstein's deal went through without a peep.  He reminded the Davos crowd and CNBC anchors of this accomplishment ever so indirectly

The annual meeting of the billionaire boys club is over.  The world still aims to serve them.  Slap your bootstraps on and enjoy being ridden.  It's the PEU way.