Carlyle Owned Power Plant Declares Chapter 11

Bloomberg reported:

Lincoln Power LLC, the owner of two Illinois power plants, filed for bankruptcy after its financial strain was exacerbated by nearly $39 million in penalties levied by the biggest US electric-grid operator.

The Chapter 11 filing allows Lincoln, a unit of Carlyle Group-backed Cogentrix Energy Power Management LLC, to keep operating while working on a plan to repay creditors.

The storm penalties and the cash withheld weighed on the company’s already-strained finances. 

The company owes lenders more than $150 million across a term loan and revolving credit facility, court papers show. It also has about $8 million in letters of credit outstanding.

It will be interesting to see if creditors take over Lincoln Power LLC.  Carlyle raised $1.5 billion for North American power assets in April 2016. 

Carlyle branched out into renewable energy assets through Aspen Power and Amp Energy.

Cogentrix's website did not share the Bloomberg story under its news page.  

Stay tuned for what be the beginning of a number of private equity underwriter (PEU) bankruptcies.  PEU practices place many affiliates in a precarious financial position.  Something changes and boom, bankruptcy.

Carlyle in Hunt for Medtronic Divisions

The Carlyle Group remains a bidder for Medtronic's patient monitoring and respiratory interventions businesses.  Reuters reported:

Carlyle is bidding through its newly formed healthcare investment platform Atmas Health

Other bidders include ICU Medical, GE Healthcare, Clayton, Dubilier and Rice (a fellow private equity underwriter-PEU).

The patient monitoring technology portfolio includes Nellcor pulse oximetry and BIS brain monitoring, while the respiratory interventions business comprises ventilators and breathing systems.

Carlyle lists its healthcare portfolio on its website.

The portfolio companies listed below have been acquired, invested, or exited within 5 years of the current quarter.

The list does not include ManorCare, the giant nursing home company Carlyle drove into bankruptcy.

ManorCare declared bankruptcy in March 2018, i.e. five years ago.  Yet, Carlyle does not show ManorCare on its healthcare portfolio.  The greed and leverage boys hide their losers.

WaPo did an expose on Carlyle's ownership of ManorCare in November 2018.  Former Medicare Chief and ManorCare board member Gail Wilensky profited mightily from Carlyle's purchase.  She served on a "quality" committee post buyout.   It's not clear how her $3.4 million in share proceeds impacted Wilensky's service on the quality committee.  It certainly raised questions as to her level of independence.

That committee had nothing to say on Carlyle's financial schemes or operational squeezing that choked the life out of ManorCare. 

If Carlyle couldn't take care of society's most vulnerable, why should they be allowed to buy critical healthcare companies for the sole purpose of flipping them for grand returns?   Because elected officials serve the policy making billionaire class, not the average citizen.

Politicians Red and Blue love PEU and increasing;y, more are one.

Blackstone Founder to Back CMBS Bonds?

The Real Deal reported:

Two months after a $271 million Blackstone loan secured by 11 Manhattan multifamily buildings went to special servicing, Moody’s downgraded the CMBS debt, citing cash flow that wouldn’t cover the debt service.

Blackstone co-founder Stephen Schwarzman need only use a small portion of his $1.27 billion in 2022 pay to make CMBS bondholders whole.  I'm sure he'll get right on that... 

Of course he won't.  It's the PEU way.

Update 3-31-23:  The man who gates BREIT withdrawals and marks assets to fantasy standards said Silicon Valley Bank failed due to people with IPhones.

Update 4-3-23:  Schwarman's gate remains on BREIT:

"individuals asked Blackstone to redeem $4.5 billion from BREIT, but the PE firm only allowed $666 million to be withdrawn."

PEU Tax Freedom Matters

The George W. Bush Presidential Center interviewed Carlyle co-founder David Rubenstein.  Before his term as President George W. Bush served on the board of directors of Carlyle affiliate CaterAir.

As a companion program to the Bush Center’s 2023 Freedom Matters special exhibit, the Bush Center hosted Carlyle Group Co-Founder and Co-Chairman David Rubenstein and “America’s Government Teacher” Sharon McMahon.

Policy making billionaire David Rubenstein non-lobbied Congress to keep private equity's preferred "carried interest" taxation.

Barron's reported in 2021:

A key tax break for private-equity and hedge-fund managers that has been targeted for elimination by every president since George W. Bush survived the latest attempt to kill it.

Politicians Red and Blue love PEU (private equity underwriters) and increasingly, more are one.

ESG Loving Youngkin Now Anti-ESG

Forbes reported:

Florida Governor Ron DeSantis’ recently announced anti-ESG alliance has grown with the addition of Virginia Governor Glenn Youngkin. 

The story missed two things with this characterization of the Virginia Governor:

Governor Youngkin is the former CEO of the Carlyle Group....If Youngkin can convince the General Assembly that ESG is harmful to state investments

Youngkin was co-CEO of Carlyle and very pro-ESG.  In a "2020 Impact Review" letter Youngkin and Kewsong Lee stated:

This work remains grounded in our long history of ESG integration, as we believe that strong ESG competencies are hallmarks of management excellence. This commitment is critical for investment performance...

...we have increased the transparency and detail of our own corporate ESG disclosures through our first Global Reporting Initiative (GRI) and Sustainability Accounting Standards Board (SASB) disclosures...

Another Youngkin flip-flop.   When it padded his pocketbook Youngkin loved ESG.  

It's even signed...

 Politicians Red and Blue love PEU and increasingly, more are one.  Watch out for Slippery Glenn.

Carlyle Capital Raise?

The Carlyle Group filed with the SEC for a possible capital raise.  It states:

We and any selling security holders identified in this prospectus or in supplements to this prospectus may from time to time offer and sell, in one or more series or classes, separately or together, the following securities:

• common stock;

 • preferred stock; 

• depositary shares;

• debt securities; 

• warrants; 

• subscription rights; 

• purchase contracts; and 

• units. 

It's unclear at this time if funds will go to Carlyle or to selling security holders:

Unless otherwise indicated in the prospectus supplement, we intend to use the net proceeds we receive from the offering of securities under this prospectus for general corporate purposes. Further details relating to the use of net proceeds we receive from the offering of securities under this prospectus will be set forth in any prospectus supplement, where applicable. 

We will not receive any of the proceeds from the sale of securities to which this prospectus relates that are offered by any selling security holders. 

Interesting that mismarked asset holders, like banks and private equity underwriters (PEU), are seeking additional capital.

Banking Crisis of the Rich to Make Rich Richer?

 

Billionaires caused the banking crisis according to one CEO.  The crisis required government institutions to funnel resources to shore up underwater banks.  

Assets = Liabilities + Owner equity

Many bank assets are not worth the amount initially paid for them due to Fed increases in interest rates.  Unwinding failed banks means harming the right side of the above equation, bondholders and shareholders.

Silicon Valley Bank catered to wealthy venture capitalists and private equity CFOs.  That subsection of billionaires got nervous and yanked their money in a digital bank run.  Oddly, a different subsection stands to gain by buying discounted bank assets, private equity underwriters (PEU).

The Carlyle Group led a PEU consortium that took on BankUnited after the 2008 financial crisis.  Uncle Sam subsidized that deal to tune of nearly $6 billion.  Carlyle et al more than doubled their money.

So a banking crisis of the rich could make some of the rich richer.  It's a PEU world.

Update 3-28-23:  More proof as to who got saved:

"the 10 largest deposit accounts at Silicon Valley Bank held a combined $13.3 billion"

The bailout really did protect billionaires from taking a modest haircut," offered Matt Stoller.

Update 3-29-23:  Former FDIC Chair Sheila Bair raised a number of questions about who benefited from the bailout.