Carlyle Group to Invest in CP Pokphand

Shanghai Daily reported The Carlyle Group will acquire an 11.3-percent stake in CP Pokphand Co Ltd. Like Carlyle, the Thai company has big plans for China.

American Chronicle didn't detail any arrangements with private equity underwriters (PEU's). It's piece on Pokphand's growth stated:

The Chia Tai Group, the Chinese unit of the Thai agribusiness giant Charoen Pokphand, will increase its investment in China of more than US$1 billion (32.4 billion baht) over the next six years. New projects will consist mainly of shopping complexes, hotels, condominiums and office buildings.

"Funding will stem mainly from the group's Chinese revenue, joint-venture partners and bank loans."

CP was the first foreign investor in China. Over nearly four decades it has poured billions of dollars into such ventures as shopping malls, the poultry industry, animal feed and motorcycle plants.

PigProgress indicated CP would focus "on promoting its CP brand ready-to-eat foods in China."



Given Carlyle's stated objective of making massive profits in China, how will fat PEU profits impact Chinese waistlines?

MultiPlan a 3 Bagger for Carlyle Group & WCAS

Private equity underwriters (PEU's) will deal MultiPlan, America's largest preferred provider organization. The Carlyle Group and Welsh, Carson, Anderson & Stowe will sell MultiPlan for $3.1 billion to BC Partners and Silver Lake Partners.

The Carlyle Group purchased MultiPlan in 2006. The amount was not disclosed. Carlyle added Viant, owned by WCAS, and PHCS. Neither purchase price was revealed. How much did Carlyle make from MultiPlan via management fees and special distributions over the last four years? The public won't know as the deal is private.

However, Carlyle wanted one number shared. The WSJ stated the politically connected PEU will make more than three times its investment in MultiPlan. This is Carlyle's latest cash in, partly designed to beat changes to carried interest taxation. It's also good to let investors touch their money now & then.

Buying prices undisclosed, while selling proceeds are broadcast widely? It's new fund marketing time.

MultiPlan will pass on deal costs to the health insurance plans it serves. How much will interest expense go up? How will increased valuations work their way through depreciation schedules and goodwill amortization? Will BC Partners and Silver Lake expect a lower rate of return than Carlyle & company?

What will Carlyle do with their proceeds? Buy HealthScope, an Australian for-profit hospital chain, or Tenet Healthcare, a domestic for-profiteer? Stay tuned. PPACA is a boon to PEU's.

Update: Ferrer Freeman & Co. owns part of MultiPlan. This fact was omitted from Carlyle's press release.

Swings of James H. Hance, Jr.

It was a day of highs and lows for James H. Hance, Jr., Senior Advisor for The Carlyle Group. The former Director and Chairman of Carlyle Capital Corporation (CCC) Limited was sued in Delaware Chancery Court for more than $1 billion. CCC was Carlyle's highly leveraged mortgage backed security fund. It imploded in March 2008.

The high came when Hance was appointed to the Ford Motor board of directors. James already served on a number of boards. SEC filings show:


An interesting aside, Obama's Deficit Commission co-chair Erskine Bowles serves on the Morgan Stanley and Cousins Properties boards. Erskine, like Hance, is a private equity underwriter (PEU). Bowles is Senior Advisor for Carousel Capital.

PEU's successfully defended their preferred taxation on carried interest. How might Bowles watch Hance's back?

Red Thumbs Up: Wilbur Ross to Buy His Third Bank

Wilbur Ross will invest $50 million in Sun Bancorp for a 24.9 percent stake in the New Jersey bank. Ross owns part of BankUnited, which has a $4.9 billion subsidy from the FDIC, and First Michigan Bank, which has an $800 million loss sharing deal.

Through May 2010, the FDIC has entered into 161 loss sharing agreements, with $173.5 billion in assets under loss sharing.

Wilbur Ross is involved in two agreements with $5.7 billion in federal support. Did Sheila Bair and her staff know of Wilbur's background as owner of the Sago Mine, where 12 miners died? Dastardly deeds rarely come back to haunt the wealthy and politically connected, even those with blood on their hands.

Update 2-12-2011:  Wilbur Ross landed another $331 million loss sharing deal with the FDIC, which took over Peoples State Bank, based in Hamtramck, Mich., with $390.5 million in assets.  Ross' First Michigan Bank, based in Troy, Mich., is acquiring the assets and deposits of Peoples State Bank  In addition, the FDIC and First Michigan Bank agreed to share losses on $331 million of Peoples State Bank's loans and other assets.Ross' loss sharing deals with the FDIC are now over $6 billion. It's bank four for Wilbur, how many more? 

Carlyle Group's Latest Defense: Unprecedented Tumult

Carlyle Capital Corporation (CCC) went belly up seven months after its independent public offering. It was one canary in financial crisis coal mine. Bloomberg reported on the latest CCC investor lawsuit:

Carlyle Group, the world’s second- largest private-equity firm, was sued by liquidators of the buyout company’s defunct mortgage bond fund, saying executives lost $945 million in overly risky investments.

Liquidators for Carlyle Capital Corp. Ltd, a Guernsey, Channel Islands-based hedge fund that collapsed in March 2008, contend Carlyle directors turned a blind eye to questionable investments in residential mortgage-backed securities and failed to stop the loss of all the company’s capital, according to a lawsuit filed in Delaware.

“In the short space of eight months, the entirety of CCC’s capital was spectacularly lost under the reckless and grossly negligent direction, supervision, management and advice of the defendants,” the liquidators said in the suit, filed today in Delaware Chancery Court.

Carlyle promised an aggressive defense, a pattern for the private equity underwriter.

“We will vigorously contest all claims and are confident we will prevail,” Chris Ullman, a company spokesman, said.

The losses were a result of “unprecedented” tumult in the mortgage-backed securities market, Ullman added.

That "unprecedented tumult" expressed as margin calls on Carlyle's highly leveraged Guernsey fund.

Lenders seized Carlyle Capital’s assets after it failed to meet more than $400 million of margin calls on mortgage-backed collateral that had plunged in value.

Where would Carlyle be if CALPERS behaved similarly? The Carlyle Group made $680 million in capital calls to CALPERS during the financial crisis. Unlike Carlyle, CALPERS stood behind their investment.

Currently, Carlyle has other aggressive legal defenses. In a SemGroup investor lawsuit, Carlyle claimed puffery as its defense. In LifeCare's wrongful patient death lawsuits, Carlyle blames the feds, claiming patients became wards of the federal government when FEMA evacuation teams set up in New Orleans. LifeCare deaths came during another unprecedented disaster, Hurricane Katrina.

Carlyle works to delay justice, that is clearly precedented. How will Delaware judge Carlyle Capital Corp. Ltd. v. William Elias Conway Jr., CA5625, Delaware Chancery Court? Stay tuned.

Update: The lawsuit contends that Carlyle siphoned off $20 million in management fees while the fund only had $75 million to meet margin calls.

Executive Pay: A Matter of Perspective

Bloomberg highlighted the plight of underpaid Japanese executives.

Japan is the land of the bargain-basement CEO.

Recent disclosure laws revealed how few Japanese CEO's make more than $1.1 million. Contrast that with average U.S. CEO compensation of $3.5 million.

Will this information entice American branded companies to go head hunting in Japan? Doubtful.




The pattern has been in place for some time:

Average public company CEO compensation is 400 times that of the average employee.

By contrast, the ratio of CEO pay to that of the average employee has remained around 22 in Britain, 20 in Canada and 11 in Japan.

While production seeks low wage sectors of the global economy, management resides in protected turf.

CEO's populate each other's boards. Executive compensation formulas peg other American branded corporations as "competitors" for leadership talent. Boards vote on pay packages, for themselves and executives. It's not unusual for a director to make $250,000 to $333,000 a year in compensation. Those on multiple boards make out like bandits.

It seems Bloomberg has a blind spot.

Carlyle Group: A Great Decade

How much sweeter will the next one be? Congress gave private equity underwriters (PEU's) a free pass under financial reform. For the fourth time, politicians kept PEU's preferred taxation on carried interest, which made this trend line more enriching.

The rabbit hole deepens as Carlyle & company ply the globe for riches, ironically driven by public pension funds needing greater returns to meet promised commitments. Carlyle has a history of taking public money and sending jobs elsewhere. How will this interaction keep American employment in the doldrums?

Expect Carlyle to have another great decade, as Uncle Sam sees PEU's as the answer to America's ills in banking, infrastructure, healthcare, and education. May yours be as sweet.