Facebook's PEU

Bloomberg reported:

Facebook gets multibillion-dollar tax deduction for the cost of executive stock options and share awards.Even though Facebook (FB) reported $1.1 billion in pre-tax profits from U.S. operations in 2012, it will probably pay zero federal and state taxes—and even receive a federal tax refund of about $429 million.

Billionaires get huge stock awards and the company gets a federal tax refund?  That's PEU worthy. 

Next up, dividend recap?

Carlyle's Broadleaf IPO

Reuters reported:

CARLYLE GROUP is launching an initial public offering for automotive industry systems supplier Broadleaf of as much as 23.3 billion yen ($248.37 million), IFR reported. Carlyle-related funds will offload 16.48 million shares to raise 17.8 billion yen.

Carlyle bought Broadleaf in 2009 for 19.5 billion yen.  It looks like Carlyle and its related funds will take in 39.78 billion yen.  That's nearly a double.

Governor Perry's Gust Account

Gust is an online service that connects business start-ups with investor capital.  One investor is The Office of the Governor-State of Texas.  Investors have to accredited, i.e. have a net worth over $1 million or have made over $200,000 per year the last two years.   The Gust description for an accredited investor is below:

An "Accredited Investor" is defined in Rule 501(a) of Regulation D under Rule 144 of the Securities Act. This definition includes certain institutional investors and (a) any natural person whose individual net worth, or joint net worth with that person's spouse, exceeds $1,000,000 at the time of purchase; or (b) any natural person who had an individual income in excess of $200,000 in each of the two most recent years or joint income with that person's spouse in excess of $300,000 in each of those years and who reasonably expects reaching the same income level or greater in the current year.

Therefore the average Texas citizen can't see or review the investment proposal.

Recall that Governor Perry gave The Carlyle Group's Vought Aircraft Industries $35 million to create 3,000 jobs in six years.  Over that period Vought cut 35 positions.  That's $1 million in taxpayer money for each job lost.

Gust is but another layer in Governor Perry's unaccountable use of taxpayer money for corporate handouts. 

The Office of the Governor-State of Texas is a part of our comprehensive directory and accepts Gust applications via email only. Hereʼs how to apply:

• Complete your Gust site.

• Weʼll generate an invitation to view your site and email it to this group.

• The email will be sent from your email address (not Gust).

• You will be able to see an entry for this group in your dashboard when you log in.

San Angelo's MedHab, a fledgling medical device company, is currently raising funds on Gust. 

Has MedHab's Johnny Ross applied for funding from the Office of the Governor-State of Texas?  He finagled a robust incentive package from the City of San Angelo ($3.6 million).  How much might he hit Governor Perry up for? 

The Office of the Governor-State of Texas - Ideal Startup Investment

The Office of the Governor-State of Texas promotes and strengthens the economy of the state. The Economic Development Bank has assistance for financing small and larger businesses. The program provides incentives for expanding business and relocating other businesses to the region. There are low interest loans and debt financing available for economic development purposes. The program also helps communities build specific programs to help increase economic prosperity and the growth of business.

The Office of the Governor-State of Texas Invests In These Industries

• Biotechnology	• Lifestyle
• Business Products and Services	• Marketing / Advertising
• Clean Technology	• Media and Entertainment
• Computers and Peripherals	• Medical Devices and Equipment
• Consumer Products and Services	• Mobile
• Education	• Nanotechnology
• Electronics / Instrumentation	• Networking and Equipment
• Financial Services	• Other
• Food / Drink	• Retailing / Distribution
• Gaming	• Semiconductors
• Healthcare Services	• Software
• Industrial/Energy	• Sports
• Internet / Web Services	• Telecommunications
• IT Services	• Travel

The Office of the Governor-State of Texas Invests In Companies That Have Reached The Following Milestones

Not Available

The Office of the Governor-State of Texas Invests In Companies With These Funding Needs

Not Available

The Office of the Governor-State of Texas Expects Their Investments To Generate

Not Available

The Office of the Governor-State of Texas Investment Portfolio

Not Available

Will Rick Perry blow a gust of financial support under MedHab?  I'm sure Johnny Ross would find that MedHab-ulous.

Megadeals Return for How Long?

Street.com cited one cause of the return of the megadeal:

As a result of access to cheap financing and corporate balance sheets flush with cash, "there is an appetite in the marketplace for big deals." 

The author forgot private equity underwriters need to mobilize cash raised prior to the financial crisis.  South China Morning Post reported:

PEU firms are under growing pressure to invest the capital they already have. About 28 per cent of the money raised from 2006 to 2008 has been paid back to investors, according to Cambridge Associates, a Boston-based research and consulting firm.

More than US$100 billion, or 14 per cent, of the US$702 billion raised, is yet-to-be invested dry powder that firms must use or lose by the end of this year. That is a record for uninvested funds set to expire in a single year.

Unless PEU "policy making" billionaires can impose another crisis, deal prices should go up.  How might David Rubenstein defend his firm after the next round of "covenant lite" excesses? 

Many PEU deals done at the height of the buying frenzy need refinancing.  If banks won't refinance, PEU's will have to do it themselves.

Carlyle's Latest Government Crossover

America's Government-Corporate Monstrosity, Eisenhower's Military-Industrial Complex on trillions in federal steroids, noted the shifting of one player.  A press release stated:

The Carlyle Group (NASDAQ:CG), today announced that Barrett Karr will join the firm as a Principal in the Global External Affairs Group where she will lead the firm’s U.S. government affairs. In this position Ms. Karr will provide insights, analysis and strategy to the firm, its funds and portfolio companies. Ms. Karr comes to Carlyle from the U.S. House Committee on Education and the Workforce, where she serves as Majority Staff Director. She begins her duties in March and will be based in Washington,

Prior to becoming Staff Director in 2009, Ms. Karr was Deputy Assistant for Legislative Affairs to President George W. Bush. From 1995-2005, Ms. Karr served in the Office of Congresswoman Kay Granger, the latter four years as Chief of Staff.

Is that eighteen years of "public service" or nearly two decades of doing billionaires' bidding.  Likely the latter.  Karr is the latest in a long line of Carlyle Group-government crossovers.  This is how oligarchs do hegemony.  It's a bipartisan thing.  Red and Blue love PEU (private equity underwriters).

Carlyle Group Flashback to 2007

Carlyle Group Chief Operating Officer Glenn Youngkin took PEHub down memory lane:

Carlyle also saw the decline in the financial markets coming in 2007, Youngkin says. The global buyout shop took some steps to shore up the firm, including having the partners inject capital, and its portfolio companies.

Carlyle Group co-founder David Rubenstein spoke to BigThink in September 2007.  He weighed in on carried interest taxation.  Rubenstein visited Capital Hill regularly with his implied threats of moving capital offshore and hurting public pension fund returns.  

Oddly, Carlyle hit CalPERS up for $652 million to save its backside in Fall 2008.  That's a staggering sum.  Did it save the firm?  Youngkin didn't say.

Six years after Rubenstein lobbied to save private equity's preferred taxation, the carried interest loophole remains. 

As for Carlyle's portfolio companies, many went bankrupt in the crisis and its aftermath.  Carlyle Capital Corporation was the canary in the coal mine, perishing under a mountain of debt in Spring 2008.  Few of these stories have been told by the media, much less popular speaker Rubenstein.

Carlyle affiliates LifeCare Hospitals (Hurricane Katrina deaths), Synagro Technologies (Detroit sludge bribes), SemGroup (Bad energy bets), Vought Aircraft Industries (Fleecing Texas taxpayers)  and Landmark Aviation (Rendition flyer) all have dark chapters under Carlyle ownership.  Rubenstein loves speeches, but not on these topics. There's face to save.

World Gone Flippy Flopy

In today's nonsensical world private equity underwriters (PEU's) go public, doing so after decades of touting their model of levered, nonpublic capital.  The Carlyle Group did just that last year, going public on NASDAQ.  Fox Business News reported NASDAQ recently held talks with Carlyle about going private.

Think of the benefits for Carlyle, with thousands of affiliates.  It could have its own IPO shop.  What fee generating potential!  Pair a Duff & Phelps consultation with a new NASDAQ listing and Carlyle makes much more than annual affiliate management fees.  Sandler O'Neill could also generate fees for parent Carlyle in an IPO.

Public, private, it matters not amongst the billionaire crowd.  "Sales lines" differ from greed strategy.

Update  2-12-13:  NYPo suggests negotiations are ongoing between Carlyle and NASDAQ.  Gotta love this inspiring quote from a Carlyle insider.

Carlyle adviser and former Securities and Exchange Commission Chairman Arthur Levitt, who said he isn’t privy to any talks, said he looks back fondly on the days when the exchanges weren’t run for profit. “It is an open question as to whether changing self-regulatory bodies to profit-making ones necessarily offers investors the same protection,” he said.

Yes, it's an open question.