Carlyle Group's PEUpont Now Axalta

WSJ reported:

Nascar driver Jeff Gordon is having a difficult year. The four-time winner of Nascar’s premier series championship is stuck in 11th place overall this season and has struggled lately for wins that used to come more frequently.

He is also getting a sort of fresh start with newly re-named sponsor Axalta Coating Systems, formerly the DuPont Performance Coatings division.

After the Carlyle Group, a private equity underwriter (PEU), purchased Dupont I jokingly referred to the company as PEUpont.  Exalted PEU Carlyle didn't go with my suggestion.  It went with Axalta. 

Gordon will debut his car's new look today at Pocono, just days after Carlyle extended its NASCAR deal with Hendrick Motorsports through 2016.  Note the use of PEU lingo in the announcement:

“We have built up so much equity in the No. 24 team over the years and Jeff Gordon is the best spokesperson any company could ask for,” said Nigel Budden, Axalta Coating Systems North America Business Director 

Watch out Hendrick for when they want to monetize their equity.  It's the PEU way.  Carlyle will cash in.  .

Carlyle PEU Affiliate Rates Carlyle a Buy

Zolmax News reported:

Sandler O’Neill initiated coverage on shares of Carlyle Group LP (NYSE: CG). Sandler O’Neill issued a buy rating on the stock.

Disclosure:  Sandler O'Neill is an affiliate of The Carlyle Group. 

Law360 Says LifeCare Being Sold to Carlyle?

The Carlyle Group's bizarre trail with LifeCare Hospitals continued as the parties seek to bring LifeCare out of bankruptcy.  Law360's last two articles raised questions as to who was selling LifeCare to whom.

May 28, 2013

A Delaware bankruptcy judge signed off on a proposed settlement Tuesday between LifeCare Holdings Inc.'s creditors committee and its private equity purchaser, removing the final obstacle to hospital group's $320 million sale to The Carlyle Group LP. 

June 5, 2013

LifeCare Holdings Inc. urged a Delaware bankruptcy judge Tuesday to ignore the federal government's attempt to block proceeds from the hospital chain's $320 million sale to Carlyle Group LP from being paid, arguing the U.S. is wrong about who actually owns the money.

The Carlyle Group lost LifeCare to bankruptcy, as a result of loading the company with debt, then choosing to default on their loans.   The "sale" is a transfer of assets to debt holders, with no cash changing hands.  The $320 million valuation is part fiction, likely needed to keep LifeCare's Medicare capital cost reimbursement from imploding. 

While Carlyle was happy to take Uncle Sam's money for services, it wasn't much for paying taxes.  LifeCare owes the federal government $24 million, an issue in LifeCare's bankruptcy settlement. 

What if Law360 is right and The Carlyle Group asset holder is selling to The Carlyle Group debt holder in a Byzantine deal?  If so, we're down the PEU rabbit hole.  My guess is it's a reporting error. 

To confirm my suspicion I sought the original bankruptcy documents from the Delaware Bankruptcy Court.  Public access included a charge of $10 per page to view their documents.  While PEUReport remains free of advertising or charges, it's becoming more difficult to access information hidden behind pay walls.  That said, I'll do my best to find answers to my questions.   

CalPERS to Sell Carlyle Group Stake

Reuters reported:

The sale of Calpers's stake in Carlyle - valued at $373.3 million as of the end of stock market trading on Monday - comes 13 months after Carlyle's initial public offering. Its shares have risen 34 percent since then.

Calpers, which is the biggest U.S. public pension fund and is also an investor in many of Carlyle's funds, acquired a 5.5 percent stake in Carlyle in 2001 for $175 million.

That's a $198.3 million profit from holding Carlyle for twelve and a half years, roughly a 9% annual return on equity.  This is well below Carlyle's historical 30% annual investor return, frequently hawked by co-founder David Rubenstein.

In February 2001 The Carlyle Group managed $5.8 billion in assets.  That's now $176.3 billion.  Assets under management grew nearly 3,000%, while CalPERs equity investment return came in at single digits.

Consider this statement when CalPERS bought 5.5% of Carlyle, which later fell to 4.1% due to share dilution:

The $170bn pension fund took a stake in US private equity powerhouse The Carlyle Group in a deal valuing the private equity firm at $3.5bn.

Carlyle is now the $170 billion PEU fund.  Bloomberg reported on Carlyle's valuation when it went public

The IPO values Carlyle at about $6.7 billion.

How will current unit holders fare?.  It's not clear, but we know private equity mavens like to exit high.   CalPERS Carlyle investment is hardly the expected home run for an early investor in an explosive market segment. 

As for why Calpers may be leaving the Carlyle fold, consider the pension's recommendations for Nabors Industries board.  Carlyle's eunuch unit holders have similar rights as Nabors shareholders.  Did CalPERS grow a set?

Update 6-6-13:  The 11.06 million common unit public offering has been priced at $27.00 per unit.  That means CalPERS grosses $300 million, not even a double for holding Carlyle for a Baker's dozen. That's slow rising dough...

PEUtraeus to Attend Bilderberg

General David Petraeus will attend The Bilderberg Group meeting in Watford, England this week.  KKR, a private equity underwriter (PEU), couldn't have scripted a better kick off for Petraeus, their new Global Institute head.  PEUtraeus will be amongst his brethren.  The Telegraph revealed the expected 2013 Bilderbergers:

Other PEU's in attendance include James A. Johnson (Perseus), Robert Rubin (Centerview), Roger Altman (Evercore), Mustafa Koc (Monument Capital and JV partner with The Carlyle Group), Henry Kravis (KKR), and the Lazard trio Kenneth Jacobs, Vernon Jordan and Peter Mandelson. 

Mandelson helped negotiate the freedom of the Lockerbie bomber before the West turned on the Ghadafi's, who they'd courted since 2006.  The Carlyle Group sought to entice the elder Ghadafi and his son Saif. 

Other global tamperers attending Bilderberg 2013 include Henry Kissinger, Richard Perle, James Wolfensohn and Robert Zoellick. 

I expect there to be a few super secret drop ins.  It's hard to run a global tampering meeting without a Clinton or Bush. 

The Carlyle Group, Gambling & Delaware Courts

The Carlyle Group successfully defeated Kuwait's National Industries Group over the proper jurisdiction for a lawsuit on NIG's failed $25 million investment in Carlyle Capital Corporation (CCC).  The judgement referred to a prior suit by Michael Huffington over a similar loss in CCC.  Page 30 of the Court's opinion states:

The recent decision of our Superior Court in Huffington v. T.C. Group is instructive here.  As described above, the plaintiff in that dispute, seeking to recover his investment in the collapsed Carlyle Capital Corporation, had filed suit in Massachusetts asserting claims under a Massachusetts blue sky law, despite the existence of a forum selection clause in favor of litigation in Delaware. After the U.S.Court of Appeals for the First Circuit had dismissed his suit, he brought his claims to the Superior Court–but at a point when they had become untimely. The Superior Court refused to waive the operation of the Delaware borrowing statute, which would allow the plaintiff to make his claims, because the plaintiff “tried to avoid the clear and unambiguous forum selection clause by filing in [the foreign forum].  He clearly sought to avoid litigating his claims here.  Sometimes when you gamble, you lose.”

Here, National deliberately chose not to sue in the contractually proper forum, and failed to take repeated chances to raise its claims in a timely manner in Delaware despite knowing that Carlyle intended to enforce the forum selection clause. National gambled and lost. There is nothing unreasonable about enforcing the forum selection clause against National, because any harm it has suffered is entirely self-inflicted.

Oddly, while searching the Delaware Court for decisions I noted a lawsuit by investors of China Agritech, a fertilizer company and Carlyle Group affiliate.  The Delaware lawsuit opens with the plaintiff's assertions:

China Agritech, Inc. ("China Agritech" or the "Company") purportedly operates a fertilizer manufacturing business in China. According to lead plaintiff Albert Rish, China Agritech is a fraud that serves only to enrich its co-founders, defendants Yu Chang and Xiao Rong Teng. Rish has sued derivatively to recover damages resulting from (i) the Company‘s purchase of stock from a corporation owned by Chang and Teng, (ii) the suspected misuse of $23 million raised by the Company in a secondary offering, (iii) the mismanagement that occurred during a remarkable twenty-four month period that witnessed the terminations of two outside auditing firms and the resignations of six outside directors and two senior officers, and (iv) the Company‘s failure to make any federal securities filings since November 2010 and concomitant delisting by NASDAQ. Before filing suit, Rish used Section 220 of the General Corporation Law, 8 Del. C. § 220, to obtain books and records, and his complaint relies both on materials that the Company produced and on the glaring absence from the production of books and records that the Company should have readily possessed and provided.

The Delaware Court's Kuwait opinion repeatedly cited how Carlyle and National Industries are large, sophisticated international organizations.  While The Carlyle Group isn't mentioned in the China Agritech shareholder suit, here's what their initial press release said:

China Agritech Co., Ltd specializes in R&D, production and marketing, as well as technical consulting services for high-tech green agricultural products in China. China Agritech is focused on improving productivity and the quality of life for farmers in China. They provide farmers with innovative, value-added and cost-effective products and services to help farmers achieve sustained growth in their income. The company has established five production bases in Harbin, Hebei, Anhui, Chongqing and Xinjiang. With tens of thousands of agricultural marketing professionals, their sales network spanning the whole country is continuously growing.

“We are fully leveraging the global resources of The Carlyle Group to back our partner companies with both capital and management expertise. Most importantly, we will continue to seek opportunities to help Chinese enterprises with unique business models and strong growth strategies to expand in an increasingly globalized economy."

Carlyle invested in China Agritech in October 2009 and had the right to appoint one board member.  Carlyle appointed Zheng "Anne" Wang.  China Agritech filed to issue 100 million additional shares in February 2010.  That dropoed to 3.1 million shares at nearly $30 each by April 2010.  Did China Agritech's shareholders count on The Carlyle Group's promise of added managerial expertise?

Here's how Carlyle's full leverage turned out (from the SEC's delisting document October 2012):

China Agritech last filed a periodic report on November 10, 2010, when it filed a quarterly report on Form 10-Q for the quarter ended September 30, 2010. Since that time, China Agritech has failed to file annual reports on Form 10-K for the fiscal years ended December 31, 2010 and December 31, 2011, and has failed to file quarterly reports on Form 10-Q for the quarters ended March 31, 2011; June 30, 2011; September 30,2011; March 31, 2012; and June 30, 2012. 

Recall these are large, sophisticated international organizations who gamble and lose, with any harm self-inflicted.   At least that's one opinion from a Delaware Court.

Disgraced Leader to Head Yet Another Global Institute

Monetary and sexual sins are easily forgiven in the Government- Corporate Monstrosity, President/General Dwight D. Eisenhower's Military-Industrial Complex on trillions in federal steroids.  Junk bond trader Michael Milken was the first to form his Milken Institute after his release from jail.

The Milken Institute seeks to enable the seamless flow of capital and commerce around the world by connecting capital-rich multinational firms and investors with countries willing to implement best practices to create, accelerate and sustain long-term economic growth and development through the Access to Global Capital Initiative. 

President Bill Clinton went from "not having sex" with that intern to forming his Clinton Global Initiative.

CGI members utilize their existing expertise and the power of collaboration to engage the market, using it as a tool to generate positive social impact across a diverse spectrum of constituents. These constituents range from individuals at the base of the pyramid, to small-to-medium enterprises (SMEs), to investors and multi-national corporations pursuing double or triple bottom line goals. CGI members focus on issues such as financial inclusion at the base of the pyramid, SME growth and innovation, redefining the future of capitalism, and emerging trends in impact investing. 

Now private equity underwriter (PEU) KKR will form its Global Institute with another philanderer, General David Petraeus.

KKR said the global institute will help it focus issues that can affect its global investments. Those include public policy, regulatory and technology trends. The institute also will build on KKR's push to help its portfolio companies expand globally.

There really is no shame in the GCM, just a brief time to lay low, followed by a time to monetize one's connections.  Both political parties, Reds and Blues, play the game.