Carlyle Commits £660m to UK's North Sea

The HeraldScotland reported:

Big tax break signaled for oil industry as taskforce established to help save jobs. 

The beleaguered oil and gas industry is set to receive a significant boost today with a £660m investment in the North Sea sector from the Carlyle Group, a US-based global asset management company. 

The announcement is being made to coincide with David Cameron's last visit to Washington before the General Election and is the largest deal among a number to be announced, totaling more than £1.1bn, which will create 1700 new jobs across the UK. It comes as Alistair Carmichael, the Scottish Secretary, signaled the industry would get a major tax break in the Budget. 

This is pure Carlyle which loves to buy stressed assets at a deep discount, garner major tax breaks and do deals with crony politicians, like David Cameron and Barack Obama.  In reference to the major tax breaks Carmichael stated:

"These are extraordinary times. Government will have to come forward with measures that are suitable for the times."

These are PEU times and the deals government gives them are truly extraordinary.  Ask Sheila Bair what the FDIC gave Carlyle et al to save BankUnited.  

Carlyle Ship Runs Aground

MarineLink.com reported:

Seaspan Corporation reports the MOL Express, a 4,600 TEU container vessel went aground in Tateyama Harbour, Japan on January 11, 2015.


There were no reported crew injuries and all preliminary reports indicate the hull is in a stable condition, and no environmental damage has occurred. Seaspan and MOL, with the assistance of salvage experts, are working on refloating the vessel and restoring it to its original condition. All parties involved are working closely with the appropriate authorities.

The vessel is currently on charter to MOL, is managed by Seaspan Corporation, and is owned by Greater China Intermodal Investments LLC, a joint-venture between the Seaspan Corporation, the Carlyle Group, and affiliates of the Washington family and Tiger Group Investments.

The ship's track can be seen below:

Potential Candidate Jeb: Calling for Dough

Bloomberg reported:

Jeb Bush's allies are setting a fundraising goal of $100 million in the first three months of this year—including a whopping $25 million haul in Florida—in an effort to winnow the potential Republican presidential primary field with an audacious display of financial strength.

The targets were confirmed by multiple Republican sources involved in finance meetings with Bush's team. They requested anonymity to discuss internal deliberations. One said the point is to persuade some establishment candidates to stay on the sidelines in the 2016 race.

The attempt to intimidate the wide-open field with a shock-and-awe fundraising machine echoes the strategy Bush's brother, former President George W. Bush, used to win the White House in 2000.

Jeb's team approached several private equity underwriters (PEU's) for donations:

Bush visited with financial backers from KKR and Bridgewater Associates, a pair of New York-based investment firms, and held a fundraiser Wednesday in Greenwich, Conn. 

Republican Ken Mehlman works for Henry Kravis' KKR, where his bio states:

Mr. Mehlman spent a dozen years in national politics and government service, including as 62nd Chairman of the Republican National Committee and Campaign Manager of President Bush's 2004 re-election campaign as well as in high level positions in Congress and the White House.

Jeb resigned from his board positions when he announced he would explore running for the Presidency.  Bush served on the boards of Tenet Healthcare, Rayonier Inc., Empower Software Solutions and CorMatrix Cardiovascular Inc.  The article did not mention Bush's board positions with CNL Bankshares or Angelica Corporation.  Are they in the past like his board slot with Swisher Corporation?

The timing of his resignation is interesting.  Will Bush's board compensation be reported later this year in corporate proxy statements?

It remains to be seen if Jeb's 2014 board haul will become public information.  If not, that leaves 2013 as the last year such information would be available.  

While the orchestration has begun Jeb hasn't decided what to do with his other ventures:

“Bush was reviewing other businesses in which he is principal partner or owner,” the Post reported, citing an aide. They include consulting firm Jeb Bush & Associates and business advisory group Britton Hill Partnership.

Jeb invited comparisons to the party's 2012 nominee, former Massachusetts Governor Mitt Romney, by expanding his private equity portfolio this year, including a new fund in November, BH Global Aviation, that raised $61 million in September, mostly from foreign investors.

BH is short for Britton Hill, Jeb's PEU.  It runs in the family as son George P. founded both Pennybacker Capital and St. Augustine Capital Partners, LLC.

Britton Hill's first investments have been tied to the exploitation of shale oil and gas in the U.S., a booming area for private equity."  Falling oil prices have hurt shale oil and gas exploration.  How might it impact Britton Hill's investments?

Brother Neil Bush was appointed to the board of Escalera Resources, a natural gas and crude oil exploration company.  Their press release stated:

Escalera Resources Co. is pleased to announce the appointment of Mr. Neil Bush to the Company's Board of Directors. 

Mr. Neil Bush is the son of President and Mrs. George H.W. Bush.  Mr. Bush has been involved in both the energy industry and international business development for three decades. He began his career in 1980 with Amoco Production Company (now BP) in Denver, Colorado. Later in the 1980's he formed two independent E&P companies that explored for oil in various locations, both domestically (Wyoming, Colorado, California, and Michigan) and internationally (Argentina).

For the last 15 years, Mr. Bush has been engaged in a variety of international development activities with a focus on China and the Middle East.  He first visited China in 1976, following his father's service as U.S. Chief Liaison Officer in Beijing.  Currently, Mr. Bush has varied business interests in Hong Kong, Singapore and China, including ties to companies active in oil and gas exploration and exploitation, real estate development and property management.

How long before Britton Hill, De Soto Partners or Escalera run short of cash in a declining oil price environment?  Surely, Jeb's advisors are running the numbers.  In addition to political fundraising Jeb could be making capital calls.

Update 1-19-15:  WaPo reported on Jeb's term on the board of InnoVida, a period when company executives committed fraud.

Update 8-31-15:  Bloomberg reported Jeb facilitated a $236 million deal for Carnival Cruise Lines to house displaced people after Hurricane Katrina.  Bush also steered Florida public retirement investments to Lehman Brothers where he later landed a consultant job paying $1.3 million per year.

Winning Only PEU Option

Jesse's Crossroads Cafe offered a commentary on Generation Me:

The lack of  empathy amongst America's privileged, and thereby largely the leadership, class makes for a disturbing tolerance for pain and misery and injustice in others.

It's easy to lie, cheat and steal when the world is beneath oneself, i.e. worthy of disgust.  Science Daily reported:

"When people feel disgusted, they tend to remove themselves from a situation. The instinct is to protect oneself. People become focused on 'self' and they're less likely to think about other people. Small cheating starts to occur: If I'm disgusted and more focused on myself and I need to lie a little bit to gain a small advantage, I'll do that. That's the underlying mechanism."

Enter Governor Bob McDonnell, who saw plenty of politicians from both parties feeding at the influence trough.  The Virginia Governor did not execute as well as the Clintons, who use their foundation to pay friends huge amounts, then claim accounting errors when funds are not properly spent or tracked.  McDonnell did not have someone watching his back like New Jersey Governor Chris Christie who was gifted a Cowboy playoff weekend, private jet ride, seats in owner Jerry Jones luxury box and hugs from Jones' himself.

The AP reported sixty four of America's Ivy League youth have the "me focus":

Dartmouth College has charged 64 students accused of cheating in a sports ethics class with violating the Ivy League school's honor code.

These sixty four have a future in American sports, politics or Wall Street where garnering the prize is all that matters.  Alfie Kohn wrote:

Setting kids against one another in contests leads to less trust, less accurate communication, less sensitivity, less likelihood of helping people in need, and less capacity to imagine how things look from someone else’s point of view.

These kids grow into adults, where corporate and social structures rely on competition to "motivate and reward" people.

The central message taught by all forms of competition can be summarized in a sentence:  “Other people are potential obstacles to my success.”

I.e., other people disgust me and must be put down by any means possible.   Consider the words of the Dartmouth professor who discovered the cheating:

"I think honor no longer is something that has a lot of resonance in society, and I suppose in some ways it’s not surprising that students would want to trade the nebulous notion of honor with what they perceive as some sort of advantage in professional advancement."

The children have learned from their adult role models.  Ethics be damned.  Winning is all that matters.  If we have too many Generation Me's there may be no Generation Us.

Update 5-30-15:  Someone else noticed the distorting nature of competition and rewards.  .  

WBH Energy Partners LLC in Chapter 11 Bankruptcy

Reuters reported:

WBH Energy, one of many tiny shale oil and gas producers in Texas, has filed for bankruptcy protection, becoming what may be the first U.S. oil company to do so since crude prices started tumbling six months ago. 

The privately held company, based in Austin, has leases in the Barnett Combo Play of the Fort Worth Basin, which mainly produces gas.

Natural gas prices followed crude oil's decline:

The Texas Comptroller of Public Accounts website shows the following governing body members for WBH Energy Partners LLC, all from Austin, Texas:

David R. Henderson
Herodutus Resources
Jacob Warnock
Joseph Warnock
Rand Winfrey

There appear to be two sister companies with the WBH name and registered agent Joe Warnock.  They are WBH Energy GP, LLC and WBH Energy, LP.  Only WBH Energy Partners LLC declared bankruptcy.  It remains to be seen if the bankruptcy spreads to the GP or LP versions of WBH or governing board Herodotus Resources, also owned by David R. Henderson. 

WSJ reported the impact of falling oil prices on The Carlyle Group's fourth quarter:

Falling oil and natural-gas prices took a bite out of Carlyle Group LP’s fourth-quarter performance, showing buyout firms’ vulnerability to the downdraft after big investments in the sector.

The Washington-based private-equity firm said Friday that its older energy funds, primarily those managed by former partner Riverstone Energy Holdings LLC, fell 17% during the quarter, and 12% on the year. Its newer energy funds, which include those it manages as well as its stake in funds run by its new oil-patch partner NGP, lost 8% on the quarter and 13% in all of 2014.

Those losses helped drag down the overall value of funds in which Carlyle and its shareholders earn a slice of the profits.  The firm’s so-called carry funds gained only 1% during the fourth quarter

Carlyle's mortgage backed security fund, Carlyle Capital Corporation, imploded six months before the fall 2008 meltdown.  Carlyle lost Semgroup to bankruptcy in 2008 and Stallion Oilfield Services in 2009.

The PEU boys, ever the salesmen, suggest now is the perfect time for energy investing.   Investor Place stated:

Carlyle is heavily invested in a number of small producers.

BidnessETC added:

Shares of companies like USA Compression Partners LP (NYSE:USAC) and Northern Blizzard Resources, a Calgary-based company. Both companies have lost 32% and 50%, respectively, of their share value during the fourth quarter (for Carlyle and Riverstone).

The joint stake of 10% in SandRidge Energy Inc. (NYSE:SD) held by Carlyle and Riverstone has tumbled 82% in value since June last year.

Ironically, several recent refinery fires might stop the steady drop in gasoline prices.  One happened over the weekend at Carlyle's Philadelphia Energy Solutions refinery.

 
It remains to be seen if WBH Energy is a harbinger of wider financial pain and if bankruptcies spread to the PEU sector. If the past is a predictor Carlyle's Limited partners in the energy space can expect capital calls.  Generally, where there's smoke there is fire.

The bankruptcy filing can be viewed at the link below:

WBH Chapter Filing

Carlyle's Absurd Legal Position: Yet Again

The Carlyle Group's lawyers will seemingly argue anything to avoid responsibility.  Carlyle's LifeCare Hospitals said 25 patients deaths post Hurricane Katrina were the federal government's responsibility as soon as FEMA teams began setting up teams in the region.  After highly leveraged mortgage backed security Carlyle Capital Corporation imploded, co-founders said, "We're Carlyle, but not that Carlyle." 

The latest involves Mountain Water, the target of government appropriation in an eminent domain action.  Carlyle argued that it does not own Mountain Water and that it is merely an upstream equity owner.  Here's the exchange:

Judge:  "Then, it would go on up a line to you, right?"

Carlyle's lawyer stumbled in response, but eventually agreed:  "It certainly, I'm not going to deny, it's sort of. Yeah, I mean, that's right. It's like any other corporate structure."

Other interesting legal positions came when Carlyle affiliate Synagro bribed the wife of Rep. John Conyers in a Detroit sewage sludge processing deal, while SemGroup imploded from bad energy hedging.  Like any other corporate structure where Carlyle wants to avoid any liability or responsibility. 

Cowboy Christie vs. Boy Scout McDonnell

To my surprise I watched New Jersey Governor Chris Christie jump up and down in Jerry Jones private box during last weekend's Dallas Cowboys playoff game with the Detroit Lions.  I thought what is Christie doing there?  Business Insider reported:

"Governor Christie attended the game last night as a guest of Jerry Jones, who provided both the ticket and transportation at no expense to New Jersey taxpayers," Roberts said.

Flying Gov. Christie and his family via private plane to Dallas and the seats within the owners' luxury box on the 50 yard line may have cost Jones' tens of thousands of dollars.

Jones is a major investor in a company that secured a contract to operate an observatory at the new One World Trade Center. The lofty business deal with the Port Authority of New York and New Jersey, an agency administered by the two neighboring states, is expected to produce approximately $875 million in revenue over the next 15 years. 

I pondered the difference between Christie and Virginia Governor Bob McDonnell, just sentenced to two years prison (with two more years of probation) for corruption, accepting "gifts from friends" like the New Jersey governor.  Business Insider links to a New Jersey Executive Order (from the Governor)giving the impression that it states:

The governor "may accept gifts, favors, services, gratuities, meals, lodging or travel expenses from relatives or personal friends that are paid for with personal funds."

I found no such language in the executive order.  However, the order establishes an Advisory Panel to assist the Governor with ethical decisions.  Did Governor Christie or his staff submit the Cowboys junket for review?  If so, what was their decision?