Aeropostale Experiences Noxious PEU

Bankrupt teen retailer Aeropostale may rue the day it partnered with private equity underwriter (PEU) Sycamore Partners.  In 2013 Sycamore purchased nearly 8% of the company as an activist investor.  Aeropostale then borrowed $150 million from Sycamore in 2014.  This loan gave Sycamore two board slots and committed Aeropostale to use Sycamore affiliate MGF Sourcing.  At the time Bloomberg reported:

The financing agreement also includes a strategic partnership with MGF Sourcing, an affiliate of Sycamore, that will diversify Aeropostale’s clothing production. 

Aeropostale's relationship with MGF Sourcing deteriorated according to Bloomberg's piece from March 2016:

The dispute with MGF is adding to Aeropostale’s woes. When Sycamore helped connect the two companies, it was seen as a way to diversify Aeropostale’s clothing production. But the retailer said on Thursday that MGF is disrupting its supply of merchandise and violating the terms of their agreement. The problem could widen losses by $5 million to $8 million if shipping delays continue, Aeropostale said.

Sycamore's Stephen Kaluzny unloaded 6.1 million shares of Aeropostale stock in February for 17 cents per share.

Aeropostale declared bankruptcy in May and asked the court for permission to investigate the role Sycamore Partners playing in Aeropostale's demise. Sycamore bought Aeropostale stock through Lemur LLC and provided debt financing via Aero Investments LLC.

While Aeropostale searches for a white knight to take it out of bankruptcy the company fired back at Sycamore.  Reuter's reported:

Bankrupt U.S. teen retailer Aeropostale (AROPQ.PK) filed a motion against its lender, private equity firm Sycamore Partners, in bankruptcy court late on Friday, accusing it of plotting a "loan to own” scheme to push the chain into bankruptcy. Aeropostale asked a U.S. bankruptcy court judge to bar Sycamore from using the $150 million it is owed as credit to bid on the company, which is up for sale in a court-supervised auction. Aeropostale also wants the judge to reduce how much Sycamore would be repaid on its loan.

Aeropostale wouldn't be the first PEU affiliate taken over by their former savior.  The Carlyle Group back doored Mrs. Fields and Brintons.  Aeropostale finds itself in a special situation, one that attracts  financial hyenas. 

Bliderberg Protector Thiel Stumps for Trump

Silicon Valley's Peter Thiel endorsed Republican Presidential candidate Donald Trump in Cleveland.  Frankly, his speech is odd in light of what Thiel said fifteen months ago:

“Calling our society a democracy is very misleading,” Thiel went on. “We’re not a republic; we’re not a constitutional republic. We live in a state that’s dominated by these technocratic agencies.”

Government isn't sclerotic, it's been overrun by a toxic virus of "technocratic agencies" looking to optimize Uncle Sam's trillion dollar budget for their personal gain.

It delivered for Peter Thiel.  The CIA funded Palantir, his startup security company.

A Palantir is a seeing rock.  Thiel's firm uses massive secret databases for spying purposes.  That can't happen in a functioning constitutional republic with a 4th amendment protecting the public from illegal search and seizure.  

Bloomberg highlighted Palantir's roots:

They devised ways to get information about a person’s computer, the other people he did business with, and how all this fit into the history of transactions.

Fortune called Palantir's technology "maximally unintrusive."   

Bloomberg described:

Using Palantir technology, the FBI can now instantly compile thorough dossiers on U.S. citizens, tying together surveillance video outside a drugstore with credit-card transactions, cell-phone call records, e-mails, airplane travel records, and Web search information. 

Palantir protects the annual global tamperer confab, also know as Bilderberg.  This technocratic agency warranted its own "no fly zone" in the Swiss Alps.  It produces positions its attendees are supposed to advance.  Participants are required to maintain absolute secrecy.

This makes Bilderberg what, a governing body, a cult or a terrorist group?  Peter Thiel endorsed Trump as the next Chief Executive for Technocratic Agencies.

GovCon 8 was Palantir's largest and most successful conference to date with over 1,500 attendees from government, military, intelligence, and financial sectors.

Trump stands to send huge security business Palanatir's way.

Update 7-24-16:  Jesse's Crossroads Cafe offered:

 "Our plutocracy, whether the hedge fund managers in Greenwich, Connecticut, or the Internet moguls in Palo Alto, now lives like the British did in colonial India: ruling the place but not of it." 

 Mike Lofgren, The Deep State: The Fall of the Constitution and the Rise of a Shadow Government, 5 January 2016

Update 11-11-16:  Thiel will serve on President elect Trump's transition team.

Update 7-30-17:  The past is predictive of the future until it's not.  Hedge funds and banks now make use of Palantir's seeing eye to make billionaires richer.  That's our bipartisan democracy in America in 2017.  

Update 11-11-23:  Billionaire Peter Thiel had this to say about his past support for Donald Trump:

“There are a lot of things I got wrong,” he acknowledged. “It was crazier than I thought. It was more dangerous than I thought. They couldn’t get the most basic pieces of the government to work. So that was—I think that part was maybe worse than even my low expectations.”

And these are the people driving government policies...

 

Carlyle Capital Trial Underway

Carlyle Group co-founder Bill Conway testified in Guernsey in defense of the failed Carlyle Capital Corporation (CCC), a highly leveraged mortgage backed security investment.  CCC liquidators brought a $1 billion suit against parent Carlyle Group.  WSJ reported on Conway's responses under oath:

On CCC’s use of 30 times or more borrowed money: “It was highly leveraged but I didn’t think the risks were going to happen, the risks that led to the downfall of CCC, the systemic market collapse.” 

On 2007’s credit crunch: “I certainly did not think it was something that was going to lead to the end of Lehman Brothers, the end of Bear Stearns, the end of Wachovia, the end of Merrill Lynch as companies.”

Conway admitted CCC was a canary in the coal mine of financial crisis. The WSJ piece also has a series of e-mails between Carlyle chiefs as CCC approached implosion.  Creditors no longer trusted Carlyle to make good on its bets.

Corporate debt, much of it private equity sponsored, ballooned since the financial crisis.  Just like CCC got overrun in 2007 private equity loans could be at risk.

Carlyle recently sold Brazilian lingerie maker Scalina for a huge discount in order to pay creditors something.  The Carlyle Group is also down $25 billion in assets under management in the last year.  Darkness looms as Carlyle reminds us of their shenanigans during the last financial crisis.

Brazilian Banks Subsidize Carlyle's Scalina Sale

Reuter's reported:

Lupo SA, a Brazilian underwear producer, has agreed to buy Scalina SA, a lingerie and hosiery maker backed by Carlyle Group LP, for an undisclosed sum.
A source with direct knowledge of the deal told Reuters that Lupo and Scalina's owners - Carlyle, millionaire Artur Grynbaum and the company's founding Heilberg family - negotiated a price tag of around 90 million reais ($28 million) for the company.

Six years ago Carlyle acquired a 51% stake in Scalina for 280 million Brazilian reais ($160 million).  An earlier Reuter's piece detailed the challenges Carlyle faced in operating Scalina:

In 2010, when Carlyle bought 51 percent of Scalina, revenue was growing at an annual rate of 20 percent.

But one year later, when Scalina's retail strategy foundered, the buyout firm allowed a new investor group led by Grynbaum to inject cash in the company in exchange for the minority stake.

Carlyle has been trying to sell Scalina for the past three years, since the economy show signs of cooling, the sources said.

Carlyle is finally out of Brazilian lingerie.

Under the plan, proceeds from the deal will be used to help repay part of 160 million reais ($48.65 million) in loans that Scalina took from Itaú Unibanco Holding SA, Banco Santander Brasil SA and Banco do Brasil SA, the sources added. As part of the agreement, the banks will take a loss on the principal of the debt.

Carlyle likely got something from the company, management fees, debt for dividend, or a portion of new investor funds.  But Carlyle's Brazilian underwear venture shrank significantly.

I find it hard to believe Carlyle recouped their original $68.3 million cash investment in Scalina.  If they did it was due to the generosity of the company, a new investor and the final bank subsidy.  Carlyle and Scalina know but they aren't talking.

Update:  Oddly The Intercept has a story on Brazilian billionaires.  It seems Brazil's super wealthy have much in common with our greed and leverage boys. 

Update 7-28-16:  Carlyle plans to sell a huge stake in Brazilian travel operator CVC.

Carlyle Group Like Hillary: No Consequences for Unauthorized Mountain Water Sale

 The Bozeman Daily Chronicle reported:

When The Carlyle Group purchased Mountain Water in 2011, it had also agreed not to sell the utility without PSC approval.

The Carlyle Group did just that in January.

The $150,000 fine for failing to fulfill Carlyle's original commitment is not coming out of Carlyle's pocket.

A Missoula water company (Mountain Water) has agreed to pay a $150,000 fine over its unauthorized sale and the new owner has agreed the utility can’t be sold again without Public Service Commission approval.

Mountain Water is paying the $150,000 fine.  The new promise sounds alot like the old promise which Carlyle reneged upon for profit purposes.  This is hardly justice.

Just as no reasonable prosecutor would charge Hillary Clinton for her negligent e-mail activity, no reasonable regulator would penalize the PEU that profited handsomely by ignoring their stated regulatory commitment.

Political royal families and private equity underwriters (PEU) share an ability to remain above the law.

Update 7-9-16:  ZeroHedge called it impunity which fits with The Carlyle Group.  IMPEUNITY

Untouchables: Hillary & Wall Street

FBI Director James Comey broke the news that Hillary Clinton acted contrary to U.S. laws but will face no accountability.

The FBI is part of the U.S. Department of Justice.  That's the "Just Us" Department that turned their gaze away from widespread fraud that caused the 2008 Financial Crisis.  Apparently "no reasonable prosecutor" would bring such a case as no Wall Street executives were charged.  Citizen Hillary received millions in Wall Street speaking fees after stepping down as Secretary of State. 

In late 2007 Hillary Clinton gave banks free passes for abandoning due diligence in packaging/selling loans as AAA rated.  President Obama's "Just Us" Department followed Hillary's lead since his 2009 inauguration.  Attorney General Eric Holder repeatedly allowed Wall Street firms to settle with fines for breaking the law.  Executives used those fines as tax deductions, helping boost their incentive compensation.  That leaves more money to donate to candidates.  Get the picture.

Carlyle's Rubenstein Predicts the UK Won't Exit EU

Washington Business Journal reported:

Billionaire private equity guru David Rubenstein has some advice for those concerned about the the eventual departure of the United Kingdom from the European Union: Don't panic, it won’t happen.

Carlyle Group (NASDAQ: CG) co-founder and co-CEO, speaking at the 2016 Aspen Ideas Festival in Colorado, said he believes it's highly unlikely Brexit will actually move to completion.

Rubenstein knows that public opinion, polled or recorded into vote, does not matter to the ruling elite.  It's something to be spun to his benefit and to his fellow private equity underwriters (PEU).

He and his PEU ilk retain their preferred carried interest taxation.  Ten years ago a majority of the public opposed a secretary or gardener paying a higher tax rate than their billionaire boss.  During the same decade wage increases evaporated while employers passed higher benefit costs onto those lucky enough to have a job.

PPACA, designed by PEU Nancy-Ann DeParle, set up healthcare for the next big billionaire profitgasm.  It ignored public opinion and foisted bad coverage, which continues to accelerate in price, on citizens. 

The general public experienced a decade of stagnation, fundamentally ignored by the political elite. Rubenstein knows this deep in his bones.  It's no surprise it emanated from his mandible.