Carlyle's PEU Financial Abuse Puts ManorCare Under

One might expect Healthcare Finance to understand the financial games The Carlyle Group used to put down ManorCare.  These include deal fees, management fees, monetizing real estate and skewing all the rewards to executives and sponsor Carlyle.  It took nearly a decade but ManorCare ceased paying its debt and the company will go to debtholders.  Carlyle's 2007 purchase of ManorCare came with the endorsement of President George W. Bush and Gail Wilensky, former Medicare Chief and ManorCare board member.  Wilensky promised a quality committee would keep Carlyle on the up and up.  That didn't happen.

Two years ago the Department of Justice said it was investigating HCR ManorCare for allegedly exerting pressure on skilled nursing facility administrators and rehabilitation therapists to perform unnecessary services on patients in order to collect additional Medicare and Tricare payment, the DOJ said in 2015. 

Patients were kept in facilities even though they were medically ready to be discharged, the DOJ said.

Skilled nursing facility managers and therapists were threatened with discharge if they did not administer the additional treatments necessary to qualify for the highest Medicare payments, according to the complaint. 

Greed, intimidation are PEU methods.  Healthcare, thanks to Presidents Bush and Obama, is peppered with PEU owned companies.  Who will provide these firms life support after years of toxic sponsor ownership?  Apollo Global Management will own part of ManorCare's carcass, so the company will not be leaving the PEU fold.  That's sad for patients and their families.

Update 6-18-17:  The media continues to soft pedal Carlyle's mismanagement of ManorCare.  The Toledo Blade traditionally has gone deeper into ManorCare as they share a hometown.  The Blade reported "HCR ManorCare has said the leases it signed came at the top of the market."  The leases were intended to enrich ManorCare's sponsor, The Carlyle Group.  Carlyle's sponsorship of ManorCare did the company in. 

Update 11-25-18:  WaPo's piece nails Carlyle's role in sinking ManorCare.

Carlyle to Buy Italian Sweet Supplier

A Carlyle Group press release stated:

Global alternative asset manager The Carlyle Group (NASDAQ: CG) has today announced it has entered into an agreement to acquire the majority shareholding of the Italian company IRCA, a large European manufacturer of ingredients and food products for pastry-making, baking and ice-cream retailing. Carlyle will acquire an 80% shareholding from Ardian and the company’s founding Nobili family, who will continue to manage the company.

Established in 1919, Irca has a prominent position in the artisanal pastry and ice-cream markets, expanding its European presence across France, Germany, Spain and Eastern Europe, renowned for the quality of its product offering, which currently totals nearly 1800 lines. Irca currently distributes its products in approximately 70 countries, through a strong network of long-standing distributors.

Mr Roberto Nobili, member of the fourth generation of entrepreneurs, will continue to retain his role as Irca’s CEO.

It will be interesting to see how the founding family mixes with Carlyle.  The Brintons' family had nothing nice to say about Carlyle and its PEU ways.

Carlyle expects high end desserts to grow.  As the rich get richer does their appetite for sweets grow?  Finally, Carlyle will have an affiliate with the mission "Let them eat cake, with a dollop of ice cream."  Fitting for our PEU world.

Carlyle Bags Another CRO

The Carlyle Group and fellow PEU GTCR struck a $922 million deal to buy AMRI, Albany Molecular Research.  Carlyle's latest deal in the pharmacy research space comes after The Carlyle Group sold PPD to Carlyle for $9.05 billion.  Carlyle paid $3.6 billion to buy PPD six years ago.  How many clinical research organizations can a PEU own and how many times?

I'll peruse the SEC filing on the deal for specifics and post any findings.

Update 6-11-17:  Carlyle inked a deal to buy iNova Pharma, another pharmaceutical company that can send business to PPD and AMRI.  

Carlyle in Double Fight Over Sinking ManorCare

The Carlyle Group faces two foes in its efforts to save face on nursing home giant ManorCare.  The external foe is Apollo Global Management's Leon Black.  Black is ready to take over ManorCare as a creditor in bankruptcy proceedings.  Carlyle's reputation is at risk given assurances it gave federal regulators when it bought ManorCare in December 2007.  President George W. Bush, a former board member for Carlyle affiliate CaterAir, supported the deal.

Congress held hearings on the buyout.  A number of former Medicare/Medicare Chiefs supported the deal, including ManorCare board member Gail Wilensky.  No one asked about Carlyle's LifeCare Hospitals failure after Hurricane Katrina which resulted in 25 patient deaths.  Oddly ManorCare is being investigated for poor quality care, including patient deaths, and inappropriate billing.

Beneath the Carlyle-Apollo PEU match lies an internal foe, ManorCare's CEO Paul Ormond.  NY Post reported:

The landlord of America’s second-biggest nursing home chain is haggling with the company’s top executive over a lavish compensation package, even as the chain teeters on the edge of bankruptcy, sources told The Post.

Paul Ormond, CEO of HCR ManorCare, is demanding $100 million in deferred compensation that private equity giant Carlyle Group promised to pay him as part of a $6.3 billion buyout of the company in 2007.

Could Carlyle be that bad to work for, that a CEO would need that kind of pay to stomach working for PEU ilk?  Not likely.  Ormond invited Carlyle in and partnered to make himself stinking rich.  Carlyle expected to make billions more.  After putting ManorCare in a precarious position, Carlyle's founders know better to throw good money after bad.

ManorCare CEO Paul Ormond grossed $198 million from Carlyle's purchase of the company.  Here's the breakdown:

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Now Paul wants another $100 million.  The Carlyle Group is free to pay Ormond what he's due.  They won't pay from the sponsor level.  Affiliates pay Carlyle for the privilege of being owned.

Ormond's excessive deferred compensation is a window into private equity practices where the top get outsized rewards while legions of employees struggle as costs from deteriorating benefits eat up more than any pitiful raises PEU boys hand out

Carlyle is ready to walk away from ManorCare's failing financial health.  The cause is PEU ownership.

They have two fights as they ready to hand over the keys.  One has Leon Black ready to back door Carlyle on ManorCare, a move quite familiar to Carlyle chiefs (Brinton's, Mrs. Fields).

The other fight is with the CEO who brought Carlyle in.  Does that make The Carlyle Group a Trojan Horse?

Update 6-13-17:  Carlyle is out of ManorCare according to NYPo.  Ten years of PEU ownership drove it under.

Carlyle Group Among Hacked OneLogin Customers

HotHardware reported a serious hack on centralized password manager OneLogin:

"We detected unauthorized access to OneLogin data in our US data region," OneLogin disclosed in a blog posting this week.

This initial notice was frustratingly lacking in detail, and customers were left to assume the worst with regards to the severity of the attack. However, OneLogin has since updated its blog posting with more details, including the unfortunate news that hackers were able to gain access to the company's AWS keys.

The hackers were then able to use those keys to "access the AWS API from an intermediate host with another, smaller service provider in the US." The company reports that the intrusion began at 2AM on May 31^st, but it wasn't until seven hours later that OneLogin staff detected any anomalies and was able to cut off access. That is a rather lengthy period of time for the "threat actors" to have access to the company's database tables.

OneLogin also provided this rather dour warning:

While we encrypt certain sensitive data at rest, at this time we cannot rule out the possibility that the threat actor also obtained the ability to decrypt data. We are thus erring on the side of caution and recommending actions our customers should take, which we have already communicated to our customers.

Those actions of course include resetting passwords, generating new API keys and creating new security certificates.

It is reported that OneLogin provides services to over 2,000 companies (including Yelp, Midas, Pinterest, Pacific Life, The Carlyle Group, Conde Nast, and Pandora) and has millions of individual users. OneLogin allows users to integrate with services like Amazon Web Services, Office 365 and Google ecosystem.

TechCrunch had a portion of the e-mail sent to customers:

All customers served by our US data center are affected; customer data was compromised, including the ability to decrypt encrypted data.

Carlyle most recent podcast tackled cybersecurity.  Their advice could be timely.  Any egg would come from vendor selection not from direct investment.

OneLogin received funding in three rounds, the first $4.7 million from Charles River Ventures, the second $15 million from Social Capital and Scale Venture Partners funded the last round at $25 million. 

I ran across an interesting story that likely is not related.  IndiaWest reported on May 13, 2017:

• Skyhigh Networks named Dheeraj Khanna as VP of technical operations. Khanna joins Skyhigh from OneLogin, where he built a team from the ground up as the VP of technical operations. 

Mr. Khanna's new employer Skyhigh Networks may be in a position to make hay from OneLogin's security failure. 

Carlyle is a OneLogin customer and its IT team is working to keep its data safe.  The question is who used OneLogin at Carlyle?  Possibilities include employees, founders and/or limited partners.  Limited partners do not like surprises, especially those placing their data at risk.

Bain's Gymboree Misses Interest Payment

News stories highlighted Gymboree's failure to make a required interest payment.  All shared the expectation of bankruptcy.  MarketWatch reported:

Gymboree is another retailer that is saddled with debt taken on in a leveraged buyout. The company was acquired by Mitt Romney’s former firm Bain Capital in 2010 for $1.8 billion. Today, the company has $1.043 billion of debt, split between a $769 million term loan, the $171 million of 9125% senior secured notes due December of 2018, an $80 million ABL revolving credit facility and a $49 million first-lien ABL term loan.

The company’s bonds were last trading at 8.729 cents on the dollar, according to MarketAxess, deep into distressed territory. Its term loan was quoted at 44 cents to 46 cents on the dollar, according to Debtwire.

The report did not say how much Bain siphoned from Gymboree via deal fees, annual management fees and special dividends/distributions.  It did not share whether Bain added Gymboree debt since 2010 to fund a sponsor PEU dividend.

Also, there is no word on credit default swaps Bain may have purchased for risk management purposes.  We'll see if any of this information exists or comes to light.

As of now everything is marked down, including Gymboree's debt.

Carlyle's Rubenstein Returns to Bilderberg

Carlyle Group co-founder David Rubenstein returns to The Bilderberg Group meeting in Chantilly, Virginia.  Carlyle has $100 billion in fundraising to do and a junk bond IPO fund to push, TCG BDC.

Other private equity firms at Bilderberg include KKR, Thiel Capital, Johnson Capital Partners, Ariel Investments, Citadel, Carlyle Group partner Koc Holdings, Evercore, Greylock and Goldman Sachs.

Bob Rubin, Vernon Jordan, Andy Stern and James A. Johnson will be at Bilderberg to relish the millions they've made by integrating the Blue Team with Wall Street and the greed/leverage boys.

Palantir will be at Bilderberg to protect the secret enclave from public scrutiny or accountability.  Trump Commerce Chief Wilbur Ross will attend the meeting.  He and Rubenstein could tell deadly stories of how they failed workers and customers.

Billionaire's don't talk about the little people very often.  Their pocketbooks are more important and they've consistently acted as democratic kingmakers.