Sunday, March 4, 2012

Dealbook Defends PEU's

Dealbook ran three pieces placing private equity underwriters (PEU's) in a mostly positive light.  The first focused on a three minute video highlighting "good done by private equity."

“This campaign is not about defending a candidate or a particular party, it is solely about setting the record straight and defending against mischaracterizations and political attacks,” Mr. Ken Spain, CEO of the Private Equity Growth Capital Council, said in an e-mailed statement.
One might expect a Dealbook reporter to get an interview, but an e-mail statement is better than nothing..

PEGCC's Ken Spain worked for the National Republican Congressional Committee during the time of Chris Ward, embezzler extraordinaire. He moved on to Quinn Gillespie, which lobbied the White House after Hurricane Katrina on behalf of Tenet Healthcare, whose Memorial Medical Center lost 35 patients.  Oddly, 25 of those died on the LifeCare Unit on Memorial's seventh floor.

The Carlyle Group's LifeCare Hospitals, like Blackstone's Vanguard, is PEU owned.  Spain would need his best flak jacket skills to spin Carlyle's multi-year LifeCare debacle regarding Hurricane Katrina.

Dealbook's second piece looked at The Top Ten PEU deals, promises vs. delivery.  It's a mostly positive story.  I prefer to look at the latest PEU monetization, via SEC filings, given PEU's are notoriously stingy with data/information.  Take Carlyle's planned IPO for Allison Transmission.

Allison Transmission lost 600 jobs, a 17.5% decrease under Carlyle.  Carlyle and company are looking at a triple of their original investment.  A mere 42 stockholders will cash in big, as the 2,800 remaining employees get to be thankful for their job.. 
Dealbook ran a third story on PEU Wilbur Ross, which stated:

The private equity industry, now in its third decade, is filled with a generation of larger-than-life personalities who have achieved enormous financial success and now must decide whether they want their companies to outlast them.
Given this characterization, one might expect a stronger PE story than access to capital for a subsidiary (DMC) of an affiliate (Vanguard).  I commented on Dealbook's Detroit Medical Center story:

When Blackstone's Vanguard purchased Detroit Medical Center, the cost basis for the hospital system changed. Uncle Sam picks up a portion of capital costs through Medicare and Medicaid.

How much of the $850 million will Uncle Sam reimburse prior to Blackstone's flipping of Vanguard?  Surely Charlie Martin has a clue.

With PEU capital comes operating expenses, i.e. management fees. How much is DMC paying Vanguard per year in management fees? One percent of net revenues would be a huge number for this sized healthcare system.

Maybe next time Spain will provide the above information.  It'd make PEU Report happy, however, I've come to expect fluff to puff pieces from private equity.