Wednesday, July 19, 2017

Alaska News Boiling Under the PEU Surface?

Disruption made big profits for The Carlyle Group when it correctly read market geography.  It cost Carlyle big when affiliates experienced unanticipated adverse conditions.  Lately Carlyle bet big on energy, trying to get access to undervalued energy assets.  Less than two years ago it struck a deal with Hilcorp Energy to invest in North America energy.  Carlyle's press release stated:

Hilcorp Energy Company ("Hilcorp"), a privately owned oil and gas exploration and development company based in Houston, Texas, today announced the establishment of a newly formed partnership, Hilcorp Energy Development, L.P. (the "Company"), which seeks to acquire, operate and develop onshore oil and natural gas properties and related assets in North America.  In conjunction with the establishment of the Company, the Carlyle Energy Mezzanine Opportunities Fund, L.P. and Carlyle Energy Mezzanine Opportunities Fund II, L.P. ("Carlyle"), funds controlled by The Carlyle Group, have entered into a definitive agreement to invest up to $1.24 billion in the newly formed partnership.
Fast forward to summer 2017 and Hilcorp Alaska is the only bidder for 14 tracts of potential energy assets under Alaska's Cook Inlet.

Hilcorp Alaska LLC, a unit of privately held Hilcorp Energy Co. and an emerging force in the Alaska oil and gas industry, spent over $3 million for exploration rights to 14 federal offshore leases covering about 76,615 acres in Cook Inlet.

It's also the developer of a pipeline that would run across Cook Inlet.

Hilcorp Alaska is moving ahead with its $75 million plan to transport oil across Cook Inlet by subsea pipeline and close a tank farm that is dangerously close to Redoubt Volcano, according to a permit application filed with the U.S. Army Corps of Engineers.
The company's Alaska operation has the following characteristics:

Hilcorp Alaska has over 500 employees, 90 percent of whom are Alaska residents. Alaska is our home. 
Hilcorp acquired its first Cook Inlet assets in 2011.
Earlier this year Hilcorp had a leaking gas line under Cook Inlet:
This line was previously used to transport oil and was converted to natural gas use a decade before Hilcorp acquired it in 2015.
Carlyle's joint venture with Hilcorp was incorporated on 10-16-2015.  It's not clear how Hilcorp Energy Development, L.P. has invested Carlyle's up to $1.24 billion and whether the partnership put any of that money to work in Alaska.

Carlyle co-founder David Rubenstein's wife Alice Rogoff Rubenstein owns Alaska Dispatch News, which reported a number of stories on Hilcorp.  None of them mentioned any potential conflicts of interest due to Rubenstein family investments..

Rogoff bought into Alaska news in 2014 and 2016 saw her commit to publishing a physical newspaper for fifteen years

The story deepens with reports from Alaskan blogger Craig Medred.  His report from July 3rd:

In Alaska, the state’s largest newspaper and by far largest news organization is teetering on the edge of financial disaster with losses reportedly running to several million dollars per year and owner Alice Rogoff now reported to have tried to shop the publication to at least four different corporations. As of yet, there have been no takers.
His June 26th piece offered details about ADN's financial distress:
Rumors circulating around Anchorage that the Alaska Dispatch News was no longer paying its bill have been given credence by a lawsuit filed by the newspaper’s newsprint provider.
Catalyst Paper went into an Anchorage court on June 22 asking for an order forcing Dispatch, which also does business as, to pay its March and April paper bills.

Based in Richmond, British Columbia, Canada, Catalyst is the largest producer of newsprint on the West Coast. 

Its suit against the ADN follows another filed against Arctic Partners, Inc., the Tacoma, Wash., company which owns a building on Arctic Boulevard that Dispatch was renovating  as its new print plant and Alaska news headquarters.

Only last fall, the building was emblazoned with a banner proclaiming “Alaska Dispatch News – COMING SOON.” The banner is gone now, and Dispatch appears to have been locked out of the building housing its new press after running up a bill of approximately $1 million with M&M Wiring, an Anchorage electric contractor.
Should Alaska Dispatch News implode it would follow Rogoff's Alaska House in New York City.  It closed in the summer 2010 despite efforts to obtain private and public funding.

Rogoff-Rubenstein's plan to raise $1 million per year from Alaska Permanent Fund money managers mired in Wall Street's meltdown. Oddly, while her husband's personal finances recovered in 2009 and Carlyle monetized affiliates, donors remained hard to find.

Alice Rogoff-Rubenstein turned to the government, which did not deliver. Senator Murkowski failed to submit a $1.5 million federal earmark to fund operations. The Alaska State Legislature passed on a requested $600,000 appropriation.
Will Rogoff-Rubenstein once again seek public support from the state or feds for her pet project?  Her husband hates throwing good money after bad.  He cut off Alaska House.  Is Alaska Dispatch News next?

Wednesday, July 12, 2017

Fed Nominee Quarles Profiting from Public Bank Subsidies a "Nothingburger"

Reuters reported how Fed Nominee Randall Quarles personally profited from public subsidies while working at The Carlyle Group, a politically connected private equity underwriter.  Carlyle's Boston Private received $150 million in TARP funding while the FDIC recapitalized BankUnited so four PEUs could make huge profits.

Those investments earned hundreds of millions of dollars for Carlyle, profits that would not have been possible without government support
Carlyle completed its highly profitable exit of BankUnited in March 2014.   Three months later Quarles left Carlyle to start The Cynosure Group.

"Profiting in the markets isn't a scarlet letter in this Congress."
Carlyle's profits came not from trading in public markets.   They came courtesy of public subsidies.  Quarles oversaw both investments while at Carlyle.  Carlyle exited Boston Private in July 2013.

Quarles will be President Trump's latest PEU appointment, capable of steering the Fed ship in a way that profits his former peers.  Once upon a time that might have been a concern.  Today it's a badge of honor for both the Red and Blue political teams (who jointly love PEU).

Update 7-16-17:  Denver Post raised concerns about Quarles appointment.

Monday, July 10, 2017

PEUs Behind Hamilton Hustle

The Hamilton Project's Advisory Board has benefited greatly from income inequality, something the group purports to reduce.

Launched in 2006 as an economic policy initiative at the Brookings Institution, The Hamilton Project is guided by an Advisory Council of academics, business leaders, and former public policy makers. The Project provides a platform for a broad range of leading economic thinkers to inject innovative and pragmatic policy options into the national debate.
The Hamilton Project "offer(s) a strikingly different vision from the economic policies that contributed to the alarming trends in rising income inequality and a mounting federal deficit."

Private equity underwriters (PEU) are in the top 0.1% and their wealth continues to rise dramatically.  PEU assets under management more than doubled since Bob Rubin founded The Hamilton Project at Brookings.

It's sad that all those pragmatic solutions rooted in evidence and experience failed to improve income inequality since the Hamilton Project's founding.

The Blue team's alignment with wealth and power ended up serving those already with wealth and power.  The greed/leverage boys on the Board of the Hamilton Project have to be grateful.

Saturday, July 8, 2017

Carlyle Weaves Profits from Brintons

The Carlyle Group sold British carpet maker Brintons to Argand Partners, another private equity underwriter (PEU).

"Brintons has been a solid investment for us (Carlyle), performing strongly over the last five years in a competitive global market."
"Solid investment" means a multiple on Carlyle's original equity investment, which oddly arose through buying discounted debt and forcing a bankruptcy. Carlyle shed Brintons pension onto the British public.

Carlyle Group took control of Brintons in 2011 by buying an £18m debt it owed to Lloyds Bank and putting it through an insolvency known as a pre-pack administration. The process sent Brintons’ pension scheme, which had 1,600 members, into the Pension Protection Fund (PPF).

The rescue cost the PPF, a lifeboat for troubled schemes, about £21.5m and resulted in benefits cuts of more than 10% for 700 members who were below retirement age.  
Carlyle's profits came on the back of workers, some of who will no longer have jobs.

Historic carpet company Brintons is aiming to axe around 60 jobs at its factory in Kidderminster as it shuts down weaving of Axminster carpets after more than a century.

The latest move comes just 18 months after Brintons cut another 65 jobs from the Kidderminster workforce.
While the sale price is undisclosed some financial information is available:

Its last accounts show earnings after tax had soared 81 per cent to £14.5 million in the 12 months to October 1, 2016.
Often the sale price is a multiple of earnings.  What multiple did Carlyle achieve in its "lucrative sale of a carpet manufacturer that dumped its pension fund?"

Update 7-9-17:  Brintons is "renowned globally for carpeting the White House, the Kremlin and Buckingham Palace."

Sunday, July 2, 2017

Temptation Returns: Record $23.5 Billion Apollo Buyout Fund

WSJ reported:

Apollo Global Management LLC, the private-equity firm co-founded by billionaire investor Leon Black, has raised $23.5 billion for the world’s largest-ever buyout fund

The record-breaking fundraising is the latest demonstration of a surge in investor appetite for leveraged buyout funds, extending a run of records in recent months. 
NYT reported:

Cash is being raised at a rate not seen since 2008. CVC Capital, based in London, raised more than $18 billion for Europe’s largest buyout vehicle earlier this year, Silver Lake pulled together $15 billion for tech deals, and Kohlberg Kravis Roberts set a record in Asia with a $9.3 billion fund while also putting the finishing touches on a $13.9 billion United States fund.

With so much money sloshing around, it is getting harder to imagine how it all will be invested profitably. The research outfit Preqin estimates there is some $920 billion available in private equity. With leverage, that is more than $3 trillion to deploy.
Private equity underwriters (PEU) count on cheap debt, preferred taxation and rising asset prices.  Take away these advantages and the greed/leverage boys have to scramble to hold things together.  Ironically, Senator Evan Bayh helped Apollo keep its preferred taxation, even as Bayh was interviewing to join the Apollo PEU team.  

Cash being raised at a rate not seen since 2008 brings back memories of the go-go PEU years.  Here's Carlyle Group co-founder David Rubenstein in 2010.  Looking back at the financial crisis he said:

“Debt was offered to you no matter whatVery few of us were able to resist the temptation”--Carlyle chief David Rubenstein 
So what did Mr. Rubenstein do as that cheap debt imploded?

"The flavor of the day is buying your own debt at below face value. I'm buying bank debt in my deal with leverage from the bank that made me that deal"--David Rubenstein in Forbes, May 2008.
There's plenty of PEU cash to make levered deals and buy back affiliate debt on the cheap should the face value of that debt fall.   Apollo Global has $23.5 billion to do just that.

New Carlyle Idea Exchange Planned for U. of Chicago

Carlyle Group co-founder David Rubernstein sits on the board of the University of Chicago, which plans to name a new building after him.  The Rubenstein Forum will be "a place of intellectual, institutional and educational exchange."

The programs for the building will be designed by several focus groups and consultants along with more than 100 plus faculty and staff from the University of Chicago.
I imagine there will be some parameters for planned programs in the Rubenstein Center.  I'll be shocked if this former financial reporter is invited to speak, given what they had to say about private equity underwriters (PEU) in 2011:

I know from personal experience that the financial press is so eager to break news on "deals" that reporters (who are increasingly compensated on the number of "market moving stories" they write) can't afford to be critical of Carlyle, KKR and Blackstone, and risk losing access to people at those firms.

I have seen so many people -- particularly those in their 50s - 70s -- taken apart by what has happened in their industry as greed has hollowed out the economy. These are people took pride in their jobs and held themselves to this invisible standard that we all just took for granted, but is being wiped out. 
The Carlyle Group scares me more than anything I've ever seen on Wall Street. It seems to exist to corrupt politicians and it's hard to know who they even represent.
I watched a video interview of (David) Rubenstein and his arrogance is really beyond tolerance. He was going on about the debt ceiling problem and how there would need to be cuts in services and higher taxes. When the reporter asked him about tax on carried interest he turned really disdainful and said that this "only" amounted to $22 billion over some number of years and this was not serious money. Boy, nothing like everybody doing their small part to save the country from oblivion!
I expect the Rubenstein Center to be a PEU safe space.

Saturday, July 1, 2017

Health Exchange Sale Bagged Gephardt $1.2 Million

The Intercept reported:

The mere prospect of single payer, however, has elicited swift derision from some corners of the party, with Dick Gephardt, the former Democratic House minority leader, laughing off the idea at a health insurance conference earlier this month.

Not in my lifetime,” scoffed Gephardt, when asked if the United States will ever adopt such a system.

Gephardt, who serves as a Democratic “superdelegate” responsible for choosing the party’s presidential nominee, was asked about the possibility of single payer at the Centene Corporation annual investor day conference at The Pierre, a ritzy five-star hotel in New York City.
Prior to serving on the board of health insurer Centene Dick Gephardt was on the board of Extend Health.  Gephardt grossed $1.2 million from his Extend Health stock holdings when Towers Watson purchased the company in 2012. Targeted markets for Extend Health's exchanges included:

  • Retirees with Employer-Sponsored Healthcare Coverage
  • Retirees without Employer-Sponsored Healthcare Coverage
  • Employees with Employer-Sponsored Healthcare Coverage
  • Employees without Employer-Sponsored Healthcare Coverage
(Source Extend Health S-1/A) 
Gephardt may well be expressing his gratitude for being personally enriched by the byzantine health insurance system Democrats foisted on the public, one that eats up more disposable income each year.  Both Extend Health and Centene put millions into Gephardt's pocketbook.  He has blatant conflicts of interest on this issue.

Thursday, June 29, 2017

PEU Deals Back On

Nearly one out of ten corporate buyout in 2017 involved private equity underwriters (PEU).  These are the people who flip whole companies in search of gigantic returns for a handful of executives and their PEU sponsor.    The greed and leverage boys enjoy close relations with leaders of both the Red and Blue political parties.  Red team's Jason Chaffetz is leaving Congress, hoping to land positions on corporate boards.  How many might be PEU owned?  I see Chaffetz getting a PEU appointment straight up.  He just might not do it right away, a strategy employed by Blue Team's Evan Bayh.

Chaffetz could be replaced by Tanner Ainge, co-founder of PEU Prelude Partners and formerly with Jon Huntsman's HGGC.  

There are companies to buy and influence to arrange.  There are Congressional seats to buy, directly or indirectly.  It's the PEU way!

Sunday, June 25, 2017

Ackman Salts Biden's Wound in Vegas

NYPO has an odd story about a dust up between Vice President Joe Biden and hedge fund manager Bill Ackman at the SALT Conference in Las Vegas last month.  The story refers to "wise ass" Bill Ackman, who'd given a half hour talk at the conference that afternoon,  Biden closed the day with his interview.

Conference Chair Anthony Scaramucci, founder of SkyBridge Capital, hosted the dinner for the day's A list speakers.  The media focus on Biden-Ackman interpersonal scuffle could simply highlight a sincere reaction by a grieving father to an insensitive lout.

The title of Biden's talk seems odd,  "Keeping the Momentum: A Conversation on Politics, Prosperity + the American Dream."  Both political parties sold their souls to big donors, who've done remarkably well as the common person lost ground the last two decades.

Biden sat in a position of power for the last eight years, a time when prosperity went to those who already had it.  It's hard to see where Joe Biden's Blue political team has any momentum at all.

Politics now involves a series of campaign positions intended to get voters to press a candidate's button.  Once votes are counted the winner is free to jettison their promises and turn the federal budget toward their political friends and supporters.

Valerie Jarrett spoke on "Democratic Divergence" and Jeb Bush on "Republican Reformation" in a discussion for the future of American politics.  Jarrett's SALT bio omitted her recent position asmember for Ariel Investments' board.

The greed and leverage boys turn out for the SALT Conference:, which fosters one-on-one meeting throughout the event.  It's a place deals can get done.  Founder Scarmucci has his deal in hand, courtesy of China's HNA Group..

SkyBridge Capital’s flagship fund saw net outflows of $1.6 billion for its fiscal year ending March 31, leaving the fund with $5.4 billion in assets, according to a filing with the Securities and Exchange Commission earlier this month.

Scaramucci, an ardent Trump supporter and fundraiser, sold Skybridge to a team of foreign buyers earlier this year in anticipation of landing a gig with the Trump administration.

The deal is expected to close this summer although Scaramucci’s White House ambitions have been delayed.
It remains to be seen if Scaramucci makes the expected $100 million in profits from selling a declining asset to the Chinese.

Scaramucci may join the Trump White House, currently stocked with billionaire private equity underwriters wanting to help their brethren.  Carlyle co-founder David Rubenstein offered insight as to how to profit in the Trump Age.

Big money boys and politicians share out-sized egos and a twisted symbiotic relationship.  Ackman's long been in the Blue camp.  That's what makes reporting the Biden-Ackman dinner skirmish so odd. 

While the media portrays Joe Biden as the unfairly treated party a few elements don't seem quite right.  It doesn't make sense to me that a grieving father would consider running for office, especially the U.S. Presidency.  There is a time when grief is the work.  It makes less sense that a grieving father would brag that they were the better candidate for the election they skipped.  How can one be better if they were brokenhearted?

I'll leave this as another conundrum in our strange world, where the rich and powerful serve the rich and powerful. Might the disintegration our money obsessed leaders foisted on those below be spreading among the ruling class?

Saturday, June 24, 2017

Healthcare Stinks Now with PPACA

Even with PPACA out of pocket healthcare expenses have eaten up more of citizen's income.  Employers and Uncle Sam conspired to shift responsibility for healthcare to the individual while generating market opportunities for companies to profit handsomely off the suffering of people.

So how do the people feel about healthcare?  Lawyers were more esteemed than the healthcare industry in an August 2016 survey.  Only the federal government fared worse than healthcare and pharmaceuticals.

Citizens have paid more out of pocket and gotten less.  My employer sponsored insurance covers less every year and my out of pocket expenses, solely for physician visits, soared in 2016.  Healthcare earned its sorry reputation by overcharging while cutting service and coverage levels.  The data shows both.

I can imagine healthcare getting worse as healthcare corporations optimize profits for their PEU owners.  Yes, PPACA kicked off huge private equity investments in health care companies.  Those firms have funneled massive amounts to sponsors.  Some affiliates will need to be flipped or returned to debt holders, like The Carlyle Group's HCR ManorCare.

KKR's HCA and Carlyle's ManorCare are but two windows into the PEU healthcare world.  Neither reduced costs during the Obama years.

People sense something is terribly wrong in healthcare.  It's hyper-profitization, the want for the greed and leverage boys to grow their billions in holdings.   Smile pretty, because they want to profit from your misery and suffering.

Thursday, June 22, 2017

India PM Modi to Meet with Carlyle's Rubenstein

Daily Mail India reported:

American CEOs expected to meet India PM Narendra Modi on Sunday include Apple's Tim Cook, Walmart's Doug McMillon, Caterpillar's Jim Umpleby, Google's Sundar Pichai and Microsoft's Satya Nadella. 

Among others are Mariott International chief Arne Sorenson, Johnson & Johnson's Alex Gorsky, Mastercard's Ajay Banga, Warburg Pincus's Charles Kaye and Carlyle Group's David Rubenstein. 
PM Modi's visit will take place June 25-26.  The Prime Minister will meet with firms helping India go cashless.  Global leaders serve the corporations, not the people.  Modi is but one.  He's coming to meet with the many.

Monday, June 19, 2017

Milk'em PEU Conference

The father of leveraged buyouts, Michael Milken, hosted his annual conference for 2017.  With the Clinton Global Institute a fond memory billionaires gathered in Beverly Hills to pontificate the best way to get even richer.

The Trump team's former PEUs mingled with their billionaire brethren according to Bloomberg.

This year’s event is a homecoming of sorts for Mnuchin, a former Goldman Sachs Group Inc. partner who later relocated to Los Angeles to invest in banks and films. (PEU - Dune Capital) Commerce Secretary Ross, who made his fortune snatching up and rebuilding distressed businesses, (PEU - Invesco/WL Ross) also slips in easily with the Wall Street who’s-who milling about the Beverly Hills Hilton. Those include PEU Blackstone Group LP billionaires Steve Schwarzman and Tony James, JPMorgan Chase’s Jamie Dimon, Wells Fargo CEO Tim Sloan, hedge-fund billionaire Ken Griffin and billionaire private equity underwriter David Rubenstein of Carlyle Group LP.
I believe the conference theme was "Milk'em in the name of progress and equality."

Sunday, June 18, 2017

PEU Bonderman's Joke About Women

This week's outrage went toward David Bonderman, TPG founder and Uber board member for his comments in an Uber board meeting.  Yahoo Finance reported:

“There’s a lot of data that shows when there’s one woman on the board, it’s much more likely that there will be a second woman on the board,” Arianna Huffington said around six minutes into the recording.

“Actually what it shows is it’s much likely to be more talking,” Uber board member David Bonderman said.

“Oh. Come on, David,” Huffington responded.
Bonderman is one of America's legendary PEU boys.  PEU is an abbreviation for private equity underwriter. Everything is fair game for the self interested greed and leverage boys.  The younger generation seem similarly self interested, including Uber's executives.    

Women cost Bonderman millions when they shopped less at J. Crew.  Have some compassion for the guy.  He's supposed to be going up the billionaires list, not going down.  

Bonderman did apologize and take responsibility for his words.  He resigned from Uber's board that very day.

David Bonderman did not say the last sentence in the image above.  That's my theory, projection, supposition, and/or active imagination.    

But if the shoe fits.........      keep it.  If not, please return using the enclosed label. That may be the greatest lesson history has taught Bonderman regarding capital structure in the retail industry.

Saturday, June 17, 2017

CCC's Failure Tied to Cobalt Energy's Sweetheart Angola Deal for Government Officials?

The Carlyle Group's $1 billion Guernsey lawsuit is yet to be decided.  Several Carlyle chiefs testified last summer in the failure of Carlyle Capital Corporation.  Crown Dependency and British Overseas Political News shared a WSJ piece::

In testimony that provided flashes of Carlyle Group’s rarefied perch in the investment world, Mr. Conway said the Angolan government, CCC’s biggest investor, considered putting $500 million in the fund. The West African country ended up taking a $150 million stake.

Several CCC investors, including former Republican U.S. congressman Michael Huffington and Kuwait’s National Industries Group, later brought lawsuits against Carlyle Group, but only the liquidators’ case made it to trial. The other suits were all thrown out or dropped and are no longer active.

The liquidators were appointed by the Guernsey court in 2008 as part of the island’s insolvency procedures.

After raising $600 million privately in late 2006 and early 2007, CCC prepared to offer shares on Euronext Amsterdam in the summer of 2007. But alarm bells began to sound on U.S. subprime mortgages, and other mortgage-related assets were hit. It was touch and go whether CCC’s initial public offering would go ahead, according to emails shown in court.

CCC’s Fannie Mae and Freddie Mac bonds had fallen in value, and banks wanted more cash and collateral to keep providing loans. CCC borrowed around 30 times its equity to increase returns and had little wiggle room.

“Pulling the deal will be a public black eye,” Mr. Rubenstein wrote in an email to Mr. Conway at the end of June 2007, according to court filings. “On the other hand I’m at a loss to say how the whole market can be wrong about the product at this time and we are right,” he wrote.
After CCC imploded Carlyle asked Michael Huffington for the chance to make his $20 million back and more.   Huffington declined and sued Carlyle for his losses.  Carlyle plead a puffery defense in another equity investor lawsuit (SemGroup).

The information about The Carlyle Group's close ties with Angola's flies in the face of Carlyle's defense regarding Cobalt Energy, which effectively partnered with government officials via subsidiary corporations, Alper Oil and Nazaki Oil and Gas.  An SEC investigation produced nothing.

In light of Carlyle's plea to Huffington to make good his CCC investment, did something similar happen in Angola?  After losing $150 million in Carlyle Capital Corporation any government would be hard pressed to partner with an affiliate of that same firm.   What inducements did Carlyle indirectly offer, if any, to keep Angolan government leaders in their PEU camp?

In 2015 Carlyle affiliate Cobalt Energy sold the Angola offshore fields back to its local partner, minus the shady add on companies.  That chapter is closed but CCC testimony on Carlyle's close ties with the Angolan government makes one wonder what happened between the $150 million debacle and Cobalt's exit of Angolan offshore oil and gas fields.

This story is important as Carlyle co-founder David Rubenstein is the new Chairman of the Board for the Council on Foreign Relations, the Western oriented group of global tamperers and profiteers.  

Friday, June 16, 2017

Chairman Rubenstein: Carlyle Chief Tops Board for CFR

Carlyle Group co-founder David Rubenstein has been named Board Chair for the Council on Foreign Relations, a collection of Western oriented global tamperers.  Rubenstein's role places Carlyle in a prime position to profit from global changes directed by CFR's high powered political stable.   

Mr. Rubenstein replaces two CFR co-chairs, former Treasury Chief and Centerview Counselor Robert Rubin and Carla Hills, member of J.P. Morgan's International Advisory Board and CEO of Hills and Company.

CFR's board elected two Vice Chairs, Jami Miscik and Blair Effron.  Jami Miscik produced faulty WMD intelligence on Saddam Hussein's Iraq and was rewarded with a global risk management position with Lehman Brothers.  That role ended in September 2008 when Lehman Brothers imploded.

After her second monumental failure with Lehman Miscik landed a job with Kissinger Associates, a consulting firm for Western companies interested in global tampering.  She sits on the board of Morgan Stanley and made a fortune when Dell bought EMC in a mega LBO deal worth $60 billion.  Miscik served on EMC's board from August 2012 until deal close. 

Centerview Partners kept a top board slot at CFR by shifting from Bob Rubin to Blair Effron.  The move will allow Centerview to keep their key player role advising global corporations

CFR retains its Western PEU orientation with its new Board officers.  Rest assured private equity underwriters (PEU) are the wrong prescription for our globe. That's all consummate salesman Rubenstein knows how to push.  Watch out globe the PEU push isn't close to over.

Update 6-21-17:  NYT produced the latest puff piece on Mr. Rubenstein.  A former big league news reporter felt differently nearly six years ago.

Wednesday, June 14, 2017

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. 

Sunday, June 11, 2017

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.

Wednesday, June 7, 2017

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.  

Monday, June 5, 2017

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:

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.

Sunday, June 4, 2017

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 31st, 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.

Saturday, June 3, 2017

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.

Friday, June 2, 2017

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.

Wednesday, May 31, 2017

Carlyle's BDC Files for IPO: 100% Level 3 Assets

Seeking Alpha reported on the looming IPO of Carlyle affiliate TCG BDC, formerly Carlyle GMS Finance, Inc:

TCG BDC has a portfolio of 94 investments in 82 companies with total fair value of $1.39B. Total investment income last year was $111M. It will trade in the Nasdaq under the symbol "CGBD." The IPO size is a placeholder amount of $100M.
The prospectus revealed all of TCG BDC's assets are level 3.

Carlyle is coming off a brutal period in its hedge funds.  Nearly all its hedge fund bets went sour.  Surely, it's time for their luck to turn.  That or it's time to dump pumped up assets onto unsuspecting investors.

Level 3— inputs to the valuation methodology are unobservable and significant to overall fair value measurement. The inputs into the determination of fair value require significant management judgment or estimation. Financial instruments that are included in this category generally include investments in privately-held entities, collateralized loan obligations, and certain over-the-counter derivatives where the fair value is based on unobservable inputs. 
Carlyle took Carlyle Capital Corporation public in Amsterdam in July 2007.   The highly leveraged fund declared bankruptcy in March 2008 when residential mortgage backed securities imploded.

Time will reveal if this IPO happens and at what price.  This market is hungry for investment and yield.  We will find out how hungry with Carlyle's BDC.

Monday, May 29, 2017

Carlyle's Moroccan Refinery Losses to Turn to Ownership?

Dow Jones reported in November 2016:

A Carlyle Group LP hedge fund has lost the $400 million it invested last year in a Moroccan oil-refinery deal, according to a securities filing and people familiar with the matter.

The hedge fund, known as Vermillion, was to receive a share of revenue at the refinery, which ran into financial trouble and was seized by Moroccan authorities later in 2015, the people said. The refinery, known as Societe Anonyme Marocaine de l’Industrie du Raffinage, or Samir, was put into liquidation this year.

In a note in the Washington, D.C., private-equity firm’s quarterly filing last week, Carlyle said it believes $400 million in petroleum commodities were “misappropriated by third parties outside the U.S.” It didn’t identify the soured deal or name the third parties. The note, which hasn’t previously been reported on, refers to Samir, the people said.
The Carlyle Group sought insurance payment for its investment losses but Mitsui Sumitomo Insurance Underwriting denied the claim, claiming Carlyle's investment was in the form of credit, not insurable assets.  Carlyle is suing the insurance company, not the people who ran the refinery into the ditch.  Simultaneously, Carlyle is teaming with Glencore to buy the refinery and add it to their European energy portfolio.

SAMIR is a public, majority-owned subsidiary of Corral Morocco Holdings AB, which operates in Morocco. Corral Morocco Holdings AB is wholly owned by Corral Morocco Gas & Oil AB, which in turn is wholly owned by Moroncha Holdings Co. Limited (Cyprus).
 The Coral Group obtained 67.27% of SAMIR in 1997.  Reuter's reported:

A Moroccan court ruled last year that Samir should be liquidated despite attempts to restart production by the company, which was controlled by the Corral Petroleum Holdings group of Saudi billionaire Mohammed al-Amoudi.
The Carlyle Group is not suing a Saudi billionaire who stood at the top of the corporate structure that lost Carlyle's $400 million, nor is it suing the ex-Morgan Stanley Vice Chair of Corral and SAMIR.

Carlyle is also not suing SAMIR's CEO or any SAMIR board members for stealing their $400 million.

These four SAMIR executives and board members could be the unnamed third parties who misappropriated Carlyle's oil.  They are the people who threw up their hands after the value of their underlying assets dropped significantly.

The question is how they went down.  Did they pull a Jon Corzine who grabbed funds from MF Global clients to make good on his bad bets?  Was Carlyle's $400 million in oil just too available to SAMIR's top executives?

Did SAMIR roll up the carpet after telling investors how solid things were, as Carlyle did with Carlyle Capital Corporation (CCC) or SemGroup?  Carlyle ran from CCC's stinking corpse after the highly leveraged residential mortgage backed securities fund imploded in March 2008.

Carlyle Capital said on Thursday it has defaulted on $16.6 billion of debt and was unable to reach a deal with lenders.
SemGroup's implosion from bad energy bets cast doubt on Carlyle's management prowess and oversight abilities..

Having failed investors before Carlyle should understand when financial shocks take down a company.  CCC liquidators sued Carlyle for "breach of fiduciary duty, breach of contract, gross negligence and unjust enrichment."  A Dutch billionaire is financially backing the CCC lawsuit against Carlyle.

Carlyle is not suing Sheik Mohamed Al Amoudi, worth an estimated $9.4 billion.  The global billionaire circle is relatively small and Carlyle's co-founders have numerous connections with the Sheik.  The year 2007 saw the Sheik discover $1 billion in gold in Ethiopia (March) and donate $20 million to the Clinton Foundation for HIV/AIDS treatment in Africa

The Carlyle Group hired the Clintons to speak at their annual limited partner investors meeting.  President Bill Clinton spoke in  2012, while Hillary received $200,000 for her 2013 talk at the same event.  Carlyle co-founder David Rubenstein next interviewed Hillary in early 2014. 

Apparently the Clintons learned from their time with Carlyle as their Foundation is a 50% owner of Fondo Acceso, a Colombia private equity underwriter (PEU).  Imitation is the greatest form of flattery.

Carlyle started with Saudi oil money and would not risk alienating it.  What's $400 million among billionaires? The sting diminishes if Carlyle can get insurers to pay up or use the loss to strike a better purchase price for the SAMIR refinery?

Interesting Aside:  The only people flying after 9-11-2001 were Saudis, a few were investors attending The Carlyle Group's annual meeting in Washington, D. C.    A Swiss bank account owned by Sheik Mohamed Al Amoudi funded the 9-11 attackers.

Sunday, May 21, 2017

Blackstone's $100 Billion Infrastructure Plans Dovetail with Trump's

Forbes reported:

Private equity giant Blackstone Group is unveiling a $40 billion infrastructure fund with the gulf nation, which will primarily invest in the United States. Saudi Arabia will commit $20 billion to the Blackstone infrastructure fund and another $20 billion will be raised from other limited partners, readying cash that could lead to $100 billion in total infrastructure investments on a leveraged basis.
I'm sure the American public is comforted by the fact that our future tolls, air travel fees, water bills and other public services will help billionaires and the Saudis profit further.

Saudi Arabia's Public Investment Fund has agreed to commit $20 billion to the Blackstone infrastructure fund, which will be set up a permanent capital vehicle
Recall Saudi citizens flew home when everyone else in America couldn't take a plane after 9-11.  Those Saudi citizens were in Washington, D.C. for the annual Carlyle Group investors meeting.

The Carlyle Group is also interested in infrastructure.  COO Glenn Youngkin told CNBC:

Airports, right out of the box, is the No. 1 target area right now.  They are an understood commercial entity, and there are airports starting to move this way” already. 
Puerto Rico has the only commercial services airport operated under private management according to a Feb. 2016 Congressional report.

Chicago Mayor Rahm Emmanuel cancelled Midway Airport's planned privatization in 2013.  Emmanuel made his post Clinton White House fortune as an investment banker for Wasserstein, Perrella and Company.  Rahm made $18 million in two and a half years.  Emmanuel served Bruce Rauner of GTCR Golder Rauner, a Chicago based private equity underwriter (PEU), according to Dealbook

Instead of private equity, Mr. Rauner advised Mr. Emanuel to pursue investment banking, where his political experience might be more valuable in landing deals in regulated industries.
Mr. Emanuel called him back after starting at Wasserstein and asked if he could take over coverage of GTCR for his new employer.
Rauner is currently the Governor of Illinois.  Both Emmanuel and Rauner are in position to privatize public assets to their PEU peers.

President Trump not only appointed billionaire PEUs to key government posts, he is touring the world intent on giving them the opportunity to get richer.

The partnership comes as top executives, including Blackstone Chief Executive Officer Steve Schwarzman and KKR & Co. co-CEO Henry Kravis, descend on Riyadh for the inaugural Saudi-U.S. CEO Forum, a weekend of deal-making. The meetings, which have already yielded billions of dollars in deals between companies including oil giant Saudi Aramco and General Electric Co., are taking place as U.S. President Donald Trump visits the kingdom.

Infrastructure investing has gained renewed attention as Trump’s administration vows to direct more private money toward improving roads, bridges and airports. 
Trump's infrastructure plan involves more leverage than Blackstone's:

The president's budget proposal, expected to be unveiled next week, will include a call for $200 billion in federal funds over 10 years for infrastructure projects, according to Bloomberg, citing a senior Office of Management and Budget official.

The White House budget blueprint would also provide incentives for at least $800 billion of infrastructure investment by the private sector and state and local governments, the official said.
Private equity hates paying taxes.  We'll see how much Blackstone's $100 billion permanent capital vehicle pays, if anything in taxes.  We might have the Trump PEU infrastructure tax rebate.  If so, the little people will pay and some of that will go to a Saudi investment fund.  It's a flash back to 2007, only that deal was with a United Arab Emirates sovereign wealth fund.