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.