Monday, December 31, 2012

Redskins Snyder Beneficiary of Richmond Taxpayer Funds

The Washington Redskins, valued at $1.6 billion, will conduct their summer training camp in Richmond, Virginia in a $10 million facility funded by taxpayers.  The Richmond Times Dispatch showed the extent to which billionaire Dan Snyder will be burdened by Redskins training:

The team is not contributing to the cost of the camp.

The city is ready to break ground on the new facility.  Billionaire Dan Snyder gets a free training camp for eight years.  That's a PEU worthy deal.

Thursday, December 27, 2012

Yes, Virginia is Santa Claus

Virginia Governor Bob McDonald will finance 83% of a $1.4 billion to build a new U.S. 460 from Suffolk to Petersburg. The remaining 17% will have the benefit of a tax free bond designation

The state will contribute $903 million, the Virginia Port Authority $250 million and the rest will be tax exempt bonds from the Route 460 Funding Corporation of Virginia.  Earlier financing reports mentioned possible federal loan funding for the project. 

Private companies behind the deal include Ferrovial Agroman, S.A. and American Infrastructure. 

Private equity underwriters wanted in on the deal, but their expected 20% annual returns made the project too expensive

State officials ditched plans to use private equity when it became apparent that such a financing model would produce tolls that were twice as high or higher than the current rates, Layne said.

“If we did attract equity, it was going to be very expensive,” he said.

Rather, the state now plans to create a special nonprofit corporation, controlled by appointed board members, that will issue debt for the work. Layne said he will serve as chairman of the corporation. The state will own the road and maintain it.
The mostly public equity project involves interest costs.

The public contribution will come from a transportation fund that McDonnell established with bonds intended for public-private partnerships and “mega” transportation projects.
Who carries the burden of this interest expense? Please tell me, Governor.  The only role for US 460 Mobility Partners is designing and building the road.

"The private-sector team will design and build the project at a fixed cost by a fixed date and will take significant risks associated with delivering the project.
Given America's longtime experience with road building, I find it hard to believe there are significant risks in the Governor's contract.  What's 460 Mobility Partner's fee for building the new 460?  Is it 3% of the project, $42 million?  Might it be more?

It's an odd public-private partnership. 

VDOT, in coordination with the Office of Transportation Public-Private Partnerships, procured the project under Virginia's Public-Private Transportation Act, which allows the Commonwealth to partner with the private sector to finance, design and build transportation improvements. 
The Commonwealth brings the lion's share of funding.  One could view Virginia as Santa Claus in this deal.

PEU to Focus Exclusively on Marijuana

Forbes reported:

Leafly’s founders established a second business–Privateer Holdings, believed to be the only private-equity firm focused exclusively on marijuana. It is closing its first-round investment pool of $7 million, which it intends to use to buy existing marijuana-related businesses. One possibility is a vaporizer manufacturer, a mainstay of the medical-user community, because it creates steam (much like the vaporizers of our childhood), instead of smoke.

Privateer Holdings, marijuana PEU.

We are a private equity firm strategically investing in the emerging legal cannabis field. 
This may be the sign of PEU ubiquity.  

Wednesday, December 26, 2012

Carlyle Christmas

The Carlyle Group issued a press release on December 25th.  It announced the sale of Qualicaps, a Japanese drug capsule maker.  Carlyle purchased Qualicaps in October 2005.

Under Carlyle's seven years of ownership revenues grew 50%.  When Carlyle purchased Qualicaps the press release stated:

Steady market growth is also expected for hard capsules in the health and nutrition sector. 
How much market growth was expected vs. the result of Carlyle's global hegemony?  Qualicaps was the second largest global capsule maker in 2005.  It's still #2.

Qualicaps has a more than 20% market share in the pharma-grade capsules segment, the largest segment of the capsule market

Carlyle didn't reveal the price paid for Qualicaps, but it shared the expected $654 million in proceeds from the sale to Mitsubishi Chemical Holdings Corp.

Chuck Hagel PEU

Ex-Senator Chuck Hagel sits on the advisory board of Corsair Capital. a private equity underwriter (PEU) focused on the financial services industry.  Hagel's PEU appointment came in February 2009  His Corsair bio states:

Prior to his election to the U.S. Senate, Senator Hagel was president of McCarthy & Company, an investment banking firm in Omaha, Nebraska. 

He also serves on the Board of Directors of Chevron Corporation and Zurich’s Holding Company of America; and the Advisory Board of Deutsche Bank America, and is a Senior Advisor to Gallup.
Hagel also serves as Senior Advisor for McCarthy Capital.and director of Wolfensohn and Company, an investment and advisory firm specializing in emerging market economies..

The Pentagon helped make the world safe for American branded multinationals.  Hagel faces a difficult nomination for his stance on Israel and the looming war with Iran over nuclear technology.

Update 1-7-13:  President Obama nominated Hagel for Pentagon Chief.   So far the press is silent on Chuck's PEU ties.

Monday, December 24, 2012

American Christmas Update

It's Christmas Eve and this year's flight found the airline close to emerging from bankruptcy.  I recalled last year's crew, which went to extra lengths to share the spirit of the Season.  They inspired this poem

Twas two nights before Christmas
and all through the plane,
weary travelers expected the usual inane.
But this safety briefing rang with humor and heart
that no corporate script could ever impart.

Travelers perked up their ears, smiles broadened wide
as Stewardess #1 delivered line after line.
The pilot announced he and the first mate
would hold up the trip, making us a little late.
Important packages were destined for the hold.
Gifts for our loved ones, young and old.

These acts took place on one solitary flight 
of an airline in bankruptcy, what a terrible plight.
Pay will be cut and pensions obliterated,
so executive bonuses can be liberated.

Yet this crew set aside the cards they face,
giving great joy to the human race.
Keep this a secret, whatever you do.
Corporate PR would never approve.

Christmas flickers in each heart's light,
especially in those facing challenges of blight.
Many thanks to the creative word stew,
the pilot, first mate, the whole inspired crew.

They brought me home for Christmas,
long before the plane finished its flight.
Love and joy to all,
and to all a good night!
The flight attendant said they'd struck a deal, with less pay, higher costs for health insurance and less retirement (from frozen pension plans).  She just wanted it over with.  At the end, she said she was thankful to have a job.

My flying experience this past year involved full planes.  This Christmas' fare wasn't cheaper than last.  Where will the employee savings go?  How will management incentive compensation grow on the backs of workers?  It remains to be seen

Sunday, December 23, 2012

It's a Carlyle Christmas

International Business Times reported on Christmas week's financial news.  It included:

Goldman Sachs (NYSE:GS) and Carlyle Group (NYSE:CG) are among a number of defendants that will go before United States District Judge Edward Harrington in Boston, for what they say are legitimate private-equity practices against investor allegations that buyout firms and their bankers colluded to rig offers on takeovers, according to Bloomberg.

Other stories included the expected UBS $1.5 billion fine for LIBOR rigging, a suit by credit unions against Bear Stearns/J.P. Morgan for misconduct in selling mortgage backed securities, a potential £350 million RBS fine for LIBOR rigging, and Morgan Stanley paying $5 million for selectively sharing sensitive Facebook financial information in the IPO process.

Meanwhile, Carlyle invested in an energy private equity venture, NGP Energy Capital Management.  NGP has $12.1 billion in assets under management.  Carlyle expects U.S. domestic energy to boom.

Carlyle’s growing natural resources investing platform includes energy mezzanine financing, energy infrastructure & power generation (Cogentrix), and commodities (Vermillion).

Will that get Carlyle back on track to make 30% annual returns for its faithful?

Warms the heart, doesn't it.   Moneychangers are back, PEU (private equity underwriter) and otherwise.

Saturday, December 22, 2012

CLO's Higher, Refininancing Wave on Horizon

Reuters reported:

The collateralized loan obligation market has snapped back briskly, with a $620 million vehicle from The Carlyle Group capping a year when U.S. volume was on track to nearly quadruple to more than $50 billion in new CLO issuance.

The story went on to identify a huge wave of corporate credit refinancing.  

But the leveraged loan market will need continued health in this instrument. According to Mark Okada, co-founder and chief investment officer at Highland Capital, 90 percent of existing CLOs will come to the end of their reinvestment periods by the end of 2014, 80 percent of them by the end of 2013.

Is this why Fed Chief Ben Bernanke is printing money like a madman, so PEU affiliates will find refinancing?  Will securitized corporate credit implode again?

Sunday, December 16, 2012

Obama's Corpora-Inauguration

President Obama's second term inauguration will be brought to you by...

Unlike four years ago, Obama now is accepting money from corporations to help pay for the festivities, and there are no limits on those donations.

Clinton and Bush corporafornicated.  Obama plans to corporainaugurate.

PEU's Borrow More on Deals

WSJ reported private equity deals returned to high debt levels seen before the financial crisis:

Private-equity firms are using almost as much debt to fund acquisitions as they did before the financial crisis, as return-hungry investors rush to buy bonds and loans backing those takeovers.

The rise in borrowed money, or leverage, heralds the possibility of juicy returns for buyout groups. Ominously, the surge also brings back memories of the last credit binge around six years ago, which saddled dozens of companies with huge levels of debt. Some companies laden with debt by private-equity firms in the mid 2000s foundered during the recession.

The Carlyle Group just lost its twelfth affiliate, LifeCare Hospitals, to bankruptcy for the reason cited below.

But the more a business borrows, the more it must spend to make debt payments, leading some to default when earnings decline.

Leverage stands at near frothy levels:

In the past six months, the percentage (of PEU equity) has fallen to 33%, according to Thomson Reuters, close to the 31% average in 2006 and the 30% average in 2007.

Recent deals have been done at 30% or less.  Are loan covenants easy again?  Is Carlyle co-founder David Rubenstein tempted again, unable to say no to easy money? Carlyle will put down a mere 25% on DuPont Performance Coatings, financing 75%. 

Tuesday, December 11, 2012

Carlyle's LifeCare Finally Bankrupt

The Carlyle Group's LifeCare Hospitals officially declared bankruptcy, after a several month implosion.  Bloomberg reported:

The company, which was acquired by private equity firm Carlyle Group LP in 2005, said it has agreed to be bought by a group of its senior secured lenders, but hopes to see what results from an auction supervised by the bankruptcy court.
Carlyle closed on LifeCare weeks before Hurricane Katrina struck, filling New Orleans with toxic gumbo.  LifeCare Hospital had the largest number of patient deaths, 25 from Katrina.  This fact was omitted from the Bush White House Lesson Learned report.  The author, Frances Townsend, continues to ascend in the political and corporate stratosphere.

LifeCare makes a dozen Carlyle bankruptcies since early 2008.  The list includes:

Carlyle Capital Corporation
BlueWave Partners
Hawaiian Telecom
IMO Carwash
Stallion Oilfield Services
Verari Systems
Oriental Trading
Church Street Health Management 
LifeCare Holdings
Carlyle's latest bankruptcies are in the health arena, dental and long term acute care.  Both deals had plenty of time for Carlyle to show their operating capabilities.  Each imploded under the heavy weight of debt.

Here's how Carlyle sold the bankruptcy:

LCI Holdco, LLC. (the Company), parent company of LifeCare Holdings, Inc., has reached an agreement to be acquired by Hospital Acquisition LLC, an acquisition vehicle owned by LifeCare's senior secured lenders. The transaction will strengthen the Company's financial health and allow future growth of LifeCare’s business.

The PEU model is proposed as the salvation of health care.  If that's the case, the medicine may be worse than the disease.

The main case is In re LCI Holding Co. Inc., 12-13319, U.S. Bankruptcy Court, District of Delaware (Wilmington). 

Saturday, December 8, 2012

New Tax Frontier to Be Set by Conflicted PEU Guard?

The Peter G. Peterson Foundation established the Coalition for Fiscal and National Security.  Like Blackstone Founder Pete Peterson, this group has deep private equity underwriter (PEU) ties.  Building on work done by HuffPo, I offer the following PEU connections.

Secretary Madeleine Albright - Chair of Albright Capital Management LLC (PEU).  White Female, 75 years old

Samuel R. Berger - Albright Stonebridge - PEU advisor.  White Male, 67 years old

Secretary Harold Brown - retired partner from Warburg Pincus (PEU) and Board of Evergreen Oil, Phillip Morris and Altria Group.  White Male, 84 years old

Dr. Zbigniew Brzezinski - Global power player and fan of centralization, concentrated source of power with universal reach.  His son Ian is a player in the defense sector, with experience in Europe and the Ukraine.  Ian currently heads The Brzezinski Group, with major client Taci Oil, an Albanian firm.  Another son Mark serves as the U.S. Ambassador to Sweden.  White Male, 84 years old

Secretary James A. Baker - Monument Capital Advisory Board (PEU) and historical ties to Carlyle Group (PEU).   White Male, 82 years old

Secretary Frank Carlucci - Monument Capital Advisory Board (PEU) and former Carlyle Group CEO (PEU)  Founder of Frontier Group (PEU).  White Male, 82 years old

Secretary Robert M. Gates - Consults with PEU's as Principal with RiceHadleyGates LLC.  Serves on the Board of Starbucks, an international company.  White Male, 69 years old.  RiceHadleyGates LLC partnered with Khosla Ventures (PEU)

Secretary Henry Kissinger - Founded Kissinger Associates, which joined with McClarty Associates.  Kissinger McLarty partnered with PEUs like Blackstone..  Partner Thomas F. "Mac" McLarty is a Senior Advisor for The Carlyle Group.  McLarty Associates dropped the Kissinger name and currently serves global bastions Nike, GE and Walmart.  White Male, 89 years old,

Senator Sam Nunn - Board of GE, Hess Corporation and Coca Cola - all international firms.  White Male, 74 years old

Secretary Paul O’Neill - Consultant to Peterson's Blackstone Group (PEU).  Served on numerous corporate boards,  including TRW Automotive, Celanese, Nalco and Eastman Kodak.  Blacktone affiliates include TRW, Nalco and Celanese.  Wants tax code fixed to be worthy of America.  White Male, 77 years old

Secretary George P. Shultz - Strategic Advisor at Pegasus Capital Advisors and chairman of the J.P. Morgan Chase International Council.  White Male, 92 years old.

Representative Ike Skelton - Serves on the Board of defense contractor EADS North America  Shelton is a partner with Husch Blackwell, a law firm with PEU clients.  White Male, 81 years old

Chairman Paul Volcker - Former Fed Chief.  White Male, 85 years old

Senator John Warner - Managing Member Old Sailor LLC and Board member for drone maker Aurora Flight Sciences.  White Male, 85 years old

Admiral Michael G. Mullen - Chairman of Coalition for Fiscal and National Security.  Mullen said over two years ago the biggest threat to the U.S. was our national debt.  White Male, 66 years old

100% White, 93% Male, average Age 79.5 and 87% conflicted.  I expect the Pete Peterson's of the world to come out on top in any new tax schema. PEU's look after their own.  It's a Red and Blue PEU world.

Update 12-22-12:  WSJ reported how "small businesses" includes PEU's.

Thursday, December 6, 2012

Rubenstein's Reading Philanthropy

Carlyle Group co-founder David Rubenstein gave The Library of Congress $1.5 million.  The Library will use the funds to establish three reading awards:

The library will create the David M. Rubenstein Prize to honor a groundbreaking contribution in advancing literacy. It’s also creating an American Prize and an International Prize to honor projects that combat disinterest in reading.

Might an early Rubenstein Prize winner be the author of a PEU lingo translation dictionary?   Will the American or International Prize go to someone fighting the latest version of bribing children?  Earlier efforts included Pizza Hut's "Book It" program or Newt Gingrich's national effort of paying kids to read.

Extrinsic motivators, "do this to get that," kill intrinsic motivators.  Education Secretary Arne Duncan uses PEU management theory, privatize, compete, bribe, punish, then double down on same.

Bribes fail to teach respect and responsibility. In place of respect and responsibility, many of today's kids are cultivating a sense of entitlement, which is a "prescription for a lifetime of unhappiness."

It's a shame when education experts can't identify and test their theories, much less learn.

Both rewards and punishments are controlling ways of raising children." Although rewards may sound preferable, she argues, they're just the flip side of punishment and don't produce lasting change. Bribing children and doling out rewards can prompt temporary compliance, she adds, but they don't foster decision making skills, competency, or autonomy.
Rubenstein's PEU house of cards is built on greed, paying interest instead of taxes, and preferred tax status, which makes private equity firms virtual nonprofits.  Rubenstein and his billionaire PEU peers have their version of Race to the Top, the Forbes Richest List.

Update 9-29-13:  Alfie Kohn's latest article is "Encouraging Courage."  That means standing up to the many corporate, top down, extrinsic motivation, compliance oriented methods used to kill kids' intrinsic motivation for learning.  PEU David Rubenstein serves the Bill Gates of the world, who by virtue of their incredible wealth, drive damaging education policy

Monday, December 3, 2012

Congress & Panda Bear Mating: Carlyle Style

The window of opportunity for pandas to mate is .05% a year, according to Carlyle Group co-founder David Rubenstein.  That's a mere one twentieth of The Carlyle Group's historic tax rate of 1%

Private equity underwriter (PEU) Rubenstein gave $4.5 million to help pandas reproduce.  However, he's not keen on sharing his PEU profits with Congress.  Rubenstein and his PEU trade group regularly descended on Capital Hill to keep Carlyle's preferred PEU tax status. 

Note Rubenstein's penchant for sexual analogy.  The Carlyle co-founder cited PEU excesses leading to the financial crash as "like sex."  Politicians, both Red & Blue, have long been in bed with PEU's, greedy financial manipulators.  Policy making billionaire Rubenstein can call them by name.

My guess is Rubenstein wants politicians to get together and make him more money.

Sunday, December 2, 2012

Gen. Peter Pace's Board Attributes

Retired General Peter Pace occupies ten director chairs.  He provides board governance for the following firms:

Berman Capital
SM&A Strategic Advisers
Pike Electric
ILC Industries
Pelican Products
AAR Corp.


Qualys, where Pace served on the board since 2009, recently went public.  They state in their S-1:

We believe that Gen. Pace possesses specific attributes that qualify him to serve as a member of our board of directors, including his experience as a director of technology and defense companies and his background in public service. 
General Pace's stature in the Government-Corporate Monstrosity, Eisenhower's MIC on trillions in federal steroids, doesn't hurt. 

Walmart Drops Health Coverage for Certain Part Time Employees

The slow shedding of employer health coverage inched forward, according to HuffPo:

Walmart, the nation’s largest private employer, plans to begin denying health insurance to newly hired employees who work fewer than 30 hours a week, according to a copy of the company’s policy obtained by The Huffington Post.

Under the policy, slated to take effect in January, Walmart also reserves the right to eliminate health care coverage for certain workers if their average workweek dips below 30 hours -- something that happens with regularity and at the direction of company managers.

Walmart declined to disclose how many of its roughly 1.4 million U.S. workers are vulnerable to losing medical insurance under its new policy. In an emailed statement, company spokesman David Tovar said Walmart had “made a business decision” not to respond to questions.

The light at the end of the PPACA tunnel is a train.  The race to the lowest global common denominator continues on worker pay/benefits.  With employers doing less and Uncle Sam tapped out, a much greater burden is headed your way.   You may be on your own for health care and retirement.

Update 2-17-13:  Many on their own for retirement are not prepared.