Monday, April 29, 2013

Carlyle Group is Deliberately ?

The Carlyle Group published an Annual Review and Corporate Citizenship Report.  The co-founders' letter mentioned LifeCare's bankruptcy and Synagro's equity write off.  They didn't mention Church Street Health Management, another Carlyle affiliate that went bankrupt in early 2012.

LifeCare lost 25 patients in the aftermath of Hurricane Katrina.  The hospital with the highest death toll warranted not one mention in Fran Townsend's Lessons Learned Report, enabling Carlyle to keep their good name.

Synagro bribed the wife of Rep. John Conyers D-MI, Monica Conyers.  Synagro declared bankruptcy last week.

Church Street Health Management settled with Medicaid for billing for unnecessary procedures for low income children.

ARINC received a 33 month ban from the World Bank for "procurement violations." 

Carlyle is deliberately different, causing heavy losses from poor management theory.  They will never learn.

Update 5-6-13:  The Baltimore Sun reported on the Synagro bankruptcy.  "Synagro has a contract with Baltimore to operate and provide equipment at Patapsco Wastewater Treatment Plant on Asiatic Avenue and Back River Wastewater Treatment Plant on Eastern Avenue.  The plants treat wastewater for the city, and Synagro recycles the byproducts for use as fertilizer and as an energy source, said Tom Becker, a company spokesman. The plants' assets, and wastewater treatment plants in Philadelphia and Sacramento, will be included in the sale to EQT but not in the Chapter 11 filing, the company said.

Partners Plan to Cash In Carlyle Units for $8.2 billion?

SEC documents show The Carlyle Group, a publicly traded private equity underwriter (PEU) filed a shelf registration, meaning some Carlyle partners are ready to monetize their holdings.  Potential proceeds could total:


The registration did not indicate which Carlyle partners wish to cash in, Carlyle's legendary co-founders/associates, Mubadala Development Corporation or CalPERS. 

The shelf registration at 264 million shares is nearly 7.5 times Carlyle's IPO float of 35 million shares   Carlyle issued  a press release on the filing. 

Sunday, April 28, 2013

Chinese PEU Stories

Not every private equity deal turned to gold in China.  Sure, The Carlyle Group's investment in China Pacific Life ended up a ten bagger, but other PEU's have not had similar luck.  South China Morning News ran a series of articles on PEU investments, the kind that won't be found at the bottom of a raiinbow:

Chinese PEU investments aren't yet dog food or infant formula, both tainted with toxic melamine by Chinese manufacturers.  Ironically, Carlye invested in Yashilli, an infant formula maker, with an aim to produce high quality, i.e. safe baby milk.

Despite Carlyle's best efforts, even poor Chinese parents find a way to import baby formula.

"If China cannot even handle baby food, what can we trust?"

It seems Carlyle's quality promise didn't change things for many Chinese citizens.  However, New Zealanders might be happier given Yashili's plans to build a $100 million infant formula plant in their country..

Private equity and China's central planners have much in common.   Neither are worthy of trust.

Thursday, April 25, 2013

Rubenstein's Preeminent PEU Contributions

Newswise reported:

The 2013 American Academy of Arts & Sciences class includes Nobel Prize winner Bruce A. Beutler, philanthropist David M. Rubenstein, astronaut John Glenn, actor Robert De Niro and singer-songwriter Bruce Springsteen.

The Academy selected the new Fellows as a result of their preeminent contributions to their disciplines and society at large. The honorees will be formally inducted into the Academy on October 12 at its headquarters in Cambridge, Massachusetts.

"Election to the Academy honors individual accomplishment and calls upon members to serve the public good," said Academy President Leslie C. Berlowitz. "We look forward to drawing on the knowledge and expertise of these distinguished men and women to advance solutions to the pressing policy challenges of the day."

One of the nation's most prestigious honorary societies, the Academy is also a leading center for independent policy research. Members contribute to Academy publications and studies of science and technology policy, energy and global security, social policy and American institutions, and the humanities, arts, and education.
Philanthropist David Rubenstein, co-founder of The Carlyle Group, makes his money by levering, then streamlining companies.  This can involve dumping the worker pension, as Carlyle did in the case of RAC and Brintons, two British companies.

Private equity underwriter (PEU) Rubenstein just pledged $10 million to Thomas Jefferson's Monticello, a magnificent estate just outside Charlottesville, Virginia.

"The gift will significantly accelerate our progress to create the landscape of slavery along Mulberry Row." 

Jefferson became a PEU pioneer by borrowing heavily, using slaves as collateral.  Rubenstein and his PEU ilk contributed to America's shrinking middle class by exporting jobs overseas and stashing investment vehicles in foreign tax shelters.

Private equity's contributions to society at large are more like a cancer, something to be excised.  Instead Red and Blue politicians cater to this manipulative investment class, enacting tax laws, budgets and regulations to benefit their PEU sponsors..

Carlyle Flushes Synagro

The Carlyle Group's latest bankruptcy is Synagro Technologies, an infrastructure play that never seemed to recovered from bribing the wife of Rep. John Conyers (D-MI). 

Synagro joins other bankrupt Carlyle affiliates, referred to as rare missteps by WaPo:

Carlyle Capital Corporation
BlueWave Partners
Hawaiian Telecom
IMO Carwash
Stallion Oilfield Services
Verari Systems
Oriental Trading
Church Street Health Management 
LifeCare Holdings
Synagro Technologies

It's hard to know who Carlyle will blame for their lack of performance.  They cited a puffery defense in SemGroup shareholder lawsuits.  After claiming in SEC documents that 25 patient deaths in LifeCare facilities post Hurricane Katrina didn't hurt the company financially, LifeCare's bankruptcy filing said the company never recovered from its Hurricane Katrina hit. 

PEU debt put LifeCare under and flushed Synagro.  The question is did other Carlyle funds have credit default swaps on Synagro?  Did one fund lose while others won?  That would fit the PEU way, greed, 30% annual returns, unlevel playing field.... 

Sunday, April 21, 2013

Rubenstein's Patriotic PEU Philanthropy

The AP reported:

One-time slave quarters will be recreated at Thomas Jefferson’s home at Monticello, and more of the Declaration of Independence writer’s living quarters will be restored using a $10 million gift from a philanthropist who has a keen interest in the nation’s history.

Mulberry Row, the community where slaves lived on the Virginia plantation, will be reconstructed with the funds. Monticello officials plan to rebuild at least two log buildings where slaves worked and lived and will restore Jefferson’s original road scheme on the plantation. The gift will also fund the restoration of the second and third floors of Jefferson’s home that are now mostly empty and will replace aging infrastructure.

Businessman David Rubenstein, the co-CEO of The Carlyle Group private equity firm, announced his gift on Friday night. It is one of the largest ever to the Monticello estate.

Thomas Jefferson was a pioneer in the use of leverage to grow his business activities, based on slave labor.   The Smithsonian reported:

It had long been accepted that slaves could be seized for debt, but Jefferson turned this around when he used slaves as collateral for a very large loan taken out in 1796 from a Dutch banking house in order to rebuild Monticello.  He pioneered the monetizing of slaves, just as he pioneered the industrialization and diversification of slavery.

The Carlyle Group's David Rubenstein perfected borrowing to buy companies, to fund dividends paid to sponsors (like Carlyle) and to minimize tax liability. He did so in an era where corporations became people.

Rubenstein told The Associated Press he has become a student of Jefferson in recent years since purchasing several copies of the Declaration of Independence and came to admire the man who wrote that “all men are created equal.
Jefferson went from "all men are created equal" to borrowing against his slave position.  He later refused to release his slaves, despite funding for such a thing from a dear friend's will.

Might such a gift ensure McIntire School of Commerce continues charging premium tuition and teaching private equity underwriter (PEU) ways?  Jefferson, it turns out, was a PEU pioneer.

Friday, April 19, 2013

PEU Daddy! Dat's Sum Lo Taxes...

Dealbook highlighted the many ways America's tax system caters to private equity underwriters (PEU's). 

1  Carried Interest
2.  Management Fee Waivers
3.  Limited Partner Loophole
4.  S Corp Loophole
5.  Exception to publicly traded partnership rule
6.  Supercharged public offerings
7.  Enterprise value (selling interests to PEU management company at capital gain rates.
8.  Angel Investor Loophole
9.  IRA diversions
10.  Interest deductions

PEU founders garnered these benefits, courtesy of Congress et al the last two and half decades.  Red and Blue politicians in Congress and The White House created modern day robber barons. Together they spread the reach and influence of the Government-Corporate Monstrosity, Eisenhower's Military-Industrial Complex on trillions in federal steroids.

Wednesday, April 17, 2013

Milken Institute Gives Rubenstein Two Slots

Carlyle Group co-founder David Rubenstein will speak on two different panels at the annual Milken Global Conference, which runs from April 28 to May 1.

Maria Bartiromo will moderate Rubenstein's Panel #1 on April 30, 2012.

8:00 AM - 9:15 AM

Big Goals, New Strategies and the Future of High-Level Philanthropy

Yuri Milner, Founder, DST Global
David Rubenstein, Co-Founder and Co-CEO, The Carlyle Group
Tom Steyer, Co-Founding Director, Center for the Next Generation; former Managing Partner, Farallon Capital

Moderator:   Maria Bartiromo, Anchor, CNBC

Philanthropy is changing around the world. From sharpening missions to increasing focus on execution, measurement, outcomes and impact, a social investment revolution is underway. With government budget crises and retrenchment in social services, attention is shifting to the private sector and the innovations and solutions that will drive philanthropy's future. Yet even the most successful philanthropists may lack the financial resources necessary to accomplish audacious goals. How are they tackling the great challenges? How do they leverage their resources to drive change? What are the impediments? Is collaboration achieving results? A group of global change agents who are taking philanthropy to the next level discuss their goals, frustrations and successes, and how they see philanthropy's next phase. 

Rubenstein will interview other guests on Panel #2 that same day.

2:30 PM - 3:30 PM
A Conversation With Gary Becker, David Rubenstein and Robert Rubin

Gary Becker, Nobel Laureate; Professor of Economics and Sociology, University of Chicago

Robert Rubin, Co-Chairman, Council on Foreign Relations; former U.S. Treasury Secretary

Moderator:   David Rubenstein, Co-Founder and Co-CEO, The Carlyle Group

In this session, Carlyle Group co-founder David Rubenstein interviews former U.S. Treasury Secretary Robert Rubin and Nobel laureate economist Gary Becker about global economic trends, public finance and the capital markets. Join us for a multifaceted discussion among three renowned leaders of finance.

Milken, always the promoter, framed the event as:

"Where the World Connects": Annual Milken Institute Global Conference Brings Tony Blair, Bill Gates, Al Gore and Other Leaders to Los Angeles.

Now that's a PEU headliner list.

Update 4-26-13:  Maria promoted her Milken slots on CNBC, including the Rubenstein one.  

Update 5-10-13:  According to one presenter at Milken (and recorded by one viewer), workers are "screwed"  It's the PEU way in the global race to the bottom on worker pay/benefits, taxes and regulation. 

Sunday, April 14, 2013

PEUropean Dividend Recaps Back

FT reported:

In 2005, The Carlyle Group added debt to German car part maker Edscha and paid itself a €60m dividend. The 139-year-old company filed for bankruptcy in 2009, despite Carlyle reinjecting €25m in the company and amid wider difficulties for the German car industry following the financial crisis.
“If companies are left very levered for protracted periods, most will suffer from the effects of low investments and sporadic crises so that the business does not prosper,” Jon Moulton, founder of private equity firm Better Capital, said. “Failures of companies post-dividend recaps will definitely bring the private equity industry back into the political focus.”

Hardly,  politicians court private equity underwriters (PEU's) like The Carlyle Group and Bain Capital.  Sometimes they are one and the same.  Mitt Romney's Bain Capital conducted a dividend recap on WorldPay.  With a new $1 billion loan, roughly $500 million in dividends will be paid to owners.

Wednesday, April 10, 2013

Fed Minutes Pre-released to Carlyle Group

CNBC reported the early release of Federal Reserve Board minutes went to more than Congressional staffers and trade groups:

A list of recipients obtained by CNBC reveals that at least 12 banks, a Wall Street law firm, a hedge fund and a private equity fund were on the distribution list that got the minutes early.

The banks included Fifth Third, Citigroup, UBS, Barclays, U.S. Bancorp, Goldman Sachs, Wells Fargo, HSBC, BNP Paribas, BB&T, JPMorgan Chase and PNC.
Sullivan & Cromwell, one of the most powerful Wall Street law firms, also got the email. 

The email was also sent to King Street Capital Management, a hedge fund with $20 billion under management, and private equity firms The Carlyle Group and The Cypress Group.

CNBC provided no insights on who sent the e-mail early or why.  However, Bloomberg did:

Brian Gross, a member of the Fed’s congressional liaison staff, distributed the March 19-20 minutes of the Federal Open Market Committee meeting at 2 p.m. yesterday.  

The release was “entirely accidental,” Smith said. “This was a list of professional contacts that one individual had,” she said. “This group of individuals does not in any normal course receive any information early.” The mistake was discovered this morning, according to the central bank.  

How does one accidentally type and e-mail, address it their personal contacts, attach the minutes and press send?

Gross is a former staffer of former Senator Phil Gramm, a Texas Republican who was chairman of the Banking Committee from 1999 to 2001. 
Reuters added:

Long-time watchers of the U.S. central bank could not recall another incident when such a highly sensitive document was released a day early.
This isn't surprising under America's Government-Corporate Monstrosity, Eisenhower's MIC on trillions in federal steroids.  Carlyle Group co-founder Bill Conway likes a PEU tilted playing field.  How could an early release help Carlyle and its PEU brethren?  And how might it help Brian Gross navigate his next high paying job with the GCM?

Africa PEUbiquitous for Carlyle Group

BizCommunity reported:

The African Development Bank and The Carlyle Group will host their inaugural joint initiative called 'In the Board Room' program in partnership with the University Of Cape Town Graduate School of Business "UCT" in South Africa.
The 'in the Board Room' initiative is envisaged for global leaders in business to business schools and campuses across Africa to share their views with sub-Saharan students. During the meeting, senior members of the African Development Bank and The Carlyle Group will conduct discussion driven presentations on business development, ownership and management to UCT business students, alumni and faculty.

Ah, formative students will be indoctrinated into greed, leverage, mining political connections, negotiating settlements without admission of guilt and preferred carried interest taxation, making PEU's virtual nonprofits.

For how many centuries has the West raped Africa?  30% annual returns come on someone's back. 

The African Development Bank put $50 million into Carlyle's sub-Saharan Africa Fund.  That press release highlighted the "in the Boardroom" program:

AfDB and Carlyle will also jointly launch the “In-the-Board-Room” programme, an audio series targeted at African business students. The programme will provide more than 1,000 African business students with access to messages on inspirational leadership, a sense of strategic command and lessons in crisis management
Who can forget Carlyle's Rubenstein's inspirational message on frothy deals with easy debt terms as being "like sex?"  Carlyle's strategic command can be seen from Synagro's bribing public officials to SemGroup's billions in bad energy bets to ARINC's being banned from World Bank projects for nearly three years..

Crisis management is Carlyle's distinctive competency.  It helps when "business media" salivates for the slightest contact with a Carlyle founder.  They only seem able to produce puff pieces on modern day Robber Barons..

Carlyle's Lifecare lost 25 patients in the aftermath of Hurricane Katrina, a distinct failure to manage in a crisis.  Their legal defense was patients became wards of the federal government as soon as FEMA set up in New Orleans.

Under seven years of ownership Carlyle loaded LifeCare with debt, such that the company imploded.  In its bankruptcy filing LifeCare blamed Hurricane Katrina for its demise, not its PEU owners.

Carlyle Capital Corporation was the canary in the coal mine for the September 2008 financial crisis.  CCC imploded in March of '08, after which Carlyle ran from its carcass.

African students will likely not hear any of these stories.  Just as Rubenstein et al opened up Libya for Western financial interests, they'll open up Africa.  Will African leaders have better luck than Gadhafi

Tuesday, April 9, 2013

China Investment Corporation Has Eye on White House

Asian Investor reported on Gao Xiqing, President of China Investment Corporation.  Gao. a Chinese private equity underwriter (PEU), shares the gift of glib with fellow PEU's.

Pressed by the moderator on his next real estate deal, Gao quipped "The White House."  It got a big laugh from the audience

I wonder how it impacted other PEU funnymen, The Carlyle Group's David Rubenstein and Blackstone's Stephen Schwarzman.   It feels like this pair owned the White House since 2001.  Are they ready to flip it for a ten bagger?

NYC Invests $330 Million in Carlyle Group Fund

PEHub reported:

New York City also made a monster $330 million commitment to the latest flagship fund from the Carlyle Group, Carlyle Partners VI LP. The commitment also includes a sidecar fund, Carlyle Partners VI Side Car LP.
Mayor Bloomberg's NYC isn't the only public retirement fund to invest in Carlyle:

The Carlyle Group, which went public in 2012, has targeted $10 billion for its latest mega-fund, which it started raising money that same year.  So far, the fund has gathered an impressive array of limited partners, including the Illinois Teachers’ Retirement System, which committed $250 million, the Florida State Board of Administration, which pledged $200 million, the Michigan Retirement Systems, which committed $175 million, the Texas County & District Retirement System, which pledged $75 million, and the New Mexico Public Employees Retirement System, which committed $40 million.

The Carlyle Group's education on its tax structure revealed:

We basically shield our public unitholders -- we at least attempt to shield our public unitholders from state tax obligations, from effectively connected income so that they have a very simple K-1 that they have to accept as a partner in our partnership.
These stories came out the same day.  Who will connect the dots?  Carlyle wants public money but hates paying taxes.

Wednesday, April 3, 2013

LifeCare Now PEU Free

Law360 reported:

A Delaware bankruptcy judge approved the $320 million sale of LifeCare Holdings Inc. to private equity owner Carlyle Group LP Tuesday, overruling the U.S. government's move to nix the deal because the firm's credit bid didn't account for paying the tax bill generated by the deal.

The government objected to Carlyle's proposed asset acquisition on the ground that the cashless transaction would leave LifeCare unable to pay an estimated $24 million in capital gains taxes, rendering the estate administratively insolvent.

The tax bill is due to Senior Secured lender debt being much higher than the tax basis of LifeCare's assets.  How will this new higher tax basis work its way through Medicare reimbursement formulas for LTAC's?

Private Equity Underwriters love Uncle Sam's business, they just hate paying taxes:

The corporate tax base is eroding because many large businesses are able to avoid the corporate tax rules altogether and choose to be taxed as pass-throughs instead. Bain Capital, the Blackstone Group, the Carlyle Group and other large asset management firms are organized as partnerships, yet take in billions of revenue each year.

LifeCare 's sad history with The Carlyle Group is over.  Carlyle's long term PEU ownership drove the life out of the company.  LifeCare is in the hands of its "Stalking Horse" Senior Secured Creditors who may or may not pay the capital gains tax bill.