Friday, November 29, 2013

Carlyle Co-Founder Buys Bay Psalm Book for $14.2 Million

Carlyle Group co-founder David Rubenstein added another historic treasure to his vast holdings, one of eleven copies of the first book printed in America, Bay Psalm Book.  WaPo reported:

Published in Cambridge, Mass., in 1640, the book is one of only 11 surviving copies and one of the rarest volumes in the world. It is also now the most expensive.

The Bay Psalm Book bought by Rubenstein was one of two owned by Boston’s Old South Church and is one of the finest copies remaining of 1,700 that were originally printed.
You have to love how Rubenstein redefined philanthropy, normally associated with donations of money or assets to a nonprofit organization.  Rubenstein purchased the Bay Psalm Book, like he did other historic documents, Magna Carta, Declaration of Independence, and Emancipation Proclamation.  The private equity underwriter (PEU) did not give these away, but retains ownership, even as these documents are on loan.

Given the record prices of historical document auctions, Rubenstein's holdings keep rising.  It remains to be seen how Rubenstein's philanthropic generosity will weigh against the tremendous economic damage Carlyle and its PEU brethren have inflicted on so many.  Judging the impact of PEU greed over seven generations of workers, that's one karmic challenge.  Someday, Carlyle's founders will meet their maker and their billions will be useless.

If the gatekeeper "sponsor" gives a thumbs up and wink on liquidity recaps, carried interest, and management fees they might want to repent, turn around.  I imagine Hades has a special room for those pursuing "Just Us" in their time on earth. 

Monday, November 25, 2013

Carlyle Group's Flagship $13 Billion Fund

FT reported:

The Carlyle Group has underlined the return of the large buyout funds that were a trademark of the boom years after it secured $13bn for its flagship North American vehicle.

It took Carlyle, its fundraising partner David Rubenstein and 269 investors from 43 countries two years to close the fund, which had a $10bn initial target.

WSJ reported that Carlyle purchased a hedge fund of funds firm, Diversified Global Asset Management Corp.

Recall the boom years went BOOM, causing Carlyle to make over $650 million in capital calls to CalPERS and to roll up its Blue Wave Partners hedge fund. 

Saturday, November 23, 2013

Eagle Killing Duke Energy Adds PEU Kennard

Duke Energy filled the headlines with one story and a press release.  BBC reported the story of Duke Energy's wind farms killing 14 golden eagles and paying a $1 million fine.  Duke is a $50 billion company, so the fine is .002% of the firms current market cap.

Wind energy facilities in 10 US states have killed at least 67 golden and bald eagles since 2008, according to one federal study.  The bald eagle symbolizes America's majestic beauty, great strength, long life.  While wind energy killed eagles over the last five years, private equity underwriters (PEU's) continued their march to acquire and flip the world.

Duke's press release stated PEU William Kennard would join their board of directors on January 1, 2014.  Kennard's PEU lineage involved The Carlyle Group from 2001 to 2009.  He now PEU's with Grain Management.  Kennard joined Grain last month.  Grain Management was founded by David J. Grain.  Grain is a certified, minority-owned business enterprise.  His website bio states:

President Barack Obama appointed Mr. Grain to the National Infrastructure Advisory Council (NIAC) in July 2011. The NIAC provides the President through the Secretary of Homeland Security with advice on the security of the critical infrastructure sectors and their information systems.

I venture Kennard's presence should minimize future fines from the Blue White House.  Kennard joins James A. Hance, Jr., another Carlyle Group executive on Duke Energy's board.  Hance made $263,000 in board compensation from Duke Energy in 2012.  Kennard will make at least $200,000, $75,000 in cash and $125,000 in stock.  Also, Duke pays board members $2,000 per phone call meeting. 

It might be a stretch to connect the killing of America's symbolic strength with greedy, soul-sucking PEU's.  Then again, it might not. 

Update 12-7-13:  The AP reported "Under pressure from the wind-power industry, the Obama administration said Friday it will allow companies to kill or injure eagles without the fear of prosecution for up to three decades."

Sunday, November 17, 2013

Carlyle Co-Founder's Cheap Gas: Unique American Advantage

Crain's Business News reported:

Cheap domestic natural gas supplies will lead to a rebirth of American manufacturing, according to a presentation Thursday by William Conway Jr., co-CEO and managing director of the Washington, D.C.-based Carlyle Group.

"Shale has changed everything. We can use this cheap energy to make a more energy-efficient America," said Conway, who recommended investing in companies that provide supplies, such as pipelines, to the natural gas industry, as well as companies that use a lot of energy, since lower costs of operation will lead to improvements in the bottom line.

"The U.S. has a huge advantage over the rest of the world, including China, because of cheap energy costs. And those costs can be sustained. The reindustrialization of America will give us a competitive advantage for a long time," Conway said. 

Under Bill Conway's tutelage United Components shifted thousands of jobs to China under Carlyle Group ownership (2004-2010).

The man who helped deindustrialize America under the siren song of cheap Chinese labor plans to reindustrialize it with cheap gas?  The catch is Carlyle has major investments in cheap gas and any new industrial jobs will need ample public subsidy.

Despite his long-term optimism in U.S. investment opportunities — he likes health care services and medical devices
Carlyle cut its teeth on Uncle Sam funded companies and sees PPACA as one way to make their next killing.  Obama's health reform was led by a former PEU, who returned to private equity after public service.  PPACA's landscape is a PEU paradise

Recall when Carlyle co-founders words come back to haunt them in court, their defense is "puffery."  I consider Conway's talk a different form of cheap gas, a sales call. 

Friday, November 15, 2013

Geithner PEU's with Warburg

WSJ reported late on a Friday evening:

Former U.S. Treasury Secretary Timothy Geithner, one of the architects of the federal government's rescue of the financial system, is joining private-equity firm Warburg Pincus LLC.  At Warburg, he will serve as president and managing director.
Warburg Pincus test drove Geithner with a $200,000 speaking fee.  Treasury Secretary Geithner was kind to private equity underwriters (PEU's) while in office.  Now he is one.

The Friday night news release is intended to make sure this story is six feet deep come Monday.   

Update 11-16-17:  HuffPo did their part to keep it floating.  Their piece picked up my meme of Dodd-Frank going easy on PEU's.   NYPo noted Treasury Secretary PEUbiquity after public service, "Five of the past nine Treasury secretaries have joined private equity firms since leaving office."  No wonder PEU's keep their preferred tax status. 

Update 11-19-13:  Zerohedge pointed me to Geithner's words when he announced his leave of public service.  "Geithner says it’s “extremely unlikely” he will take a job in the world of finance, but the idea that he is somehow, secretly, working hand in hand with that community persists, and every once in a while someone pulls out records of his phone calls and meetings with CEOs as evidence. Geithner is not really sure what to say about that. “I’m the secretary of the Treasury.” He laughs. “How am I supposed to run a financial rescue if I don’t take phone calls from people?”

Thursday, November 14, 2013

Murthy Water Around Surgeon General Nominee

President Barak Obama will nominate Vivek Murthy, M.D. for Surgeon General, America's medical bully pulpit.  Besides being a talented hospitalist at Boston's Brigham & Women's, Murthy is chair of Doctors for America.

Doctors for America's first campaign occurred in February 2009, one month after President Obama was sworn into office.  Their website lists nearly 70 campaigns conducted by the group.   The following disclosure is on their donation page:

Doctors for America is a project of the Center for American Progress, which has been incorporated and is operated as a public charity. The Center for American Progress has received official IRS recognition of its tax exempt status under sections 501(c)(3) and 509(a)(1) of the Internal Revenue Code. Our federal ID number is 30-0126510. With the exception of conference registration fees and donor gifts ($40 per fleece, $5 per USB), donations will be tax deductible and may be disclosed to the IRS.
Dr. Murthy's Doctors for America is wedded to PPACA, in both design and implementation.

John Podesta, founder of the Center for American Progress, served as the head of President-elect Obama's transition team.  CAP's current President served as senior advisor for health reform at HHS and worked with the White House's Nancy-Ann DeParle on health reform.  DeParle since left the White House to found a health-oriented private equity firm, Consonance Capital Partners.  The Consonance team is made of former JP Morgan Partners members.  They describe their investment strategy as:

The firm targets growth equity, leveraged buyouts, and recapitalization transactions in the lower middle market. Target companies generally have between $20 million and $150 million in revenues. The sources of these opportunities are typically derived from private/family-owned businesses seeking liquidity, growth capital, or both – and large corporations seeking to divest non-core assets. The principals build value for the firm's investors by leveraging their relationships and resources to drive internal growth initiatives, operational improvements, and mergers & acquisitions.
With over 25 years of health care investing, across numerous economic cycles, the team has broad experience across multiple sub-sectors, including:
  • Providers (specialty providers, inpatient and outpatient facilities)
  • Payors (commercial, Medicare, Medicaid, and carve outs)
  • Distribution (pharmaceuticals, products, and specialty)
  • Devices (commercialized products)
  • Specialty pharmaceuticals (commercialized and later-stage development products)
  • Outsourced services (servicing managed care, pharma, and providers)
  • Healthcare information technology

Dr. Murthy may need capital from firms like Consonance Capital going forward.

He (Murthy) also helped found two technology companies related to medicine: Trial Networks, a cloud-based platform for pharmaceutical and biotechnology trials; and Epernicus LLC, a networking site for research scientists.

Time will show how Nancy-Ann DeParle and Dr. Murthy play their political/business hands to their advantage.   President Obama's first Surgeon General had a heart for caring for people regardless of their insurance status.  Dr. Murthy looks like a pure political appointment, a reward for a loyal follower. 

PPACA sets the stage for employers to shed that pesky health insurance benefit, in part or in whole.  Retirees are finding themselves jettisoned into an into individual exchanges by companies wishing to cap the amount of money they pay for retiree healthcare.  With their group health policies eliminated, elderly retirees have to navigate a complex sign up procedure, one that takes hours by phone for each person covered under the plan.

Similarly, PPACA's complexity ensures many Americans will not be able to navigate the signup process.  I couldn't imagine individual high-deductible health plans as the solution to America's legions of uninsureds, but that's exactly what PPACA provides. 

If approved by the U.S. Senate, America will have two years of Dr. Vivek Murthy as Surgeon General.  Watch what happens to employer sponsored health insurance over that period and pay attention to private equity underwriters with ex-politicians making hay over the unique features of PPACA.  Those who set up the field know how to profit from it.

In the immortal words of Vice President Joe Biden, "This is a big fucking deal!" --Biden caught on an open mic congratulating President Barack Obama during the health care signing ceremony, Washington, D.C., March 23, 2010

Watch the deals and decide who's getting screwed.  

Monday, November 4, 2013

Carlyle Goes to China, Again

FT reported on an event that occurred two weeks ago:

Chinese President Xi Jinping was almost effusive as he welcomed an all-star group of global capitalists.

“Many of you are renowned entrepreneurs and business leaders in the world today and you all have profound insight into the global economy,” Mr Xi told the likes of Mike Duke, Walmart CEO, Indra Nooyi, the head of PepsiCo, Muhtar Kent, Coca-Cola chairman, David Rubenstein, Carlyle Group founder, and Maurice “Hank” Greenberg, the former AIG boss. “Your suggestions are a very important source of inspiration for the Chinese government.”
A number of Chinese companies have an abysmal quality record and carry two sets of quality records, one for western buyers and the other for Chinese.  The FT article highlighted President Xi's investigation into western firms for bribes and bad behavior.  They surmise the move to be political, but it could also shore up the market position of Chinese firms.  

By pursuing foreign companies the authorities are sending a message to entire industries that they intend to clean things up in order to provide quality products at reasonable prices in industries about which the public is concerned.

By forcing multinationals to lower prices and improve their offerings they are hoping to raise the bar for domestic competitors as well as provide concrete examples to the masses of how their lives are improving under the new administration.
Two weeks ago Carlyle's David Rubenstein was silent on the prospect of U.S. government default.   Shortly thereafter, The Economist noted the new world of PEU sponsored capitalism, the one that turns private equity underwriters into nonprofits. I refer to this as peu-palism.

Rubenstein once said this about China:

However, the Chinese have been reasonably open to people like us. But we had to have a Chinese face on us. Every one of our professionals is a Chinese native. I feel we are welcome there. And many of the government officials there are relatively easy to meet -- in fact easier to meet than probably in any other country in the world.

An ex-Bloomberg reporter provided PEUReport with this comment on Chinese leaders and private equity:

I can't tell if the PE guys are being insincere when they talk about China or they are actually stupid. There is no way that the Chinese govt would let American firms come in and strip cashout of Chinese companies the way they've been allowed to in the US! I imagine the Chinese welcome the PE guys because they see it as another way (through PE orchestrated mergers) to get hold of more American technology and companies and jobs.
Carlyle loves both the U.S. and China.  PEU boys pit world governments against one another in their race to the bottom on taxes, worker pay/benefits and regulation.  There's little sign of this trend abating.

Friday, November 1, 2013

PEU Whistler

Carlyle Group Managing Director and the Director of Global Communications Christopher Ullman whistled the Titanic theme song to the President of the Bank of China making all well in the PEU world.  Before becoming a private equity underwriter (PEU) Ullman had a smattering of political experiences:

He interned in the office of then-Rep. Chuck Schumer, D-N.Y., working alongside a young Anthony Weiner, who would go on to win seven terms in Congress.  About a year after his graduation in 1986, Ullman returned to Washington and began climbing the ladder in communications: He worked for a small public-relations firm; for a citizens’ advocacy group; for former Rep. John Kasich, R-Ohio; for former Securities and Exchange Commission Chairman Arthur Levitt; and for the White House under President George W. Bush, as spokesman for Office of Management and Budget Director Mitch Daniels.
His twelve years with Carlyle saw assets under management grow from $15 billion to over $180 billion.  Ullman can thank Schumer, Levitt and George W. Bush for their assistance in fertilizing the PEU soil. The Carlyle Group is a virtual nonprofit for federal taxes, much like your local nonprofit community hospital.  That's enough to make any PEU whistle.

Update 12-7-13:  Whistler is set to get an award from United Steelworkers Local 10-1.