Sunday, January 21, 2018

PES Sinks Under Debt Funded Dividends to PEU Parent Carlyle Group

Reuters reported:

Philadelphia Energy Solutions LLC, the owner of the largest U.S. East Coast oil refining complex, announced to its employees on Sunday that it plans to file for Chapter 11 bankruptcy.
PES is owned by The Carlyle Group and Energy Transfer Partners-Sunoco Logistics.

Carlyle put up $175 million in 2012 in exchange for two-thirds of the new company and full responsibility for day-to-day operations.
Carlyle mined debt funded cash from PES and did so more than once:

About $121 million of the loan proceeds were paid as distributions to Carlyle and to ETP. The loan also funded a $25 million payment to preferred unit holders at Carlyle.

Expecting a boost in cash from an IPO, Carlyle, ETP and other smaller investors took out an additional $260 million in payouts in 2015, regulatory filings show.
Moody's downgraded the company's debt in November 2017, saying:

The downgrade of Philadelphia Energy Solutions R&M's ratings reflects the very high risk of default on PESRM's term loan that matures in April 2018.
 Reuter's reported Moody's warning in April 2016.

Moody’s Investors Service warned  that “additional aggressive distributions” to Carlyle and ETP posed a risk to the company’s B1 credit rating
Somehow Carlyle retained a stake in PES despite operating it into bankruptcy.

Following an agreement with its creditors, the company has secured access to $260 million in new financing, and said it expected the bankruptcy filing to have no immediate impact on its employees.

The $260 million in financing secured by the company involves $120 million in debtor-in-possession and exit financing, $75 million in additional capital from Sunoco Logistics, and a $65 million equity investment from the company’s shareholders, led by Carlyle along with the refiner’s management. 
The Carlyle Group made money off PES.  It made an initial equity investment of $175 million.   Carlyle received $105.5 million in 2013 plus $173.2 million in 2015.  That's $278.7 million cash, well above the private equity underwriters' initial investment.

Carlyle was up over $100 million when PES' operator declared the company bankrupt.  The timing is good for an enterprising reporter to ask Carlyle co-founder David Rubenstein about this development.  Davos happens this week where Mr. Rubenstein will present twice. 

Rubenstein will also meet with India's Prime Minister Modi.  It's unlikely he will mention PES's or ManorCare's bankruptcies under Carlyle ownership.

Saturday, January 20, 2018

Davos the Epitome of Western Corporate Greed


For whom has the world improved?  The global billionaire corporate class that sponsors the World Economic Forum.  Consider the state of the average worker:

"the average American worker has not been paid more since 1974 for an hour’s work."
That's 44 years with stagnant worker wages.  The World Economic Forum started in 1970.  It became the must attend meeting for Western corporate chiefs and sponsored politicians

“We are seeing a flowering of corporatism where government is designed to maximize the opportunities of giant influential companies and industries that spend a lot of money lobbying,” he said. “We continue down that primrose path today with yet another cycle of deregulating designed to help corporations.”
The irony is that voter push back against self-serving politicians got Donald Trump the White House, which he is using to enrich his personal empire.

In promoting their 2018 event the World Economic Forum stated:

"Citizens yearn for responsive leadership; yet, a collective purpose remains elusive despite ever-expanding social networks. All the while, the social contract between states and their citizens continues to erode."
And the billionaire boys at Davos will ensure it continues to erode.

Update 1-22-18:  The billionaire boys took home 82% of all new wealth in 2017.  The bottom half took home nothing, nada, zip.   WEF sponsors have been supremely successful.  The Billionaire Boys Club lobs softball questions to make members look good.

Thursday, January 18, 2018

PEU Speakers at Davos 2018


Private equity headliners at the World Economic Forum in Davos, Switzerland are familiar faces.  Blackstone Group founder Stephen Schwarzman will speak on "Building Saudi Arabia's Future Economy."

One bullet point is "new opportunities for investment."  Will Stephen speak on the plight of detained Prince Alwaleed bin Talal, currently held in a high security prison?  Oddly, Carlyle's David Rubenstein made big money off the Prince in the early 1990's.

Schwarzman will also address "Global Markets in a Fractured World" alongside the former CFO of The Carlyle Group.

Carlyle Group co-founder David Rubenstein will talk about "The Next Financial Crisis" alongside former brother-in-law Kenneth Rogoff.  Rubenstein will also moderate a discussion on retail supply chain innovation.  Will Rubenstein have on Supreme street-wear and Golden Goose Deluxe sneakers?  He is ever the salesman.

Global Technology Partners' Ashton Carter will address "Future Shocks:  Cyberwar without Rules."

Generation Investment Management's Al Gore will revisit climate change in a session titled "Responding to Extreme Environmental Risks", "Stepping Up Climate Action." and "Climate's Two Degrees of Separation."  Former Vice President Gore didn't make the "How Do We Stop Sexual Harassment" panel.

The World Economic Forum is a symbol of greed and accumulation of power/influence which broke a number of societies over the last few decades.  That private equity underwriters (PEU) are advising the reformation of Saudi Arabia is darkly comedic. 

Sunday, January 14, 2018

Saudis Going to Davos, bin Talal Lands in High Security Prison


Saudi Prince Alaweed bin Talal has been transferred to a high security Al Ha'ir prison.  News report indicates Prince Alwaleed's leverage to demand a trial or negotiate a deal is "dwindling by the day." 

Trial by jury used to be important to our federal republic and a key feature of international expectations.  It's clear strong counter-puncher President Donald Trump will not intervene on the Prince's behalf.

The Saudis will send a delegation to the 2018 World Economic Forum in Davos, Switzerland.  ArabNews reported:

Saudi Arabia has accepted an invitation on behalf of senior policymakers, in addition to official WEF partners like Saudi Aramco and Saudi Basic Industries Corporation (SABIC).
In addition to placing bin Talal in a high security prison the Saudi government has taken over BinLaden Group, the country's largest construction company.

Holding people without trial and seizing family owned corporate assets should be important to a group concerned about economic fairness and justice.  The Davos boys have long been a club that enriched one another.  Few high profile people have spoken out on Prince Alaweed bin Talal's behalf.

If Davos is true to form attendees will cater to louts who can push money their way, ignoring how such leaders flout basic civil liberties. 

Thursday, January 11, 2018

Trump's Billionaires Boys to Club at Davos


President Donald Trump's economic team will join him in Davos, Switzerland for the annual World Economic Forum meeting.  Treasury Secretary Steven Mnuchin and Commerce Secretary Wilbur Ross will chaperone America's petulant President/Commander in Chief.

Here's what CNBC had to say about Ross in 2014:

Billionaire vulture investor Wilbur Ross knows a crisis when he sees one. He likes to buy stuff when a crisis becomes more like desperation. And he's really good at it. That's why he's rich.

Half billionaire Steven Mnuchin earned the nicknamed “foreclosure king” for purchasing distressed mortgages during the financial crisis and evicting thousands of homeowners.

The last time Trump's billionaire boys hung out with their peers was the Milken Global Conference, sometimes called "Davos with better weather."

Might Trump express his gratitude given the Davos boys created the fertile conditions that got him elected?  The Clinton Global Meeting grew to Davos like stature, a place to rub elbows and push money around to friends.

There's irony in Trump is attending the very meeting he slammed as a Presidential candidate, more proof that election promises stay with the campaign. Both the Red and Blue political teams do it.

Energy Secretary Rick Perry attended Davos in as Texas Governor.  Governor Perry gifted The Carlyle Group's Vought Aircraft with $35 million.  Rather than create 3,000 new jobs Carlyle cut 35 positions.  Perry gave Carlyle $1 million per job eliminated over a six year period.

Those who aren't yet in the billionaire class, serve the billionaire class.  Trump's team will be in Davos to serve the uber-rich.  

Wednesday, January 10, 2018

Carlyle Group Writes Down 93.5% of China Fishery

FT reported

The Carlyle Group, the private equity firm that spent $186.6m on a minority stake in China Fishery in 2010, has reduced the valuation of its own investment to $12m, according to documents it has sent investors. 
That's nearly a 94% asset write down.   Debt can become worthless when the asset base evaporates.

One private equity executive in Hong Kong describes the group’s finances as “a spaghetti structure”. His company looked at buying China Fishery last year before deciding that the debt burden was too heavy. “It is difficult to sort out the inter-company loans, there is a lot of debt at every level and the [value of its] hard assets are low compared to the level of borrowing, which is insane,” he says. “Why would anyone underwrite that much debt?”
That's a question for Carlyle and our PEU economy.  It's interesting to hear a private equity executive criticize his industry's business model.  How often do the greed and leverage boys accuse one another of excess?

Monday, January 8, 2018

Two Weeks to Davos, Where Billionaires Yearn


The World Economic Forum Annual Meeting will reconvene in Davos, Switzerland on January 23rd.

Socially, citizens yearn for responsive leadership; yet, a collective purpose remains elusive despite ever-expanding social networks. All the while, the social contract between states and their citizens continues to erode.
Translated:  Leaders don't listen to the people they supposedly serve.  Instead they focus on the needs of their super rich donors who are likely to employ them post public service.  The eroding social contract makes citizens fearful and angry, especially as nearly all economic gains have gone to the wealthy and uber wealthy.  Davos is a gathering of these two groups, political leaders and the super rich, many of whom are corporate chiefs.  That's the group that refused to raise their hands when asked if they would use the tax cut to increase worker pay. 

Davos 2018 has the following plans:

We can shape the future by joining this unparalleled global effort in co-design, co-creation and collaboration
The Davos crowd co-designed a political system that only listens to money.  They co-created a world that caters to billionaires and their needs to have more.  They fractured the world over the last two decades.  The public just began to notice on a widespread scale what the greed and leverage boys have accomplished.

Do you trust the group that employed greed to fracture the world to repair their damage?  It looks like a Gary Cohn gathering, most of you have your hands down.

Update 1-9-18:  President Trump will attend Davos.  Might Trump express his gratitude given the Davos boys created the fertile conditions that got him elected.  The Clinton Global Meeting grew to Davos like stature, a place to rub elbows and push money around to friends.  The irony is Trump is attending the very meeting he slammed as a Presidential candidate.  More proof that election promises stay with the campaign.