Sunday, August 13, 2017

Carlyle Cites PEU Paradox


Carlyle Group co-founder David Rubenstein shared in a recent earnings call:

"I think, final comment, what I’d call the paradox of private equity is that returns are coming down, prices are high. There’s a lot of dry powder by normal standards. So why are so many people giving so much money to people like us? Because they see everything else being less attractive
What has Carlyle done in the past to earn returns for investors?  It launched Carlyle Capital Corporation during an era of high prices and lots of dry powder.  Carlyle's website states:

When The Carlyle Group created Carlyle Capital Corporation in 2006, it was designed to provide attractive risk-adjusted returns for shareholders by investing in a diversified portfolio of fixed income assets consisting of U.S. government agency AAA-rated RMBS securities and leveraged finance assets. Due to the low-risk, low-return nature of the U.S. government agency-backed securities, a large position (and thus a correspondingly large amount of leverage) was required to realize gains substantial enough to warrant the investment. At the time, this approach was time tested in the market for these types of assets.  Unfortunately, extreme volatility and market movement during this liquidity crisis created a hostile environment for CCC and similar types of vehicles.
Carlyle promised to make back investor losses:

David Rubenstein, co-founder of the Carlyle Group, on Thursday pledged to compensate investors hit by the collapse of a $22bn mortgage-backed securities fund his private equity group floated seven months ago. “We have stood behind our products in the past and we are working on ways to address the losses that are being suffered by investors,” Mr Rubenstein told the Financial Times
One investor did not fill compensated for his CCC losses and chose another route for payback, bankrolling a lawsuit against Carlyle for its representations and actions regarding Carlyle Capital Corporation.

There are other paradoxes of private equity, some identified by the business media.  I'll offer:

1.  Pension funds invest in Carlyle, which has been known to dump employee pensions as part of its takeover strategy.
2.  Family offices invest in Carlyle, whose co-founder David Rubenstein refuses to leave an inheritance to his children to establish a family office.
3.  Preferred carried interest taxation continues despite ten years of overwhelming popular support for billionaires to pay a higher tax rate than their gardener or secretary. 
The PEU industry grew mightily from the last paradox.

At a Credit Suisse forum in Miami, in 2013, Rubenstein said of private equity, “Carried interest is really what the business has historically been about—producing distributions for your investors from good sales and I.P.O.s . . . and getting twenty per cent of the profits for yourself.” He went on, “That’s how we’ve really grown our business.” 
That's how Mr. Rubenstein likes it.  America's PEU sponsored politicians kept his wish to continue carried interest despite little to no public support.  That's my PEU paradox for the week.

Rogoff-Rubenstein's Alaska Dispatch News Files Bankruptcy


Alaska Dispatch News reported on its bankruptcy declaration:

Alaska's largest newspaper filed for Chapter 11 bankruptcy protection Saturday evening.

In a prepared statement Saturday, Alaska Dispatch News LLC owner Alice Rogoff, who also has served as publisher, said it was a "truly bittersweet" moment for her.
The filing is a Chapter 11 bankruptcy.  Bankruptcy filings are legal proceedings.  I was not aware Alaska courts are open on Saturday evenings.

It's not Alice Rogoff's first Alaska implosion.  Rogoff, wife of billionaire Carlyle Group co-founder David Rubenstein, couldn't save her Alaska House in New York City.  It closed in 2010.

A local buyer group has been identified and committed $1 million for ADN to pay its bills, many of them in arrears.  Buyers will operate the newspaper starting Monday morning.

Rogoff paid $34 million for the former Anchorage Daily News in 2014.  The reported purchase price is "up to $1 million."

The Rubenstein's have strong Alaska connections.  Rogoff hosted President Barack Obama for dinner in her Alaska home.  Two private equity underwriters attended the dinner, one from Guggenheim Partners and the other from Pt Capital.  The Carlyle Group manages Alaska Permanent Fund money and has an interest in Hilcorp Energy, which has a significant Alaska presence.

Two of Alice Rogoff-Rubenstein's Alaska pet projects sank for financial reasons.  Her husband knows when to stop throwing good money into a sinkhole.  Carlyle did that recently with nursing home giant ManorCare and refiner Philadelphia Energy Solutions. Carlyle has $50 billion in dry powder but won't put a penny more in PES.

Lenders clearly want to tie Mr. Rubenstein and his billions to ADN debts.  When the big money boys no longer trust one another to make good on their debts it's financial crisis time.  Will ADN's failure take us one step closer to that reality?

Friday, August 4, 2017

IPOs Opportunity for PEUnicorn Founders to Cash In?


Blue Apron expected to go public between $15 and $17 per share.  It went public at $10 and closed today at $5.83.  Bloomberg and other financial media ran reports of a 24% layoff but the job reductions are but part of the picture.  Blue Apron plans to open new fulfillment centers with more jobs than those lost.

The initial S-1 revealed Blue Apron's President has private equity underwriter PEU roots:

Matthew B. Salzberg, one of our founders, has served as our president, chief executive officer, and a director of Blue Apron since inception, and previously served as our treasurer until January 2017. Before co-founding Blue Apron, Mr. Salzberg was employed as a senior associate by Bessemer Venture Partners, a venture capital firm, from June 2010 to January 2012, and as an analyst by The Blackstone Group, a private equity firm, from June 2005 to June 2008.

In June 2014, we used a portion of the proceeds from the April 2014 Series C preferred stock financing to provide liquidity to Matthew B. Salzberg, Ilia M. Papas, and Matthew J. Wadiak, executive officers of our company, by repurchasing shares of common stock from them at a purchase price of $16.6586 per share.  Salzberg sold 150,073 share for proceeds of $2,500,006.

In October 2015, Matthew B. Salzberg, Ilia M. Papas, and Matthew J. Wadiak sold shares of common stock to unrelated investors at a purchase price of $13.3269 per share, which was equal to the common stock-equivalent price at which we issued and sold Series D preferred stock in May and July 2015.  Salzberg received $22,001,899 for his 1,650,939 shares.
Currently Mr. Salzberg owns over 47 million shares of Blue Apron.  Here's the breakdown:

Consists of (i) 25,154,605 shares of Class B common stock held of record by Mr. Salzberg, (ii) 19,744,091 shares of Class B common stock held of record by Family Trust Created Under Article V of the Matthew Salzberg 2014 Annuity Trust Agreement, for which Mr. Salzberg and his father serve as co-trustees, (iii) 2,500,000 shares of Class B common stock held of record by The Matthew Salzberg Family 2014 Trust, for which Mr. Salzberg serves as a trustee, (iv) 18,759 shares of Class B common stock held of record by Aspiration Growth Opportunities II GP, LLC, with respect to which Mr. Salzberg has shared investment and voting power and (v) 3,888 shares of Class B common stock subject to options exercisable within 60 days of April 30, 2017 of which 1,944 are vested as of such date. 
Salzberg got nearly $25 million for a small portion of his stock holdings prior to Blue Apron's going public.  His $25 million came from stock sales at prices well above today's close. It's a nice gig when an executive can sell his stock on the inside at a multiple of its current share value.

It's also cool when you can hire your brother:
Shaun Salzberg Design, LLC, which is owned by Shaun Salzberg, the brother of Matthew B. Salzberg, provides software design, implementation, and related services to us as an independent contractor. For these services, we pay hourly fees and reimburse specified expenses. These services were initially provided under a consulting agreement dated October 28, 2015 and, following expiration of the agreement on October 28, 2016, have continued to be provided on substantially the same terms. To date, we have paid Shaun Salzberg Design, LLC an aggregate of $149,550 pursuant to these arrangements. 
While Bloomberg got the employment story wrong this tidbit is enlighteing:

Our tri-class capital structure has the effect of concentrating voting control with our president and chief executive officer, Matthew B. Salzberg, and the other holders of Class B common stock. This structure will limit or preclude your ability to influence corporate matters, including a change of control, and might affect the market price of our Class A common stock. 
I bet Salzberg learned it from Blackstone.  It's a PEU world. 

Tuesday, August 1, 2017

Carlyle Won't Use Dry Powder for PES


The Carlyle Group invested $175 million in 2012 for for two-thirds of Philadelphia Energy Solutions (PES).  The deal received public subsidies and Carlyle did a liquidity recap, loaded PES with debt to siphon off dividends.  Reuters reported:

The refinery owners enjoyed a taxpayer-funded rescue package, which included the creation of a tax-friendly zone, $25 million in grants and environmental liability waivers. 

The company took on the $550 million loan that comes due early next year in 2013 to finish capital projects and pay out dividends to Carlyle and Sunoco. 

The payouts and tax advances reached $480.9 million between 2013 and 2015, according to filings.
Now Carlyle wants to restructure the company with someone else's money.  Insiders say Carlyle hired an investment bank to help tackle PES' debt burden.  

Carlyle has been a big investor in energy and has loads of dry powder but it will not throw good money after bad, especially for an investment that has already returned a multiple of its initial equity position.  

Public subsidy, debt for dividend, and preferred taxation are all common private equity underwriter (PEU)strategies.  Carlyle is skilled at executing the first two and keeping the latter.  Carried interest taxation remains soundly in place a decade after our PEU sponsored Congress first considered removing the billionaire tax break.  Mr. Rubenstein went to Capital Hill many times to keep his preferred taxation.  He got his way as politicians Red and Blue love PEU.

Saturday, July 29, 2017

Anthony Scaramucci's Skybridge: Fees in the Clouds


Brash Wall Street financier Anthony Scaramucci successfully translated Trumpish at the 2017 billionaire bash in Davos, Switzerland.  Scaramucci announced the sale of Skybridge Capital, his hedge fund of funds, while at the World Economic Forum meeting.  The price tag for China conglomerate HNA Group and RON Transatlantic EG dropped from a rumored $250 million to $180 million over the last six months as hedge fund withdrawals grew.  Bloomberg valued the deal at $200 to $230 million.

Scaramucci  received two appointments by President Donald Trump this summer.  His first was to the Export-Import Bank.

Financier Anthony Scaramucci, a prominent surrogate and fundraiser during President Donald Trump's campaign for the White House, has joined the embattled Export-Import Bank in a top position.

Scaramucci became a senior vice president and chief strategy officer at the agency on June 19.
His second appointment elevated Scaramucci to White House Communications Director.  Oddly he never occupied the Ex-Im Bank slot:

Scaramucci has been on unpaid leave from Ex-Im since the day he started there, June 19, a bank spokeswoman said, forgoing his $172,100 salary as chief strategy officer.
The Ex-Im job was essentially a special purpose vehicle (SPV) for Scaramucci to get to Washington.  Once installed in the White House Scarmucci went to work, employing his sales skills.  It turned out Scaramucci speaks Trumpish directly, as he did to the The New Yorker's Ryan Lizza.

Skybridge G II Fund's prospectus dated 1-30-2013 listed fees and expenses of over 10% per year, according to a SEC filing
The purpose of the table above is to assist prospective investors in understanding the various fees and expenses Shareholders are expected to bear directly or indirectly.
That's quite the prospectus showing fees at twice the rate of projected returns.  One's investment could be sucked away over time to pay Anthony Scaramucci and his staff.

In addition Scaramucci earned $200,000 in income from a majority stake in Hastings Capital Group, the principal underwriter for Skybridge's various investment vehicles. It's a form of double dipping, making multiple fees on a transaction.

Hastings Capital Group, LLC, an affiliate of the Adviser, serves as the Company’s Principal Underwriter with authority to sell Shares directly and to appoint Placement Agents to assist the Principal Underwriter in selling Shares.

The Adviser or its affiliates, including the Principal Underwriter, may pay from their own resources compensation to the Placement Agents in connection with placement of Shares or servicing of investors. Prospective investors also should be aware that these payments could create incentives on the part of the Placement Agents to more positively consider the Company relative to investment funds not making payments of this nature or making smaller such payments. 
It's difficult to tell how much Scaramucci will make from the delayed sale of Skybridge Capital as a "principal of the investment advisor."  It will be enough for him to dive into politics without financial worry.  The Blue team's Rahm Emanuel made big money between public service stints.

Chicago is the place where Rahm's personal financial house expanded greatly in terms of resources.  As an investment banker Emanuel made $18.5 million in two and a half years.  His political influence grew as a member of Congress and President Obama's Chief of Staff.   
How far might Anthony Scaramucci go in the Trump White House?  Will he make it to Trump's  #1 advisor once he has his core wealth locked up?  Scaramucci curses like Rahm and is also hyper-competitive.  Both share a potty mouth.  They are but two sides of the same coin, greed and power.  Politicians Red and Blue love PEU.  Scaramucci is the latest appointment in Trump's D.C. swamp. 

Update 7-31-17:  After 10 days on the job the Trump White House dismissed Scaramucci as Communications Director.  

Wednesday, July 19, 2017

Alaska News Boiling Under the PEU Surface?

Disruption made big profits for The Carlyle Group when it correctly read market geography.  It cost Carlyle big when affiliates experienced unanticipated adverse conditions.  Lately Carlyle bet big on energy, trying to get access to undervalued energy assets.  Less than two years ago it struck a deal with Hilcorp Energy to invest in North America energy.  Carlyle's press release stated:

Hilcorp Energy Company ("Hilcorp"), a privately owned oil and gas exploration and development company based in Houston, Texas, today announced the establishment of a newly formed partnership, Hilcorp Energy Development, L.P. (the "Company"), which seeks to acquire, operate and develop onshore oil and natural gas properties and related assets in North America.  In conjunction with the establishment of the Company, the Carlyle Energy Mezzanine Opportunities Fund, L.P. and Carlyle Energy Mezzanine Opportunities Fund II, L.P. ("Carlyle"), funds controlled by The Carlyle Group, have entered into a definitive agreement to invest up to $1.24 billion in the newly formed partnership.
Fast forward to summer 2017 and Hilcorp Alaska is the only bidder for 14 tracts of potential energy assets under Alaska's Cook Inlet.

Hilcorp Alaska LLC, a unit of privately held Hilcorp Energy Co. and an emerging force in the Alaska oil and gas industry, spent over $3 million for exploration rights to 14 federal offshore leases covering about 76,615 acres in Cook Inlet.



It's also the developer of a pipeline that would run across Cook Inlet.

Hilcorp Alaska is moving ahead with its $75 million plan to transport oil across Cook Inlet by subsea pipeline and close a tank farm that is dangerously close to Redoubt Volcano, according to a permit application filed with the U.S. Army Corps of Engineers.
The company's Alaska operation has the following characteristics:

Hilcorp Alaska has over 500 employees, 90 percent of whom are Alaska residents. Alaska is our home. 
Hilcorp acquired its first Cook Inlet assets in 2011.
Earlier this year Hilcorp had a leaking gas line under Cook Inlet:
This line was previously used to transport oil and was converted to natural gas use a decade before Hilcorp acquired it in 2015.
Carlyle's joint venture with Hilcorp was incorporated on 10-16-2015.  It's not clear how Hilcorp Energy Development, L.P. has invested Carlyle's up to $1.24 billion and whether the partnership put any of that money to work in Alaska.

Carlyle co-founder David Rubenstein's wife Alice Rogoff Rubenstein owns Alaska Dispatch News, which reported a number of stories on Hilcorp.  None of them mentioned any potential conflicts of interest due to Rubenstein family investments..

Rogoff bought into Alaska news in 2014 and 2016 saw her commit to publishing a physical newspaper for fifteen years

The story deepens with reports from Alaskan blogger Craig Medred.  His report from July 3rd:

In Alaska, the state’s largest newspaper and by far largest news organization is teetering on the edge of financial disaster with losses reportedly running to several million dollars per year and owner Alice Rogoff now reported to have tried to shop the publication to at least four different corporations. As of yet, there have been no takers.
His June 26th piece offered details about ADN's financial distress:
Rumors circulating around Anchorage that the Alaska Dispatch News was no longer paying its bill have been given credence by a lawsuit filed by the newspaper’s newsprint provider.
Catalyst Paper went into an Anchorage court on June 22 asking for an order forcing Dispatch, which also does business as ADN.com, to pay its March and April paper bills.

Based in Richmond, British Columbia, Canada, Catalyst is the largest producer of newsprint on the West Coast. 

Its suit against the ADN follows another filed against Arctic Partners, Inc., the Tacoma, Wash., company which owns a building on Arctic Boulevard that Dispatch was renovating  as its new print plant and Alaska news headquarters.

Only last fall, the building was emblazoned with a banner proclaiming “Alaska Dispatch News – COMING SOON.” The banner is gone now, and Dispatch appears to have been locked out of the building housing its new press after running up a bill of approximately $1 million with M&M Wiring, an Anchorage electric contractor.
Should Alaska Dispatch News implode it would follow Rogoff's Alaska House in New York City.  It closed in the summer 2010 despite efforts to obtain private and public funding.

Rogoff-Rubenstein's plan to raise $1 million per year from Alaska Permanent Fund money managers mired in Wall Street's meltdown. Oddly, while her husband's personal finances recovered in 2009 and Carlyle monetized affiliates, donors remained hard to find.

Alice Rogoff-Rubenstein turned to the government, which did not deliver. Senator Murkowski failed to submit a $1.5 million federal earmark to fund operations. The Alaska State Legislature passed on a requested $600,000 appropriation.
Will Rogoff-Rubenstein once again seek public support from the state or feds for her pet project?  Her husband hates throwing good money after bad.  He cut off Alaska House.  Is Alaska Dispatch News next?

Update 8-1-17:  Must Read Alaska ran a story on the missing Mr. Rubenstein. 

Wednesday, July 12, 2017

Fed Nominee Quarles Profiting from Public Bank Subsidies a "Nothingburger"


Reuters reported how Fed Nominee Randall Quarles personally profited from public subsidies while working at The Carlyle Group, a politically connected private equity underwriter.  Carlyle's Boston Private received $150 million in TARP funding while the FDIC recapitalized BankUnited so four PEUs could make huge profits.

Those investments earned hundreds of millions of dollars for Carlyle, profits that would not have been possible without government support
Carlyle completed its highly profitable exit of BankUnited in March 2014.   Three months later Quarles left Carlyle to start The Cynosure Group.

"Profiting in the markets isn't a scarlet letter in this Congress."
Carlyle's profits came not from trading in public markets.   They came courtesy of public subsidies.  Quarles oversaw both investments while at Carlyle.  Carlyle exited Boston Private in July 2013.

Quarles will be President Trump's latest PEU appointment, capable of steering the Fed ship in a way that profits his former peers.  Once upon a time that might have been a concern.  Today it's a badge of honor for both the Red and Blue political teams (who jointly love PEU).

Update 7-16-17:  Denver Post raised concerns about Quarles appointment.

Monday, July 10, 2017

PEUs Behind Hamilton Hustle


The Hamilton Project's Advisory Board has benefited greatly from income inequality, something the group purports to reduce.

Launched in 2006 as an economic policy initiative at the Brookings Institution, The Hamilton Project is guided by an Advisory Council of academics, business leaders, and former public policy makers. The Project provides a platform for a broad range of leading economic thinkers to inject innovative and pragmatic policy options into the national debate.
The Hamilton Project "offer(s) a strikingly different vision from the economic policies that contributed to the alarming trends in rising income inequality and a mounting federal deficit."


Private equity underwriters (PEU) are in the top 0.1% and their wealth continues to rise dramatically.  PEU assets under management more than doubled since Bob Rubin founded The Hamilton Project at Brookings.


It's sad that all those pragmatic solutions rooted in evidence and experience failed to improve income inequality since the Hamilton Project's founding.

The Blue team's alignment with wealth and power ended up serving those already with wealth and power.  The greed/leverage boys on the Board of the Hamilton Project have to be grateful.

Saturday, July 8, 2017

Carlyle Weaves Profits from Brintons


The Carlyle Group sold British carpet maker Brintons to Argand Partners, another private equity underwriter (PEU).

"Brintons has been a solid investment for us (Carlyle), performing strongly over the last five years in a competitive global market."
"Solid investment" means a multiple on Carlyle's original equity investment, which oddly arose through buying discounted debt and forcing a bankruptcy. Carlyle shed Brintons pension onto the British public.

Carlyle Group took control of Brintons in 2011 by buying an £18m debt it owed to Lloyds Bank and putting it through an insolvency known as a pre-pack administration. The process sent Brintons’ pension scheme, which had 1,600 members, into the Pension Protection Fund (PPF).

The rescue cost the PPF, a lifeboat for troubled schemes, about £21.5m and resulted in benefits cuts of more than 10% for 700 members who were below retirement age.  
Carlyle's profits came on the back of workers, some of who will no longer have jobs.

Historic carpet company Brintons is aiming to axe around 60 jobs at its factory in Kidderminster as it shuts down weaving of Axminster carpets after more than a century.

The latest move comes just 18 months after Brintons cut another 65 jobs from the Kidderminster workforce.
While the sale price is undisclosed some financial information is available:

Its last accounts show earnings after tax had soared 81 per cent to £14.5 million in the 12 months to October 1, 2016.
Often the sale price is a multiple of earnings.  What multiple did Carlyle achieve in its "lucrative sale of a carpet manufacturer that dumped its pension fund?"

Update 7-9-17:  Brintons is "renowned globally for carpeting the White House, the Kremlin and Buckingham Palace."

Sunday, July 2, 2017

Temptation Returns: Record $23.5 Billion Apollo Buyout Fund


WSJ reported:

Apollo Global Management LLC, the private-equity firm co-founded by billionaire investor Leon Black, has raised $23.5 billion for the world’s largest-ever buyout fund

The record-breaking fundraising is the latest demonstration of a surge in investor appetite for leveraged buyout funds, extending a run of records in recent months. 
NYT reported:

Cash is being raised at a rate not seen since 2008. CVC Capital, based in London, raised more than $18 billion for Europe’s largest buyout vehicle earlier this year, Silver Lake pulled together $15 billion for tech deals, and Kohlberg Kravis Roberts set a record in Asia with a $9.3 billion fund while also putting the finishing touches on a $13.9 billion United States fund.

With so much money sloshing around, it is getting harder to imagine how it all will be invested profitably. The research outfit Preqin estimates there is some $920 billion available in private equity. With leverage, that is more than $3 trillion to deploy.
Private equity underwriters (PEU) count on cheap debt, preferred taxation and rising asset prices.  Take away these advantages and the greed/leverage boys have to scramble to hold things together.  Ironically, Senator Evan Bayh helped Apollo keep its preferred taxation, even as Bayh was interviewing to join the Apollo PEU team.  

Cash being raised at a rate not seen since 2008 brings back memories of the go-go PEU years.  Here's Carlyle Group co-founder David Rubenstein in 2010.  Looking back at the financial crisis he said:

“Debt was offered to you no matter whatVery few of us were able to resist the temptation”--Carlyle chief David Rubenstein 
So what did Mr. Rubenstein do as that cheap debt imploded?

"The flavor of the day is buying your own debt at below face value. I'm buying bank debt in my deal with leverage from the bank that made me that deal"--David Rubenstein in Forbes, May 2008.
There's plenty of PEU cash to make levered deals and buy back affiliate debt on the cheap should the face value of that debt fall.   Apollo Global has $23.5 billion to do just that.

New Carlyle Idea Exchange Planned for U. of Chicago


Carlyle Group co-founder David Rubernstein sits on the board of the University of Chicago, which plans to name a new building after him.  The Rubenstein Forum will be "a place of intellectual, institutional and educational exchange."

The programs for the building will be designed by several focus groups and consultants along with more than 100 plus faculty and staff from the University of Chicago.
I imagine there will be some parameters for planned programs in the Rubenstein Center.  I'll be shocked if this former financial reporter is invited to speak, given what they had to say about private equity underwriters (PEU) in 2011:

I know from personal experience that the financial press is so eager to break news on "deals" that reporters (who are increasingly compensated on the number of "market moving stories" they write) can't afford to be critical of Carlyle, KKR and Blackstone, and risk losing access to people at those firms.

I have seen so many people -- particularly those in their 50s - 70s -- taken apart by what has happened in their industry as greed has hollowed out the economy. These are people took pride in their jobs and held themselves to this invisible standard that we all just took for granted, but is being wiped out. 
The Carlyle Group scares me more than anything I've ever seen on Wall Street. It seems to exist to corrupt politicians and it's hard to know who they even represent.
I watched a video interview of (David) Rubenstein and his arrogance is really beyond tolerance. He was going on about the debt ceiling problem and how there would need to be cuts in services and higher taxes. When the reporter asked him about tax on carried interest he turned really disdainful and said that this "only" amounted to $22 billion over some number of years and this was not serious money. Boy, nothing like everybody doing their small part to save the country from oblivion!
I expect the Rubenstein Center to be a PEU safe space.

Saturday, July 1, 2017

Health Exchange Sale Bagged Gephardt $1.2 Million


The Intercept reported:

The mere prospect of single payer, however, has elicited swift derision from some corners of the party, with Dick Gephardt, the former Democratic House minority leader, laughing off the idea at a health insurance conference earlier this month.

Not in my lifetime,” scoffed Gephardt, when asked if the United States will ever adopt such a system.

Gephardt, who serves as a Democratic “superdelegate” responsible for choosing the party’s presidential nominee, was asked about the possibility of single payer at the Centene Corporation annual investor day conference at The Pierre, a ritzy five-star hotel in New York City.
Prior to serving on the board of health insurer Centene Dick Gephardt was on the board of Extend Health.  Gephardt grossed $1.2 million from his Extend Health stock holdings when Towers Watson purchased the company in 2012. Targeted markets for Extend Health's exchanges included:


  • Retirees with Employer-Sponsored Healthcare Coverage
  • Retirees without Employer-Sponsored Healthcare Coverage
  • Employees with Employer-Sponsored Healthcare Coverage
  • Employees without Employer-Sponsored Healthcare Coverage
(Source Extend Health S-1/A) 
Gephardt may well be expressing his gratitude for being personally enriched by the byzantine health insurance system Democrats foisted on the public, one that eats up more disposable income each year.  Both Extend Health and Centene put millions into Gephardt's pocketbook.  He has blatant conflicts of interest on this issue.

Thursday, June 29, 2017

PEU Deals Back On



Nearly one out of ten corporate buyout in 2017 involved private equity underwriters (PEU).  These are the people who flip whole companies in search of gigantic returns for a handful of executives and their PEU sponsor.    The greed and leverage boys enjoy close relations with leaders of both the Red and Blue political parties.  Red team's Jason Chaffetz is leaving Congress, hoping to land positions on corporate boards.  How many might be PEU owned?  I see Chaffetz getting a PEU appointment straight up.  He just might not do it right away, a strategy employed by Blue Team's Evan Bayh.

Chaffetz could be replaced by Tanner Ainge, co-founder of PEU Prelude Partners and formerly with Jon Huntsman's HGGC.  

There are companies to buy and influence to arrange.  There are Congressional seats to buy, directly or indirectly.  It's the PEU way!

Sunday, June 25, 2017

Ackman Salts Biden's Wound in Vegas


NYPO has an odd story about a dust up between Vice President Joe Biden and hedge fund manager Bill Ackman at the SALT Conference in Las Vegas last month.  The story refers to "wise ass" Bill Ackman, who'd given a half hour talk at the conference that afternoon,  Biden closed the day with his interview.

Conference Chair Anthony Scaramucci, founder of SkyBridge Capital, hosted the dinner for the day's A list speakers.  The media focus on Biden-Ackman interpersonal scuffle could simply highlight a sincere reaction by a grieving father to an insensitive lout.

The title of Biden's talk seems odd,  "Keeping the Momentum: A Conversation on Politics, Prosperity + the American Dream."  Both political parties sold their souls to big donors, who've done remarkably well as the common person lost ground the last two decades.

Biden sat in a position of power for the last eight years, a time when prosperity went to those who already had it.  It's hard to see where Joe Biden's Blue political team has any momentum at all.

Politics now involves a series of campaign positions intended to get voters to press a candidate's button.  Once votes are counted the winner is free to jettison their promises and turn the federal budget toward their political friends and supporters.

Valerie Jarrett spoke on "Democratic Divergence" and Jeb Bush on "Republican Reformation" in a discussion for the future of American politics.  Jarrett's SALT bio omitted her recent position asmember for Ariel Investments' board.

The greed and leverage boys turn out for the SALT Conference:, which fosters one-on-one meeting throughout the event.  It's a place deals can get done.  Founder Scarmucci has his deal in hand, courtesy of China's HNA Group..

SkyBridge Capital’s flagship fund saw net outflows of $1.6 billion for its fiscal year ending March 31, leaving the fund with $5.4 billion in assets, according to a filing with the Securities and Exchange Commission earlier this month.

Scaramucci, an ardent Trump supporter and fundraiser, sold Skybridge to a team of foreign buyers earlier this year in anticipation of landing a gig with the Trump administration.

The deal is expected to close this summer although Scaramucci’s White House ambitions have been delayed.
It remains to be seen if Scaramucci makes the expected $100 million in profits from selling a declining asset to the Chinese.

Scaramucci may join the Trump White House, currently stocked with billionaire private equity underwriters wanting to help their brethren.  Carlyle co-founder David Rubenstein offered insight as to how to profit in the Trump Age.


Big money boys and politicians share out-sized egos and a twisted symbiotic relationship.  Ackman's long been in the Blue camp.  That's what makes reporting the Biden-Ackman dinner skirmish so odd. 

While the media portrays Joe Biden as the unfairly treated party a few elements don't seem quite right.  It doesn't make sense to me that a grieving father would consider running for office, especially the U.S. Presidency.  There is a time when grief is the work.  It makes less sense that a grieving father would brag that they were the better candidate for the election they skipped.  How can one be better if they were brokenhearted?

I'll leave this as another conundrum in our strange world, where the rich and powerful serve the rich and powerful. Might the disintegration our money obsessed leaders foisted on those below be spreading among the ruling class?

Saturday, June 24, 2017

Healthcare Stinks Now with PPACA


Even with PPACA out of pocket healthcare expenses have eaten up more of citizen's income.  Employers and Uncle Sam conspired to shift responsibility for healthcare to the individual while generating market opportunities for companies to profit handsomely off the suffering of people.

So how do the people feel about healthcare?  Lawyers were more esteemed than the healthcare industry in an August 2016 survey.  Only the federal government fared worse than healthcare and pharmaceuticals.


Citizens have paid more out of pocket and gotten less.  My employer sponsored insurance covers less every year and my out of pocket expenses, solely for physician visits, soared in 2016.  Healthcare earned its sorry reputation by overcharging while cutting service and coverage levels.  The data shows both.

I can imagine healthcare getting worse as healthcare corporations optimize profits for their PEU owners.  Yes, PPACA kicked off huge private equity investments in health care companies.  Those firms have funneled massive amounts to sponsors.  Some affiliates will need to be flipped or returned to debt holders, like The Carlyle Group's HCR ManorCare.

KKR's HCA and Carlyle's ManorCare are but two windows into the PEU healthcare world.  Neither reduced costs during the Obama years.

People sense something is terribly wrong in healthcare.  It's hyper-profitization, the want for the greed and leverage boys to grow their billions in holdings.   Smile pretty, because they want to profit from your misery and suffering.

Thursday, June 22, 2017

India PM Modi to Meet with Carlyle's Rubenstein

Daily Mail India reported:

American CEOs expected to meet India PM Narendra Modi on Sunday include Apple's Tim Cook, Walmart's Doug McMillon, Caterpillar's Jim Umpleby, Google's Sundar Pichai and Microsoft's Satya Nadella. 

Among others are Mariott International chief Arne Sorenson, Johnson & Johnson's Alex Gorsky, Mastercard's Ajay Banga, Warburg Pincus's Charles Kaye and Carlyle Group's David Rubenstein. 
PM Modi's visit will take place June 25-26.  The Prime Minister will meet with firms helping India go cashless.  Global leaders serve the corporations, not the people.  Modi is but one.  He's coming to meet with the many.

Monday, June 19, 2017

Milk'em PEU Conference


The father of leveraged buyouts, Michael Milken, hosted his annual conference for 2017.  With the Clinton Global Institute a fond memory billionaires gathered in Beverly Hills to pontificate the best way to get even richer.

The Trump team's former PEUs mingled with their billionaire brethren according to Bloomberg.

This year’s event is a homecoming of sorts for Mnuchin, a former Goldman Sachs Group Inc. partner who later relocated to Los Angeles to invest in banks and films. (PEU - Dune Capital) Commerce Secretary Ross, who made his fortune snatching up and rebuilding distressed businesses, (PEU - Invesco/WL Ross) also slips in easily with the Wall Street who’s-who milling about the Beverly Hills Hilton. Those include PEU Blackstone Group LP billionaires Steve Schwarzman and Tony James, JPMorgan Chase’s Jamie Dimon, Wells Fargo CEO Tim Sloan, hedge-fund billionaire Ken Griffin and billionaire private equity underwriter David Rubenstein of Carlyle Group LP.
I believe the conference theme was "Milk'em in the name of progress and equality."

Sunday, June 18, 2017

PEU Bonderman's Joke About Women


This week's outrage went toward David Bonderman, TPG founder and Uber board member for his comments in an Uber board meeting.  Yahoo Finance reported:

“There’s a lot of data that shows when there’s one woman on the board, it’s much more likely that there will be a second woman on the board,” Arianna Huffington said around six minutes into the recording.

“Actually what it shows is it’s much likely to be more talking,” Uber board member David Bonderman said.

“Oh. Come on, David,” Huffington responded.
Bonderman is one of America's legendary PEU boys.  PEU is an abbreviation for private equity underwriter. Everything is fair game for the self interested greed and leverage boys.  The younger generation seem similarly self interested, including Uber's executives.    

Women cost Bonderman millions when they shopped less at J. Crew.  Have some compassion for the guy.  He's supposed to be going up the billionaires list, not going down.  

Bonderman did apologize and take responsibility for his words.  He resigned from Uber's board that very day.

David Bonderman did not say the last sentence in the image above.  That's my theory, projection, supposition, and/or active imagination.    

But if the shoe fits.........      keep it.  If not, please return using the enclosed label. That may be the greatest lesson history has taught Bonderman regarding capital structure in the retail industry.

Saturday, June 17, 2017

CCC's Failure Tied to Cobalt Energy's Sweetheart Angola Deal for Government Officials?

The Carlyle Group's $1 billion Guernsey lawsuit is yet to be decided.  Several Carlyle chiefs testified last summer in the failure of Carlyle Capital Corporation.  Crown Dependency and British Overseas Political News shared a WSJ piece::

In testimony that provided flashes of Carlyle Group’s rarefied perch in the investment world, Mr. Conway said the Angolan government, CCC’s biggest investor, considered putting $500 million in the fund. The West African country ended up taking a $150 million stake.

Several CCC investors, including former Republican U.S. congressman Michael Huffington and Kuwait’s National Industries Group, later brought lawsuits against Carlyle Group, but only the liquidators’ case made it to trial. The other suits were all thrown out or dropped and are no longer active.

The liquidators were appointed by the Guernsey court in 2008 as part of the island’s insolvency procedures.

After raising $600 million privately in late 2006 and early 2007, CCC prepared to offer shares on Euronext Amsterdam in the summer of 2007. But alarm bells began to sound on U.S. subprime mortgages, and other mortgage-related assets were hit. It was touch and go whether CCC’s initial public offering would go ahead, according to emails shown in court.

CCC’s Fannie Mae and Freddie Mac bonds had fallen in value, and banks wanted more cash and collateral to keep providing loans. CCC borrowed around 30 times its equity to increase returns and had little wiggle room.

“Pulling the deal will be a public black eye,” Mr. Rubenstein wrote in an email to Mr. Conway at the end of June 2007, according to court filings. “On the other hand I’m at a loss to say how the whole market can be wrong about the product at this time and we are right,” he wrote.
After CCC imploded Carlyle asked Michael Huffington for the chance to make his $20 million back and more.   Huffington declined and sued Carlyle for his losses.  Carlyle plead a puffery defense in another equity investor lawsuit (SemGroup).

The information about The Carlyle Group's close ties with Angola's flies in the face of Carlyle's defense regarding Cobalt Energy, which effectively partnered with government officials via subsidiary corporations, Alper Oil and Nazaki Oil and Gas.  An SEC investigation produced nothing.

In light of Carlyle's plea to Huffington to make good his CCC investment, did something similar happen in Angola?  After losing $150 million in Carlyle Capital Corporation any government would be hard pressed to partner with an affiliate of that same firm.   What inducements did Carlyle indirectly offer, if any, to keep Angolan government leaders in their PEU camp?


In 2015 Carlyle affiliate Cobalt Energy sold the Angola offshore fields back to its local partner, minus the shady add on companies.  That chapter is closed but CCC testimony on Carlyle's close ties with the Angolan government makes one wonder what happened between the $150 million debacle and Cobalt's exit of Angolan offshore oil and gas fields.

This story is important as Carlyle co-founder David Rubenstein is the new Chairman of the Board for the Council on Foreign Relations, the Western oriented group of global tamperers and profiteers.  

Friday, June 16, 2017

Chairman Rubenstein: Carlyle Chief Tops Board for CFR


Carlyle Group co-founder David Rubenstein has been named Board Chair for the Council on Foreign Relations, a collection of Western oriented global tamperers.  Rubenstein's role places Carlyle in a prime position to profit from global changes directed by CFR's high powered political stable.   

Mr. Rubenstein replaces two CFR co-chairs, former Treasury Chief and Centerview Counselor Robert Rubin and Carla Hills, member of J.P. Morgan's International Advisory Board and CEO of Hills and Company.


CFR's board elected two Vice Chairs, Jami Miscik and Blair Effron.  Jami Miscik produced faulty WMD intelligence on Saddam Hussein's Iraq and was rewarded with a global risk management position with Lehman Brothers.  That role ended in September 2008 when Lehman Brothers imploded.

After her second monumental failure with Lehman Miscik landed a job with Kissinger Associates, a consulting firm for Western companies interested in global tampering.  She sits on the board of Morgan Stanley and made a fortune when Dell bought EMC in a mega LBO deal worth $60 billion.  Miscik served on EMC's board from August 2012 until deal close. 

Centerview Partners kept a top board slot at CFR by shifting from Bob Rubin to Blair Effron.  The move will allow Centerview to keep their key player role advising global corporations

CFR retains its Western PEU orientation with its new Board officers.  Rest assured private equity underwriters (PEU) are the wrong prescription for our globe. That's all consummate salesman Rubenstein knows how to push.  Watch out globe the PEU push isn't close to over.

Update 6-21-17:  NYT produced the latest puff piece on Mr. Rubenstein.  A former big league news reporter felt differently nearly six years ago.

Wednesday, June 14, 2017

Carlyle's PEU Financial Abuse Puts ManorCare Under


One might expect Healthcare Finance to understand the financial games The Carlyle Group used to put down ManorCare.  These include deal fees, management fees, monetizing real estate and skewing all the rewards to executives and sponsor Carlyle.  It took nearly a decade but ManorCare ceased paying its debt and the company will go to debtholders.  Carlyle's 2007 purchase of ManorCare came with the endorsement of President George W. Bush and Gail Wilensky, former Medicare Chief and ManorCare board member.  Wilensky promised a quality committee would keep Carlyle on the up and up.  That didn't happen.

Two years ago the Department of Justice said it was investigating HCR ManorCare for allegedly exerting pressure on skilled nursing facility administrators and rehabilitation therapists to perform unnecessary services on patients in order to collect additional Medicare and Tricare payment, the DOJ said in 2015. 

Patients were kept in facilities even though they were medically ready to be discharged, the DOJ said.

Skilled nursing facility managers and therapists were threatened with discharge if they did not administer the additional treatments necessary to qualify for the highest Medicare payments, according to the complaint. 
Greed, intimidation are PEU methods.  Healthcare, thanks to Presidents Bush and Obama, is peppered with PEU owned companies.  Who will provide these firms life support after years of toxic sponsor ownership?  Apollo Global Management will own part of ManorCare's carcass, so the company will not be leaving the PEU fold.  That's sad for patients and their families.

Update 6-18-17:  The media continues to soft pedal Carlyle's mismanagement of ManorCare.  The Toledo Blade traditionally has gone deeper into ManorCare as they share a hometown.  The Blade reported "HCR ManorCare has said the leases it signed came at the top of the market."  The leases were intended to enrich ManorCare's sponsor, The Carlyle Group.  Carlyle's sponsorship of ManorCare did the company in. 

Sunday, June 11, 2017

Carlyle to Buy Italian Sweet Supplier


A Carlyle Group press release stated:

Global alternative asset manager The Carlyle Group (NASDAQ: CG) has today announced it has entered into an agreement to acquire the majority shareholding of the Italian company IRCA, a large European manufacturer of ingredients and food products for pastry-making, baking and ice-cream retailing. Carlyle will acquire an 80% shareholding from Ardian and the company’s founding Nobili family, who will continue to manage the company.

Established in 1919, Irca has a prominent position in the artisanal pastry and ice-cream markets, expanding its European presence across France, Germany, Spain and Eastern Europe, renowned for the quality of its product offering, which currently totals nearly 1800 lines. Irca currently distributes its products in approximately 70 countries, through a strong network of long-standing distributors.

Mr Roberto Nobili, member of the fourth generation of entrepreneurs, will continue to retain his role as Irca’s CEO.
It will be interesting to see how the founding family mixes with Carlyle.  The Brintons' family had nothing nice to say about Carlyle and its PEU ways.


Carlyle expects high end desserts to grow.  As the rich get richer does their appetite for sweets grow?  Finally, Carlyle will have an affiliate with the mission "Let them eat cake, with a dollop of ice cream."  Fitting for our PEU world.

Wednesday, June 7, 2017

Carlyle Bags Another CRO


The Carlyle Group and fellow PEU GTCR struck a $922 million deal to buy AMRI, Albany Molecular Research.  Carlyle's latest deal in the pharmacy research space comes after The Carlyle Group sold PPD to Carlyle for $9.05 billion.  Carlyle paid $3.6 billion to buy PPD six years ago.  How many clinical research organizations can a PEU own and how many times?

I'll peruse the SEC filing on the deal for specifics and post any findings.

Update 6-11-17:  Carlyle inked a deal to buy iNova Pharma, another pharmaceutical company that can send business to PPD and AMRI.  

Monday, June 5, 2017

Carlyle in Double Fight Over Sinking ManorCare

The Carlyle Group faces two foes in its efforts to save face on nursing home giant ManorCare.  The external foe is Apollo Global Management's Leon Black.  Black is ready to take over ManorCare as a creditor in bankruptcy proceedings.  Carlyle's reputation is at risk given assurances it gave federal regulators when it bought ManorCare in December 2007.  President George W. Bush, a former board member for Carlyle affiliate CaterAir, supported the deal.

Congress held hearings on the buyout.  A number of former Medicare/Medicare Chiefs supported the deal, including ManorCare board member Gail Wilensky.  No one asked about Carlyle's LifeCare Hospitals failure after Hurricane Katrina which resulted in 25 patient deaths.  Oddly ManorCare is being investigated for poor quality care, including patient deaths, and inappropriate billing.

Beneath the Carlyle-Apollo PEU match lies an internal foe, ManorCare's CEO Paul Ormond.  NY Post reported:

The landlord of America’s second-biggest nursing home chain is haggling with the company’s top executive over a lavish compensation package, even as the chain teeters on the edge of bankruptcy, sources told The Post.

Paul Ormond, CEO of HCR ManorCare, is demanding $100 million in deferred compensation that private equity giant Carlyle Group promised to pay him as part of a $6.3 billion buyout of the company in 2007.
Could Carlyle be that bad to work for, that a CEO would need that kind of pay to stomach working for PEU ilk?  Not likely.  Ormond invited Carlyle in and partnered to make himself stinking rich.  Carlyle expected to make billions more.  After putting ManorCare in a precarious position, Carlyle's founders know better to throw good money after bad.

ManorCare CEO Paul Ormond grossed $198 million from Carlyle's purchase of the company.  Here's the breakdown:

.   
Now Paul wants another $100 million.  The Carlyle Group is free to pay Ormond what he's due.  They won't pay from the sponsor level.  Affiliates pay Carlyle for the privilege of being owned.

Ormond's excessive deferred compensation is a window into private equity practices where the top get outsized rewards while legions of employees struggle as costs from deteriorating benefits eat up more than any pitiful raises PEU boys hand out

Carlyle is ready to walk away from ManorCare's failing financial health.  The cause is PEU ownership.

They have two fights as they ready to hand over the keys.  One has Leon Black ready to back door Carlyle on ManorCare, a move quite familiar to Carlyle chiefs (Brinton's, Mrs. Fields).

The other fight is with the CEO who brought Carlyle in.  Does that make The Carlyle Group a Trojan Horse?

Update 6-13-17:  Carlyle is out of ManorCare according to NYPo.  Ten years of PEU ownership drove it under.

Sunday, June 4, 2017

Carlyle Group Among Hacked OneLogin Customers

HotHardware reported a serious hack on centralized password manager OneLogin:

"We detected unauthorized access to OneLogin data in our US data region," OneLogin disclosed in a blog posting this week.
This initial notice was frustratingly lacking in detail, and customers were left to assume the worst with regards to the severity of the attack. However, OneLogin has since updated its blog posting with more details, including the unfortunate news that hackers were able to gain access to the company's AWS keys.
The hackers were then able to use those keys to "access the AWS API from an intermediate host with another, smaller service provider in the US." The company reports that the intrusion began at 2AM on May 31st, but it wasn't until seven hours later that OneLogin staff detected any anomalies and was able to cut off access. That is a rather lengthy period of time for the "threat actors" to have access to the company's database tables.

OneLogin also provided this rather dour warning:

While we encrypt certain sensitive data at rest, at this time we cannot rule out the possibility that the threat actor also obtained the ability to decrypt data. We are thus erring on the side of caution and recommending actions our customers should take, which we have already communicated to our customers.

Those actions of course include resetting passwords, generating new API keys and creating new security certificates.

It is reported that OneLogin provides services to over 2,000 companies (including Yelp, Midas, Pinterest, Pacific Life, The Carlyle Group, Conde Nast, and Pandora) and has millions of individual users. OneLogin allows users to integrate with services like Amazon Web Services, Office 365 and Google ecosystem.
TechCrunch had a portion of the e-mail sent to customers:
All customers served by our US data center are affected; customer data was compromised, including the ability to decrypt encrypted data.
Carlyle most recent podcast tackled cybersecurity.  Their advice could be timely.  Any egg would come from vendor selection not from direct investment.

OneLogin received funding in three rounds, the first $4.7 million from Charles River Ventures, the second $15 million from Social Capital and Scale Venture Partners funded the last round at $25 million. 

I ran across an interesting story that likely is not related.  IndiaWest reported on May 13, 2017:

Skyhigh Networks named Dheeraj Khanna as VP of technical operations. Khanna joins Skyhigh from OneLogin, where he built a team from the ground up as the VP of technical operations. 
Mr. Khanna's new employer Skyhigh Networks may be in a position to make hay from OneLogin's security failure. 

Carlyle is a OneLogin customer and its IT team is working to keep its data safe.  The question is who used OneLogin at Carlyle?  Possibilities include employees, founders and/or limited partners.  Limited partners do not like surprises, especially those placing their data at risk.