weekend commentary - 'Private Equity' makes a comeback
my 'friend' Elaine on a particularly vehement rant ...
(snip)"The comeback of private equity
They seem ready to do so. TPG, a large buy-out group, led a $7 billion injection of capital into Washington Mutual (WaMu), a Seattle thrift that grew into America’s sixth-biggest bank and came a cropper in subprime mortgageslate-payments-on-consumer-loans-at-16-year-high Apr-3-2008 . TPG is also among a trio of big-name private-equity firms (Apollo and BlackstoneThe-Old-Guard-of-Private-Equity are the others) that are reportedly negotiating with Citigroup to snap up $12 billion-worth of leveraged loans that have been stuck on the bank’s balance sheet since the credit markets froze. A deal may be announced when Citi reveals first-quarter results on April 18th.
The transactions highlight two things. One is the changed environment in which private-equity firms are operating. Frothy markets, public-to-private deals and easy lending terms have given way to distressed prices and lesser degrees of leverage: TPG is using $2 billion of its own cash to take a minority stake in WaMu, which will remain firmly listed.
The other is that the industry still has lots of capital to put to work, no small matter in the current environment. Funds continue to flow in. The amount of money raised by America’s private-equity funds in the first quarter of 2008 grew by 32% compared with the same period of 2007, according to data from Private Equity Analyst, a newsletter.
Capital is profit from the translation of labor into goods which then can be sold in mass markets. This is the fundamental basis of capitalism just like savings is the foundation of banking. The present system is NOT about any of this! The capital these pirates are using is all DEBTS! And they park these on capitalist entities in the hopes of capturing capital, not increasing investments that will pay off in profits from manufacturing mass goods, etc. This is the ANTITHESIS of capitalism! It is 'coupon cutting' by debtors who should be in Bedlam, not running around pirate islands, scheming to increase global inflation!
With financial engineering a fading memory, the real value of private [ELAING: PIRATE] equity lies in improving the performance of portfolio companies. “As leverage multiples go down, operational improvements will drive a higher proportion of the industry’s required returns,” says Paul Mullins of Boston Consulting Group (BCG). Despite appearances, that shift in emphasis was well under way even before last summer. BCG analysed 32 companies that had been bought and sold by European private-equity firms before the crunch: more than half of the uptick in the value of these companies was due to higher sales and margins.
Whether private-equity firms can work this kind of magic in financial institutions remains uncertain, however. Regulators are jumpy about who runs banks: TPG has reportedly promised WaMu’s supervisor that it will not use its holding to exercise control. That rather defeats the point.
What the hell is this 'magic'? 'Sales' go up....BUT NOT PROFITS. Why is that?
HAHAHA. Debts! The profits don't flow to the enriching parts of the corporations, they flow OUTSIDE to these 'investors' who are madly piling debts upon once-functional operations! The money they 'raise' isn't used to expand production. It usually is used to CANNIBALIZE production. And the way it makes any 'profit' is via the very cruel method of destroying the income of the workers in these organizations. All these takeovers feature not hirings but LAY OFFS. And if this happens more and more, the world economy falls apart.
These very same pirates are responsible for the gross and growing collapse of commerce and value! The more they hammer the workers, the worse the economies fare. For several years, I yelled every time Wall StreetWall-Street-Layoffs and these pirates jumped for joy on the announcement of a take over/huge lay off/huge downsizing of a corporation. Now we pay a pretty penny for this foolish way of finance.
IMF admits late to act on crunch
"We're not going to blame for the past, the question is how can we have for the future, an institution which is likely to give to different governments early warning and warning which will be listened to," said Mr Strauss-Kahn.
Several IMF officials have pointed out in recent days that they had warned about the dangers of bad debt in the US mortgage market that last summer sparked the continuing global financial woes.
Speaking at the IMF's headquarters in Washington, Mr Strauss-Kahn also described the current economic situation as between "ice and fire".
This man should follow the noble gesture of the ancient Japanese: he was stupid, he was wrong, he was inept. So he should now don a white kimono, tie his hair back with a band and using his sword, disembowel himself on international TV. Pay-for-view, of course. And all the brainiacs working with him should be fired. I saw clearly what was coming down the pike long ago and I am NOT alone. Maybe we should hand over the IMF to Volker. Heh. Let him run it and the Federal Reserve.
Re: weekend commentary - 'Private Equity' makes a comeback
A lot of the private equity disappeared in the dot-con bubble.
Re: weekend commentary - 'Private Equity' makes a comeback
^^^ yeah true ... but given that private equity involved more debt than equity it's questionable as to who actually took those losses !