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Sign reads: "War On Greed - starring Henry Kravis and his homes" Photo: Brave New Films, on flickr
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If you read me often enough, you have probably noticed that I tend to check various news and opinion sites throughout the TradMed each morning, after I’ve spent a few minutes reviewing emails and jobs sites. Most of the time, I just shake my head at the various levels of stupidity I find, not being able to quite give it the full YOU HAVE GOT TO BE F*CKING KIDDING ME! treatment so richly deserved. Then there are days like today where teh stoopid is so truly dumbfounding.
Today, we have Henry Kravis, co-founder of private equity firm KKR, sending up a fine whine to Bloomberg on how tighter credit rules are forcing the private equity firms to kick in more of their own money and making buy-outs more expensive. Sayeth Mr Kravis:
“As the debt markets tighten and the cost of capital goes up, something has got to give,” Kravis said yesterday at the Bloomberg Dealmakers Summit in New York. “You just have to pay more.”
Kravis, 67, said the cost of capital for a leveraged buyout has risen more than 2 percentage points since the firm agreed to buy Pfizer Inc.’s Capsugel unit in April, forcing buyers to put up more cash for deals and borrow less. Uncertainty in the equity markets also is making it more difficult to reap profits through initial public offerings or sales of companies owned by private-equity funds, he said.
…snip…
Buyout firms typically use loans secured on the targets they acquire to finance more than half of the purchase price and cash from their own funds for the rest. The firms seek to improve performance at the companies they acquire or expand them before selling them within about five years.
KKR, which Kravis created in 1976 with George Roberts and Jerome Kohlberg, is expanding into hedge funds, real estate and underwriting to reduce reliance on buyouts after the firm gained a listing on the New York Stock Exchange last year. KKR this year hired a group of former Goldman Sachs Group Inc. (GS) traders led by Bob Howard to start KKR’s first hedge fund.
Wow. Just. Wow.
Mr. Kravis joins JP Morgan Chase CEO Jamie Dimon as a poster child for those who have no clue about life amongst the peons. Now Dimon has set the whiners’ bar high with his whines about how banksters get no love and how it’s just so mean as to be anti-American to require banks to increase their capital but I think Kravis has nudged Lloyd Blankfein out of second place.
Private Equity firms use small per cents of their own funds and large debt in leveraged buy-outs. There seem to be as many articles saying LBOs are bad as there are good. I’m sure it is no surprise that I lean towards the LBO = bad perspective. While there may be some benefits in efficiencies, there are far too many examples of lost jobs, high interest payments on those loans, and destroyed pensions. The pattern seems to be Private Equity firm creates huge debt to take over Business. Business then has to service the resulting debt before investing in R&D, employees, pensions, whatever. In order to streamline costs, Private Equity firm is within a couple of years “forced” to declare bankruptcy, turning their pension obligations over to the Pension Benefit Guaranty Corporation. At the end of approximately five years, the private equity firm files for an “Initial Public Offering” for all or part of the firm they had taken private five years before. IN the intervening years, they have cut employees, destroyed the pension, used company assets to pay off the debt (which never seems to be in their names, but only in the name of the company they used the debt to acquire) and walk away with more millions to off set the devastation they leave in their wake.
Congratulations Henry Kravis, your whine even managed to top that of folks CNN found who complained that they were more like Joe Schmuck than Warren Buffett and shouldn’t have to pay a “Millionaire’s Tax”:
Only 24% of millionaires said higher taxes on higher incomes is the fairest way to go, according to recent survey from Spectrem Group, a research firm specializing in finances of affluent Americans. The biggest chunk of millionaires, 44%, think a flat rate tax across all income brackets is the fairest system.
…snip…
One millionaire CNNMoney reader said that for the past five years, his tax rate (including state income taxes) has ranged from 40% to 55% — which he thinks is more than enough money to be forking over to Uncle Sam.
Uh, Earth to CNN Money reader – taxes going to the state are not going to Uncle Sam. You might also check with the folks making $30K or $40K per year and find out how much they are paying in taxes and fees at all levels.
DoG, but these WATBs do tend to irritate, don’t they?
And because I can:
Cross posted from Just A Small Town Country Boy by Richard Taylor
22 Comments
KKR was a mutation of Corporate Conglomerate Capitalism practices and strategies that powered up the economic vampirism of the CCC regimes to gain profits from laying sieges and doing $$ plunder and pillage via Wall Street raw money power buyouts/takeovers.
I worked for one such corporation during the 1970′s that had been in the farming community where my family is from for a long time (several decades) creating lots of accessible jobs and a market for local farmers to grow crops for and create income from.
My dad had worked for this corporation as a employee and as a small family farmer grew crops (sweet peas and sweet corn) for it as well.
I began work for this corporation in the early 1970′s and being I had direct farmwork experience and knowledge was able to do work on a hourly basis that for the early 1970′s paid pretty well. It was seasonal work as is much of farming related employment at field and factory work levels in vegetable processing but that was OK as it made doing travel during the “off season” winter months possible.
Each season worked brought wage increases and by the early 1980′s after several seasons I had built up my hourly wage rate and had climbed up the workplace ladder and gained better job slots as well.
KKR came along and bought out this corporation for I think was about $500 million at the time. After which it proceeded to plunder and spin off chunks of the corporation while applying downward pressure on jobs creation,wage levels and eroding long time/term employment security/pensions.
Eventually the KKR buyout of this corporation* brought about much pillaging and plundering and the corporation being made hollowed out and a husk was sold off by KKR entirely.The local factory was closed,the local small farmers lost a market and many local workers were no longer able to do this work.
What KKR did in above story has been done many times across USA.
>>> The S and L Debacle
>>> The Long Term Capital Meltdown
>>> The Enron Implosion
– were all in the leadup to what took place in Wall Street/Big Banks with the Mortgage Chop and Blend Disaster of Late 2008 which had origins going back to Clinton WH era of late 1990′s.
Many working class Americans have been played for chumps these past thirty years as real wages declined,job security was eroded and communities were taken/plunged into the nonsense of Houses = Profits which Crashed Into Reality in late 2008.
We know what came afterwards. We are there.
Lots of good thinking out there as to what the causes were and who is winning and who is not winning.1% vs 99% is not working.
There is something going on now though that may not be fully viewable due to the size of the smokescreen being deployed.
Where are the jobs? They are gone.
The Great Misdirection? Unless and until Americans will work at Chinese/Indian wage scales jobs are not coming back.
So American housing and standards/conditions of living/working are being wound back and down. Last twenty-five years of housing markets,working and retirement finish lines and counting on a solid SS being there are now being taken down,closed out and undermined.
Wall Street and the Big Banks just were not going to take the hit.
So American working class taxpayers are instead.
Occupy Wall Street? More the Better.
If Barack Obama won’t lead this? Out with Obama. We require a hero.
Not a charlatan and fraud.
KKR does not like it? Too bad. Down with the Vampires.
Americans had 1776 moment. We need 1789 moment now.
Liberty WITH Equality.
* Del Monte Corporation
There was a story in our local rag this week about how the new Dodd/Frank law is impacting the smaller banks, who are at constant threat of being put out of business. Small wonder that the laws were written to favor the large banks we were told needed regulation. Of course the TBTF banksters wrote the law, and they will be there to take over the small, local banks.
Same story, different day.
Occupy Wall St. Arab Spring, Wall St. Fall.
Perhaps Mr. Kravis and his fellow “venture capitalists” (big laugh) would like to get their pitchforks, tar and feathers and join the “Occupy Wall Street” protest.
Really stick it to “The Man” that drove up his cost of doing business.
Of course, his coital relationships with “The Man” may prove awkward, but he should really press his point. Hard. No, harder.
“Buyout firms typically use loans secured on the targets they acquire to finance more than half of the purchase price and cash from their own funds for the rest.”
Or maybe we could outlaw the practice of using the victim’s (targets) funds to buy them out and then screw them over.
Is there anyone in government bold enough to propose this?
(Rhetorical question, of course.)
F*CK Henry Kravis.
Yeah, I have to admit, that one has always bumfoozled me. In most places, you actually have to, you know, own something, before you an use it for collateral on loans and such
Many are asking, beyond occupation, what exactly do these folks want? What’s the immediate demand of the Occupy Wall Street protesters? What’s the ‘action item’?
Check out this interview featureing Max Keiser and others which highlights this issue and the perceived confusion of the protest:
http://tinyurl.com/6jd62be
Then consider this from Keiser — what can be more direct?
http://tinyurl.com/6zm4qyq
Jamie Dimon in handcuffs!!
Financial terrorist extraordinaire!
Wanted posters on every street corner –
As to diary . . . you DK, and others above in comments said it all. Nice recap of Del Monte n KKK hoss, well done there.
Emmy, Sam, Nash Ramblers.
Sweet.
Well after all, as everyone knows, the top 1% are the only people who really count.
x 2
Sam is always easy to ID – he played the same way when he would play at parties in BG back in the old days.
Try this asshole: If you can’t afford it, don’t buy it!!!!!
Um…so I starve if I can’t afford food? My kids go shoeless in the winter if I can’t afford shoes? We all freeze if we can’t afford heat, and sit in the dark if we can’t pay the electric bill?
Or was that meant as snark without the tag?
But you know, if I owned, say, the the Empire State Building, I could do a helluva lot with the value of the property, irregardless of my cash investment. Do you think a thousand dollars (cash) could get me ownership of that property?
It would be a much better investment than $1000 in lottery tickets.
msmolly, you know me better than that. I meant Kravis, and indeed twas snark. Tagless, but snark nonetheless.
My new slogan: Too Big to Jail.
Took a spin to/thru Bing and did some reading/updating on DelMonte and KKR history.
Was interesting to read DelMonte has been in play again as recently as this year — 2011 — in another KKR LBO bid/effort for DelMonte.
The going price tag for DelMonte now? In the 20-30 billion $$ range.
Years ago I had come across and read a business news article either in a Time or Newsweek magazine that had to do with DelMonte having been originally taken over for around a half billion $$ or so (perhaps even higher at around $$600 million?) by then RJR/Nabisco which were then shucked off to create sell off/spin off/slice and dice “value” for RJR/Nabisco and then KKR used RJR/Nabisco/DelMonte assets to pay down the KKR LBO of RJR/Nabisco and make for KKR cash-outs for doing the LBO “deal” of RJR/Nabisco. Like $$ abracadabara.
The history of KKR and DelMonte has remained/remains ongoing with KKR evidently still making big $$ deals for control of DelMonte.
Thanks Bing :-)
Making corrections to $$ amounts given/used in above comment(s).
Bloomberg reported on March 07,2011 that shareholders had approved KKR led takeover of Del Monte for $5.3 billion.
KKR LBO of RJR/Nabisco was made at $24 billion in 1988.
Buyout of Del Monte by RJR/Nabisco done for $618 million in 1979.
Very excellent. ;-)
Beyond the rational, beyond shame, beyond views about God, or concerns regarding the state of human civilization and the continued survival of life on earth, there is the capitalist organism.
Humans are complicated, capitalists are simple; capitalists are the organisms that accumulate.
Capitalist organisms are unique life forms because they are born by choice, not reproduction.
Evaluating the actions of capitalist organisms using value systems applicable to human beings will produce nonsensical data.
The only yardstick that pertains to the capitalist organism is whether its actions support its accumulation.
As with all living organisms, it is up to us to recognize them for what they are and respond to them in accordance with our value systems and survival imperatives.
Testing
“EXTERMINATE!” Where are the Daleks when we need them?