Private Equity, Insider Sales, Audit the Fed
Good article on private equity.
Simmons Bedding Company says it will soon file for bankruptcy protection, as part of an agreement by its current owners to sell the company — the seventh time it has been sold in a little more than two decades — all after being owned for short periods by a parade of different investment groups, known as private equity firms, which try to buy undervalued companies, mostly with borrowed money. For many of the company’s investors, the sale will be a disaster. Its bondholders alone stand to lose more than $575 million.I don't know who buys these companies' bonds. Fool you once... Part of being in a credit bubble I guess.
But Thomas H. Lee Partners of Boston has not only escaped unscathed, it has made a profit. The investment firm, which bought Simmons in 2003, has pocketed around $77 million in profit, even as the company’s fortunes have declined. THL collected hundreds of millions of dollars from the company in the form of special dividends. It also paid itself millions more in fees, first for buying the company, then for helping run it.
Insider sales holding steady at bearish level.
Audit the Fed, the Senate version (S 604) added two cosponsors on Friday, Roger Wicker and Thad Cochran, both of Missouri. Both are Republicans.
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1 comment:
It's a great link:
Wall Street investment banks also cashed in. They collected millions for helping to arrange the takeovers and for selling the bonds that made those deals possible. All told, the various private equity owners have made around $750 million in profits from Simmons over the years.
How so many people could make so much money on a company that has been driven into bankruptcy is a tale of these financial times and an example of a growing phenomenon in corporate America.
Every step along the way, the buyers put Simmons deeper into debt. The financiers borrowed more and more money to pay ever higher prices for the company, enabling each previous owner to cash out profitably.
But the load weighed down an otherwise healthy company. Today, Simmons owes $1.3 billion, compared with just $164 million in 1991, when it began to become a Wall Street version of “Flip This House.”
There really is one born every minute. More than one apparently.
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