Comments on: Overly Leveraged Private Equity Deals Add to Unemployment and Deepen Recession

By: Joachim Mueller

Joachim Mueller — Mon, 15 Dec 2008 07:00:04 +0000

Excellent article!

Some two years ago a German politician was chastised for calling private equity firms "hyenas". Well, that's what they are: bone crushing predators. The people running those hyena companies love to have power and money and destroy the markets. That way they they also destroy the capitalistic ideology that claims that market "clean" themselves.

I believe those predators should be outlawed because they are of no benefit except to a tiny greedy minority taking advantage of their aggressiveness that regular people cannot (and should not) match.

Thanks again,

Joachim

By: Maurice Malcolm

Maurice Malcolm — Mon, 15 Dec 2008 03:05:29 +0000

Twenty years ago I worked for a very good geophysial company called Geosource. I was with them for nearly 14 years and they were taken over my AETNA for a period of three months only. In that time they stripped the liquid assets, world wide pension funds and anything that was worth anything and just spat it out. The long term employees lost just about everything and there was nothing we could do. I am retired now and have not a cent from Geosource, all my retirement fund went in some CEO`s bonus package. Greed without conscience is their motto.

By: Carlos E. Comesana

Carlos E. Comesana — Sun, 14 Dec 2008 22:04:48 +0000

The damage is and will be so great that it is time to make the list of the responsible people. FED, SEC and Treasury Secretary officials and the Presidency itself are involved. Should also include financial executives from both sides that enriched putting on motion "ex-professo" new and uncontrolled financial mechanisms. Problem is that I don't see who is capable and morally free to undertake this job.

By: Searcher

Searcher — Sun, 14 Dec 2008 17:59:14 +0000

Calls for regulatory oversight, transparency in reporting, and stripping away weasel euphemisms have been made after every systematic folly for as long finance has been an identified, if not understood, concept. Leveraging other people’s money is at the heart of any concept of finance as an ‘industry’. Institutions, of varying legitimacy, supposedly mitigate, if not prevent, the inevitable excesses of human nature. Unfortunately, institutions require structure and rules and the administration of their enforcement through investigation and prosecution resulting in sanctions; all subject to human nature. I don’t think ignorance of the subject is an acceptable trade off for minimizing the taint of knowledge. That is why we have academicians?

By: Tom

Tom — Fri, 12 Dec 2008 13:38:44 +0000

Dear Shah: You article was interesting, but several parts are inaccurate. Private equity (PE) is an asset class that includes leveraged buyouts, but also expansion, growth and bridge financing. To lable LBOs as PE is not true, some even lump venture capital (VC)into the general catch all phrase of private equity.

Investors and funds have been doing, and continue to do expansion, growth and bridge financing, which is done as loans and equity, but with no leverage. Sorry for correcting you, but I'm in the VC/PE business for 22 years.

By: list cases where process server is sued | Digg hot tags

list cases where process server is sued | Digg hot tags — Fri, 12 Dec 2008 02:17:11 +0000

[...] Overly Leveraged Private Equity Deals Add to Unemployment and … [...]

By: Advantages High Speed Internet Technology | Broadband Providers

Advantages High Speed Internet Technology | Broadband Providers — Fri, 12 Dec 2008 00:51:11 +0000

[...] Overly Leveraged Private Equity Deals Add to Unemployment and … [...]

By: Kerry Gillespie

Kerry Gillespie — Thu, 11 Dec 2008 23:19:18 +0000

I would like to point out that not all private equity firms can be painted with the same brush. I happen to work for a portfolio company of a very conservative PE firm who's modus operandi is to buy firms at a discount (due to poor management or other conditions) with an appropriate mix of debt and equity, hire strong management teams to improve operations and financial results, and then cash out at an appropriate time. The headline failures noted in Shah's article are the result of financial engineering and other excesses made possible by cheap debt, which no longer exists. Yes, many of these PE firms are dens of thieves, but there are others who legitimately add value to companies through good old fashioned equity growth.

By: Joe East

Joe East — Thu, 11 Dec 2008 20:42:22 +0000

If ever there was a need for regulation, this is it!
A case in point of how these people operate and the results of their actions, is the just announced filing for bankruptcy of Tribune Corp. Exactly the same scenario as exposed in the great article.

By: Jutia Group - Market Jitters & Political Critters

Jutia Group - Market Jitters & Political Critters — Thu, 11 Dec 2008 18:41:25 +0000

[...] By Shah Gilani Money Morning [...]

By: Robert Boden

Robert Boden — Thu, 11 Dec 2008 16:38:43 +0000

Having seen this leveraging first hand, I'd add that Mr. Galani has it exactly right. Please keep us informed as the process of deleveraging plays on and on and on. He can give us a road map we'll all need to navigate these troubled economic waters.

By: David

David — Thu, 11 Dec 2008 16:26:11 +0000

I have not seen this information on Apollo. It should be public information. When did this take place?

By: James MacInnis

James MacInnis — Thu, 11 Dec 2008 15:53:38 +0000

Thankyou so much for Shah Galani's columns; I look forward to his contributions! Mr. Galani has such a firm grasp of the complexities of the World's financial and economic structure that when he shines the spotlight on them he exposes all their inconsistancies.
We are very privilaged and fortunate that such a knowlegable individual has made himself available to us. I know it sounds patronizing and it may appear that I am laying it on with a trowel but I mean it sincerely. I have one question to ask! Why isn't Mr. Galani running the U.S. Fed instead of the present bunch of incompatants?

By: D Wells

D Wells — Thu, 11 Dec 2008 15:52:41 +0000

Great article with great insight.

These A**holes basically come in, loot and plunder these companies for everything they can get out of them, and leave them in so much debt that they have to file for bankruptcy with no consequences to the original A**holes. Meanwhile, the people that have worked for these companies (I'm sure in many cases for their whole professional careers) are left unemployed and out on the streets.

RIDICULOUS!!!!

Hopefully some of these above mentioned people will be caught cheating people and be put in jail.

By: Stephanie

Stephanie — Thu, 11 Dec 2008 15:38:37 +0000

Wow… Thanks for naming names. If America falls and is dissolved, we will have to hunt down and try, convict, and execute these people in the town square.

By: Norm Talsoe

Norm Talsoe — Thu, 11 Dec 2008 15:21:13 +0000

I have read all of Shah Gilani's articles and this one is as excellent as all the others in giving insight concerning what is really happening in the meltdown. Although I am not a financial person I am a retired engineer and am familiar with modeling engineering problems and looking at system stability issues. Based on Mr. Gilani's explanations it appears to me that the 62 trillion dollars in CDS's covering CDO's are an ongoing threat that is going to hang around for a long time. Even if notional they become real in every deleveraging action. With constant triggers from foreclosures and increasing unemployment occuring in the deflationary part of
this downturn cycle isn't a worldwide depression inevetable?