"I think we've finally found the secret phase 2 of the underpants gnomes"* | Bleader

Monday, October 5, 2009

"I think we've finally found the secret phase 2 of the underpants gnomes"*

Posted By on 10.05.09 at 01:55 PM

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Two NYT stories, same old BS:

"Let’s say that a group of corporate executives uses scads of debt to take over a struggling company, sells off some profitable assets, lays off thousands of employees while achieving miserable results. And then, less than a year after saddling the company with $8 billion in debt, they opt for bankruptcy.

"You’d expect them to walk the plank, or at the very least, spend a good stretch of time in the naughty corner. But you wouldn’t expect the top 700 managers to collect $66 million in bonuses.

"But that’s just what might happen at the Tribune Company."

Via Athenae, Michael Miner.

"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. Last year, the firm even gave itself a small raise.

"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."

Via Atrios, and Yves at Calculated Risk, who writes: "But the PE firms found a much easier approach: just pile on more and more debt, and pay themselves a special dividend. No need to do any work, just keep borrowing until you had recouped your investment and then some. And that way you did not need to care how the company fared. If you destroyed the business, it was of no mind to you and your investors. Other saps were left holding the carcass."

It's like my mother always told me - don't do business with someone named Judge Elihu Smails "Chandler Bigelow III." Fun facts:

"Mr. Bigelow grew up on Riverside Drive on Manhattan's Upper West Side. He attended Deerfield Academy, an elite all-boys boarding school in Massachusetts, where he was class president. "

"Indeed, longtime friend George Mesires says Mr. Bigelow passed up pre-calculus [Ed note.: !?! I suck at math, and I struggled through pre-calc so I could get into college; I clearly got screwed] his senior year of high school in favor of 'fun math, where students learned to balance a checkbook and such.'"

"Back then, Mr. Bigelow wanted to design golf courses for a living"

"After graduating in 1991, he took a job with public relations and corporate crisis management firm** Abernathy MacGregor Scanlon in New York because he thought it sounded 'interesting.'"

"It was while working an investor-relations job at struggling Naperville-based software company Spyglass Inc. that Mr. Bigelow decided to turn his interest in media into a career."

*Cf.

** "The ethics of corporate crisis management is a seriously underdeveloped field."

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