Satire for September 2012 - Page 4 - Politics Forum.org | PoFo

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Political and non-political satire; all those terribly biased analogies live here.
#14065019
Homer Simpson votes, 2012

[youtube]O2_G1TnmsWo[/youtube]
By mikema63
#14065802
When did investors start getting that involved in the workings of the companies they invest in?
User avatar
By Potemkin
#14065805
I agree - the collective organisation of labour occurs at management level, most of whom are themselves salaried employees rather than owners of the company. Nevertheless, the point is valid - industrial capitalism introduced and requires an unprecedented degree of socialisation of production. Socialism merely goes one step further and socialises distribution as well. :)
By mikema63
#14065812
Why Potemkin ou do satire so well I almost thought you were a communist but because of this post in satire I know you are actually a libertarian too!

(and that you fall into traps easily for someone who killed me with a chocolate truffle)
#14065979
Potemkin wrote:I agree - the collective organisation of labour occurs at management level, most of whom are themselves salaried employees rather than owners of the company. Nevertheless, the point is valid - industrial capitalism introduced and requires an unprecedented degree of socialisation of production. Socialism merely goes one step further and socialises distribution as well. :)


Depends also on the "investor."

Investors such as Romney in his halcyon Bain days had a nice little legal scam going. They would borrow vast sums of cash from megabanks (who had been freed from Glass-Steagall limitations), and use it for hostile buyouts of company stock. The companies purchased would be sucked dry (a la Goodfellas) and eventually sold. Tax laws enabled profits to be paid at low capital gains rate, and the service of the loans to be deducted from taxes. After the target companies were sold they were left with the debt, and were quite frequently forced into bankruptcy - even companies that had been healthy before their Bain experience. By turning over these acquisitions at a furious rate, Bain was able to make a nice return for its investors; in fact, larger returns by orders of magnitude than simply investing in companies to participate in their profits (as a mutual fund would do).
By mikema63
#14066123
What were some of the names of national companies that were sucked dry by bains again? I can only remember staples.
#14066188
The rationale for the enormous fees Bain extracts from its target companies is its 'expertise' as a turnaround manager. The 'turnaround' involves Bain actively managing companies, and imposing heavy debt loads. The debt would be used for two purposes: to finance the original buyout deal, and to finance a risky acquisition strategy wherein the target company acquires as many other companies as possible. These sub-acquisitions could be immediately resold as soon as the original deal began to look shaky.

"In four of the seven Bain-owned companies that went bankrupt, Bain investors also profited, amassing more than $400 million in gains before the companies ran aground, The Times found. All four, however, later became mired in debt incurred, at least in part, to repay Bain investors or to carry out a Bain-led acquisition strategy.

Debt from acquisitions, usually part of a “roll-up” strategy of buying competitors, played a role in at least five of the seven bankruptcies The Times examined. In most of these cases, Bain investors garnered some initial gains before the companies faltered.

For example, after Bain acquired Ampad, a paper products company, in 1992, the company grew through a series of acquisitions. Sales jumped, but its debt climbed to nearly $400 million, and it found itself squeezed by “big box” office retailers. It filed for bankruptcy in 2000. Bain and its investors walked away with a profit of more than $100 million on their $5 million investment, on top of at least $17 million in fees for Bain itself, according to securities filings and investor prospectuses.

A similar phenomenon unfolded with DDi, a Bain-owned circuit board maker that expanded aggressively in the late 1990s. Sales soared, but so did its debt. The bursting of the tech bubble forced it to scale back. It filed for bankruptcy in 2003. The gains for Bain’s investors easily exceeded $100 million. Bain also collected more than $10 million in fees.

Private equity firms also collect transaction or deal fees, ostensibly for advisory work, from companies they buy. These fees are generally collected for major transactions, like the purchase of another company, a public stock offering or even the initial acquisition of the company. A third fee stream comes from annual monitoring or advisory fees that portfolio companies typically pay to their owners, the buyout firms.

These fees can be substantial. In the case of Dade International, a medical supply company in which Bain acquired a stake in 1994, Bain and other investment firms piled up nearly $90 million in fees over seven years. The company filed for bankruptcy in 2003 but not before it had borrowed heavily to pay $420 million to Bain and other investors several years earlier.

In the case of Cambridge Industries, Bain first acquired a stake in the manufacturer of plastic automotive parts in 1995. Bain employees personally invested $2.2 million, according to bankruptcy records, alongside $15.7 million from outside investors.

Bain immediately collected $2.25 million from Cambridge as a transaction fee for investing in the company. Cambridge then acquired several companies in rapid succession, and each time, Bain earned 0.75 percent of the purchase price as a transaction fee. The rest of Bain’s $10 million in fees came through advisory fees and payments for a debt refinancing completed by Cambridge in 1997.

By then, interest payments from the company’s expansion were outstripping operating income. As part of the refinancing, aimed at lowering interest payments, Cambridge repaid $17 million it owed to a debt fund run by Bain. This involved paying it a $2 million prepayment penalty.

Cambridge was finally forced into bankruptcy in 2000, when Bain declined to provide the company with an infusion of capital needed to fulfill a major new order, according to former company officials. During bankruptcy proceedings, lawyers for some of Cambridge’s creditors leveled scathing criticism at Bain, zeroing in on the fees extracted while they said Cambridge was insolvent, as well as the prepayment to Bain’s debt fund.

Eventually, Bain settled the dispute by paying $1.5 million to the bankruptcy trustee.

“We have been unable to identify what, if any, ‘reasonably equivalent value’ the Company received in exchanges for these exorbitant fees,” Michael Stamer, a lawyer for the unsecured creditors committee, wrote to Bain’s lawyers. “It appears, instead, these fees were nothing more than a device used by Bain to provide a return on its equity.”

But is this satire?, you ask. You betcha! :D
By mikema63
#14066225
Romney is bad because stuff commercials are on 24/7 here so I'm sick of Bain this and Bain that at this point.

He really didn't do anything wrong and what he did is an important function of capitalism if you accept capitalism of course.

Nope, as I just mentioned the more accurate term […]

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