Sun Jun 24, 2012, 02:51 PM
JHB (23,110 posts)
Romney "Sick at Heart" Over Bain Job Losses
From Crooks and Liars:
Emphasis is mine.
Mods: this is 4 paragraphs from the C&L article. The indented parts are portions where the quoted article is quoting other sources, and are part of the paragraph of the non-indented lines above it.
But as the New York Times documented Friday, large sums of that money were going to Mitt Romney and his Bain colleagues whether their portfolio companies were profitable or not. Put another way, Bain won either way:
Bain structured deals so that it was difficult for the firm and its executives to ever really lose, even if practically everyone else involved with the company that Bain owned did, including its employees, creditors and even, at times, investors in Bain's funds.
Cambridge Industries, which filed for bankruptcy in 2000 after amassing $300 million in debt, is hardly unique when it came to Bain's "win even when they lose" business model:
Yet Bain Capital, the private equity firm that controlled the Michigan-based company, continued to religiously collect its $950,000-a-year "advisory fee" in quarterly installments, even to the very end, according to court documents.
In all, Bain garnered more than $10 million in fees from Cambridge over five years, including a $2.25 million payment just for buying the company, according to bankruptcy records and filings with the Securities and Exchange Commission. Meanwhile, Bain's investors saw their $16 million investment in Cambridge wiped out.
"Traditionally," Josh Kosman wrote in his 2009 book The Buyout of America, "cash-rich public companies have paid dividends to lure and reward investors." But private equity firms, he explained, stand this process on its head:
Fourteen of the largest American private equity firms had more than 40 percent of the North American companies they bought from 2002 until September 2006 pay them dividends. In thirty-two of the eighty-three case, 38 percent, they took money out in the first year.
Mitt Romney was a pioneer of this strategy. His private equity firm, Bain Capital, was the first large PE firm to make a serious portion of its money not from selling its companies or listing them on the stock exchange, but rather by collecting distributions and dividends, which in this context is the exact opposite of reinvesting in a company. Bain Capital is notorious for failing to plow profits back into its businesses.
Just how notorious was first detailed by the Times five years ago during Mitt Romney's first presidential bid:
One transaction, involving the medical diagnostics company Dade Behring, took place in 1999 as Mr. Romney was leaving the firm, and the other, involving KB Toys, occurred about two years later. Bain and its co-investors extracted special payments of over $100 million from each company, enabling Bain to make a healthy profit even before re-selling the businesses -- a practice known as "getting back your bait." Lenders say Bain is one of the firms that has taken the most in such payments, which companies usually make by taking on additional debt.
Both Dade Behring and KB Toys soon suffered dips in their business. Unable to meet the burden of their debts, each filed for bankruptcy and laid off thousands of workers. Bain Capital spokesmen have said the company did nothing improper.
Mr. Romney, who remains an investor in Bain Capital, said he had not been involved in those decisions but acknowledged that such payments became part of the buyout business "very early on."
14 replies, 2472 views
Romney "Sick at Heart" Over Bain Job Losses (Original post)
Response to JHB (Original post)
Sun Jun 24, 2012, 04:43 PM
Ilsa (43,118 posts)
5. He's a principal reason KB Toys failed?
Crap. That store and Toys R Zus were the only two toy stores we had. After they both shut down, I had to do my toy shopping 100 away because I refused to shop at WalMart.
Response to Ilsa (Reply #5)
Sun Jun 24, 2012, 04:54 PM
BumRushDaShow (23,537 posts)
6. It's sad.
And I grew up with Kiddie City and even Sears, which had a huge toy department and their famous catalog. But when the big Sears here and Kiddie City bid adieu, you at least had the Toys R Us and KB. And ironically, the Toys R Us near me used to be a Woolworth's 5 & 10 (long gone). Now both of the toy stores are gone gone gone. Am left ordering online if I need toys for the younger nieces & nephews.
Response to zappaman (Reply #7)
Sun Jun 24, 2012, 04:59 PM
Avalux (35,015 posts)
8. It's a phrase psychopaths use to make people think they have feelings.
If Romney had truly been sick at heart, had been tormented by people losing their jobs, then he would have STOPPED WHAT HE WAS DOING.