LBO

The 77-year old billionaire twitterer extraordinaire, Carl Icahn, shows everyone just how it's done, making a levered profit in the process, but not before he lets a few sharp barbs out to tell everyone just how he feels.  To wit: "We jokingly ask, “What’s the difference between Dell and a dictatorship?” The answer: Most functioning dictatorships only need to postpone the vote once to win.... One of the great strengths of our country is that we abide by the rule of law.  However, state laws dealing with corporate governance often favor incumbent corporate boards and management and are weak in many areas.  While we must abide by these laws, we believe that they can and must be changed.  Among many other things, boards should not be able to treat elections as totalitarian dictatorships do; where if they lose, they simply ignore the results.
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The evaporating “wealth effect”

The “Great Rotation” consensus is now under pressure. A “buyers strike” is suddenly visible in late August as investors see the potential for event risk in coming weeks. September is seasonally the weakest month of the year for risk assets and the S&P500 has not recorded an official “10%” correction in 2 years, so it is no surprise that US equities, in particular, are taking a bit of a breather here. But is there something more sinister at play than a healthy correction in risk assets? Conflict (policy, military), Rates (liquidity), Asia, Speculation (forced selling) and Housing are all potential catalysts for a much more contagious autumn market event.

It was only last week that yet another conspiracy theory became fact when we learned, for the first time after nearly three years of lies, that Tepco had been deceitful and wrong with its "all clear" message about Fukushima, and that instead some 300 tons of contaminated, irradiated water had been flowing into the Pacific ocean every day. So now that the opportunity cost of telling more lies is zero, and the radioactive cat is out of the bag, so to say, the news about the absolute, unmitigated disaster that Fukushima is, and will be for decades, are coming fast and furious. Sure enough, moments ago Tepco reported, and Kyodo confirmed, that radioactive water has risen above the protective barrier and is freely leaking into the surrounding environment.

Yesterday, in the aftermath of first Apollo then Blackstone, it was the turn of that third mega Private Equity shop, Fortress, to "say that now is the time to exit investments as stocks rally and interest rates start to rise. "This is a better time for selling our existing investments than making new investments," Pete Briger, who oversee the New York-based firm's $12.5 billion business said on a call with investors yesterday. "There’s been more uncertainty that’s been fed into the markets." Ironically, this is precisely the opposite of what one will hear on the mainstream media, but such is life: for every smart money seller, there must be a willing sheep led to the slaughter.

Just in case there was any question if a thousand monkeys armed with iPads could not only give Moody's a run for the money (even without leaking LBO information to the highest bidder) but solidly trash Uncle Warren's rating agency, the following statement should put any doubts to rest: "The bankruptcy filing by Detroit is a credit negative, Moody's Investors Service said on Thursday, because it creates uncertainty for bondholders, will likely interrupt payments on general obligation and limited tax bonds, and begins a process that may span years." That this statement comes from the same rating agency which concurrently with the Detroit bankruptcy raised its outlook on the US (a/k/a established a DOJ litigation reserve) due to, among other things, the "secure status of US dollars" is not surprising at all.

With the untapering due any minute, and cost of debt set to plunge to even lower record levels, one thing is certain: the private equity industry is about to be bathed with even more costless credit and, with a portfolio of companies already accounting for 8% of US GDP, is about to accelerate its "going private" take over of America's corporations. Of course, in the pursuit of the almighty cashflow driven IRR, all is fair in love and LBO wars, however, one group of people who may not like the outcome are America's workers especially following tonight's glimpse of the "cost-cutting" process that is about to be unleashed by the Fed-funded corner office on workers everywhere. A few hours ago First Data Corp., a KKR portfolio company, announced that it will suspend 401(k) contributions to employees and replace cash bonuses with stock "as part of its new chief executive's strategy to return the credit-card processor to profitability." The move was announced to all 24,000 employees of the Atlanta company in an internal memo Monday.

No, last week’s jobs report was not “strong”. It was just another edition of the “born again” jobs scam that has been fueling the illusion of recovery during the entire post-crisis Bernanke Bubble. In short, the US economy is failing and the welfare state safety net is exploding. And that means that the true headwind in front of the allegedly “cheap” stock market is an insuperable fiscal crisis that will bring steadily higher taxes, lower spending and a gale-force of permanent anti-Keynesian austerity in the GDP accounts. And for that reason, the Fed’s strategy of printing money until the jobs market has returned to effective “full employment” is completely lunatic. The bottom-line is that Bernanke is printing money so that Uncle Sam can keep massively borrowing, and thereby fund a simulacrum of job growth in the HES Complex. Call it the Bed Pan Economy. When it finally crashes, Ben Bernanke will be more reviled than Herbert Hoover. And deservedly so.

There was a time when one couldn't spend an hour without some moronic rumor of a Radioshack LBO popping up. Those time are gone. Instead, as DebtWire reports, the rumor of a takeover has been replaced with the all too unpleasant reality of a corporate restructuring which may or may not end up in Chapter and which likely means the equity is all but wiped out. As DW reports the firm is set to listen to restructuring pitches from the usual restructuring suspects, which means unless someone is crazy enough to do another JCP-type deal (they aren't), the firm's debt is about to be substantially discharged. This usually means a full or at least partial wipe out of the equity tranche below it. "The move to hire a banker to explore a balance sheet fix comes as the struggling electronics retailer faces a string of maturities, escalating cash burn and bloated inventory levels, the sources said. RadioShack first engaged AlixPartners for operational help over a year ago, as previously reported by Debtwire."

The short but profitable tale of how 483,000 private individual have "top secret" access to the nation's most non-public information begins in 2001. "After 9/11, intelligence budgets were increased, new people needed to be hired, it was a lot easier to go to the private sector and get people off the shelf," and sure enough firms like Booz Allen Hamilton - still two-thirds owned by the deeply-tied-to-international-governments investment firm The Carlyle Group - took full advantage of Congress' desire to shrink federal agencies and their budgets by enabling outside consultants (already primed with their $4,000 cost 'security clearances') to fulfill the needs of an ever-more-encroaching-on-privacy administration.

The gold and bond markets have been "saying" that QE is ending for the past few months. The equity and junk markets have largely ignored the signs. June is setting up as an interesting month.

When news hit the tape in February of 2007 that TXU would be acquired by a consortium of PE firms including KKR, TPG and Goldman, for the mind-boggling price of $45 billion, to this day the biggest LBO in history, there were those who were morbidly excited about the future as money was flowing freely, bonuses would hit a record, and there was only upside, and then there were those who knew this was the can't miss top-tick indicator of the beginning of the end. The latters ones turned out to be right. And not only because a year later the entire financial system imploded and only a $25 trillion global coordinated bailout prevented the collapse of the western way of life as we know it, but because now six years later, in the worst kept secret of Wall Street of the past month, TXU, now known as Energy Futures Holdings, is on the verge of the ultimate humiliation for private equity investors: Chapter 11, and a complete wipe out of not only the equity but major impairment of the debt holders as well.

A new twist in the neverending battle between Icahn and Ackman over the true value of Herbalife emerged moments ago when while reading from the criminal complaint filed against the charged former KPMG auditor Scott London, CNBC's Jane Wells cited an email from London to his "client" that "Herbalife was going to go private." Supposedly this means that Icahn is not just sitting there and twiddling his thumbs waiting for Ackman to be crushed under the weight of JCPenney, but that he, or someone else, is preparing an imminent LBO, if at least the data KPMG had until its resignation as HLF's auditor is credible.  Why, however, an auditor would know what an equity investor's plans for the company are, remains unclear.

• French unemployment rises again to highest since 1999 (Reuters)
• BoJ rejects call for monetary easing (FT)
• North Korea threatens pre-emptive nuclear strike against US (Guardian)
• Firms Race to Raise Cash (WSJ)
• Time Warner Will Split From Magazine Unit in Third Spinoff (BBG) - slideshows, kittens, "all you need to knows" coming to Time
• U.S. economy, world's engine, remains in "neutral": Fed's Fisher (Reuters)
• BOE Keeps QE on Hold as Officials Weigh More Radical Measures (BBG)
• Jobs start to go as US sequestration cuts in (FT)
• BofA Times an Options Trade Well  (WSJ)
• Congress Budget Cuts Damage U.S. Economy Without Aiding Outlook (BBG)
• Dell’s Crafted LBO Pitch Gets Messy as Investors Circle (BBG)
• Dell says Icahn opposes go-private deal (Reuters)
• Portugal Rating Outlook Raised to Stable by S&P on Budget Plan (BBG)
• China’s Richer-Than-Romney Lawmakers Reveal Reform Challenge (BBG)

Bernanke: "None of the things you said are accurate"

Corker: "Oh yes they are"