| Flipping Houses...That is *so* 2005. How About Flipping Public Companies? PART I Comparing the 2002-2005 real estate bubble to PE M&A LBOs repackaged as IPOs | |
| Hal F. Wit for the Drooling Oatmeal Investment Club Step 1: Buy public company with LBO Is this really happening? Perhaps. But instead of sub-prime mortgage CDOs (Collateralized Debt Obligations) we have CLOs: (Collateralized Loan Obligations) for LBOs (Leveraged Buy Outs). There is a lot of cheap money sloshing around right now. The Black Stone (BX) group was a private equity firm. They bought companies and took them private. No SARBOX, no need for GAAP. Private corporations. Why did they go public then? |  "If I have learned anything from the housing bubble: |
``There are some very scary analogies between high yield and the mortgage market,'' said Kevin Lorenz, a managing director who oversees $2.5 billion of high-yield assets at TIAA- CREF in New York. ``You cannot do fundamental analysis and believe that those are creditworthy companies.'' Bloomberg
So, let's make some money on this. The easy and most obvious play is shorting BX.
"We also question whether there is sufficient evidence to prove that the higher returns ... are driven by stronger management teams or because, in a benign and liquid credit environment, leverage by itself can provide substantial returns.'"— Christina Padgett, Moody's
TWX20.99, -0.03, -0.1% ) music subsidiary was acquired by private-equity firms including Thomas H. Lee, Bain Capital and Providence Equity, the company distributed a dividend that paid off almost all the equity originally committee by the buyout group, Moody's said.
"Of concern to Moody's is the willingness of private-equity firms to issue special dividends despite commitments to reduce leverage, sometimes within 12 months of the transaction's closing," Padgett wrote in the report.The payment happened despite public comments by the company to the contrary, the rating agency noted."
"Celanese US Holdings, a chemical business bought by Blackstone, borrowed money within a year of the acquisition to pay a dividend to the private-equity firm, Moody's added, removing more than 95% of the cash equity originally invested in the deal."
Does that smell like "Cash back at closing" to anyone else? NOT criminal. Yet *too* savvy. Taking advantage of us halfwits.
Here are the steps I took in intelligently speculating the housing bubble SHORT:
posted by Hal F. Wit @ 8:39 PM
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