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Related: Editorials & Other Articles, Issue Forums, Alliance Forums, Region ForumsDan Quayle ruins World Airways and loots it.
Private equity firm Cerberus Business Finance, LLC, is looting a bankrupt airline that for 66 years ferried troops and equipment to war zones in the Middle East and Southeast Asia. Cerberus' greed has tragic consequences for pilots and flight attendants now without a job, a paycheck or health insurance.
Cerberus took control of the bankrupt airline, World Airways, and retroactively cancelled the pilots' health insurance coverage without telling them. A pilot who'd been with World for 25 years went into a coma thinking he was covered. When he came out of the coma, he found Cerberus had cancelled his health insurance -- and he owed $2 million for his medical care.
As president of the International Brotherhood of Teamsters, I have seen private equity firms plunder company after company, taking rich fees for themselves and cutting costs until there's nothing left to cut. Time and again I've seen their reckless behavior drive companies to declare bankruptcy. When the dust settles, you can count on Wall Street contracts being honored. And you can be pretty sure contracts with workers will be abrogated.
That's pretty much what's happening with World Airways, a passenger and cargo carrier that sought Chapter 11 bankruptcy protection in November 2013. The airline shut down on March 27, 2014 because it had no money. All employees were fired that day.
World Airways was a profitable company until another private equity firm, MatlinPatterson, came along and loaded it with debt. They collected handsome fees and interest until Cerberus -- run by former Vice President Dan Quayle and former Treasury Secretary John Snow -- threw the airline in the trash along with its employees. Many of the flight attendants and pilots had served their country and company since the Vietnam War.
http://www.huffingtonpost.com/james-p-hoffa/cerberus-loots-bankrupt-a_b_5225964.html
Blue Owl
(50,494 posts)(sic)
Gidney N Cloyd
(19,847 posts)mountain grammy
(26,648 posts)Cirque du So-What
(25,973 posts)and the one responsible for ruining one company for whom I worked.
2naSalit
(86,775 posts)probably either on the BOD or a consultant at the very least.
Did they go to school together?
JHB
(37,161 posts)Quayle may have crossed paths with Romney here and there, but for the most part they don't appear to have operated in the same arenas.
The problem isn't a tight little circle of self-dealers (though there are more than enough of those), it's the pervasive mindset of monied interests in general -- and the financial industry in particular -- that puts return on investment over everything else, and so has pushed for the regulatory and tax legislation that allowed this business model to thrive -- no matter the damage it does to everyone else's business and lives.
DeSwiss
(27,137 posts)K&R
BlancheSplanchnik
(20,219 posts)DeSwiss
(27,137 posts)BlancheSplanchnik
(20,219 posts)I just had no idea how to read that.
DeSwiss
(27,137 posts)...everyone on Wall Street and even the WH tries to claim they do, namely that they ''strengthen the market by culling out the weak'' -- then the obligation and commitments that these ''weak firms'' have made to their workers should have precedence over anything else, IMHO, upon liquidation. Not the custodians.
Morally, it's inescapable to conclude otherwise. ''The needs of the many outweigh the needs of the few.'' Economically, one must conclude once again that the focus of the greater negative impact is clear, rather than any supposed benefit the market will gain from the elimination of assets into the pockets of Wall Street Pimps Inc.
All we end up doing under the current laws and policies, is socializing the cost of doing bad business. We seem to be giving an incentive for management to play fast and loose with the company's assets because they'll bear no personal burden, only the workers do and the society at-large when the final tabs come in.
In a so-called ''civilized society,'' (again IMHO) there should be a price of admission into the marketplace. At minimum one must be required to follow the existing rules. But then, those rules are enforced by those we elect. Or, not. That is the question.
- So like I said mostly, but not completely.
BlancheSplanchnik
(20,219 posts)I gotta get to sleep, too tired to read much past the first paragraph....it's past midnight. I'm turning into a pumpkin.
But what I read so far was really worthwhile. Thank you! Gotta come back to it tomorrow.
rhett o rick
(55,981 posts)acquired company with debt? How do they get away with that?
KT2000
(20,587 posts)the company as collateral to get loans to buy more companies.
They also charge the company fees every time the equity firm has dealings with them.
rhett o rick
(55,981 posts)KT2000
(20,587 posts)one of the first things they do is change the retirement benefits or cancel them.
JHB
(37,161 posts)...other companies to create a shiny well-publicized "package" for resale, selling it to other PE firms because there's a tax advantage to do so, etc. The goal of the PE firms is to maximize their own returns. They have no long-term interest in the companies they take over, so debt is just a tool for "forcing efficiencies" or to leave someone else holding the bag when it goes south.
In 2012 Matt Taibbi gave a general outline of how Bain Capital did it
***
But here's the catch. When Bain borrows all of that money from the bank, it's the target company that ends up on the hook for all of the debt. Now your troubled firm let's say you make tricycles in Alabama has been taken over by a bunch of slick Wall Street dudes who kicked in as little as five percent as a down payment. So in addition to whatever problems you had before, Tricycle Inc. now owes Goldman or Citigroup $350 million. With all that new debt service to pay, the company's bottom line is suddenly untenable: You almost have to start firing people immediately just to get your costs down to a manageable level.
***
Fortunately, the geniuses at Bain who now run the place are there to help tell you whom to fire. And for the service it performs cutting your company's costs to help you pay off the massive debt that it, Bain, saddled your company with in the first place, Bain naturally charges a management fee, typically millions of dollars a year. So Tricycle Inc. now has two gigantic new burdens it never had before Bain Capital stepped into the picture: tens of millions in annual debt service, and millions more in "management fees." Since the initial acquisition of Tricycle Inc. was probably greased by promising the company's upper management lucrative bonuses, all that pain inevitably comes out of just one place: the benefits and payroll of the hourly workforce.
Once all that debt is added, one of two things can happen. The company can fire workers and slash benefits to pay off all its new obligations to Goldman Sachs and Bain, leaving it ripe to be resold by Bain at a huge profit. Or it can go bankrupt this happens after about seven percent of all private equity buyouts leaving behind one or more shuttered factory towns. Either way, Bain wins. By power-sucking cash value from even the most rapidly dying firms, private equity raiders like Bain almost always get their cash out before a target goes belly up.
By the way, when they talk of "troubled" companies, sometimes that simply means they are "underperforming" by Wall Street view of things, i.e. "could be sending more money skyward, but it's not".
Donald Barlett and James Steele have been chronicling this sort of thing since their 1991 Philadelphia Inquirer series and 1992 book "America: What Went Wrong".
http://www.amazon.com/America-Wrong-Donald-L-Barlett/dp/0836270010
http://www.politicalindex.com/wrong1.htm <-- first chapter available for free. It has some examples, but the sorts of details you're looking for are in later chapters.
http://americawhatwentwrong.org/
This has been going on for decades, aided and abetted by deregulation and tax laws that enhance the advantages of doing business this way.
rhett o rick
(55,981 posts)DeSwiss
(27,137 posts)...then it must find a way to issue loans to sustain itself. Even to sick companies with one foot in the grave and the other foot on a banana peel. Don't worry, they have insurance companies to protect them from bad debts like AIG. So no worries since the market can take care of its own (in theory).
So a company in trouble needs help. Maybe they have a liquidity problem since most companies have to borrow just to operate these days, it can happen. But say the banks in the local area may be tapped out for commercial loans for this firm. Or maybe bad investments made by the management company renders them vulnerable to a takeover. Enter the private equity firm.
Private equity firms are touted as saviors but are actually the equivalent of a Mafia Loan Shark. Sharks who dress better and live in tonier neighborhoods. So in comes the ''saviors'' who themselves have borrowed money to make the acquisition of the firm. They immediately take those assets and starts selling them off or obligating them with debt instruments (land, equipment, employee pension funds, etc) which cash can now be used to help the firm? No. Insure employment stability? No. Provide long-term guidance and support for the future of the company? No. They can now guarantee more loans since they have all this cash-on-hand with this new entity, and voila! Instant cash bonuses for a job well done.
They keep doing this until the company can't take anymore debt. When the bankruptcy finally hits and everyone is thrown out of their jobs, ''The Law'' kicks in -- which has different priorities (their frat bros and golfing buddies) than normal people as to whom gets paid what, if at all. Thus you end up with the Courts, the Congress and the Executive all working together to screw the little guy on behalf of The Corporations. This is the kind of shit what passes for ''economic growth'' these days.
- And they call it the varsity rag. And it's all LEGAL.....
starroute
(12,977 posts)That's the Dyncorp that's recently drawn scrutiny for having the bulk of US government contracts in Afghanistan. (And don't freak out because it's RT. The story has been all over.)
http://rt.com/usa/155392-dyncorp-afghan-reconstruction-contract/
And here's the gun stuff:
http://www.motherjones.com/politics/2013/12/freedom-group-cerberus-calstrs-bushmaster-newtown-sandy-hook
Dec. 10, 2013
Last December, four days after Adam Lanza murdered 20 first graders and six educators at an elementary school in Newtown, Connecticut, Cerberus Capital Management pledged to sell the Freedom Group, the company that manufactured the Bushmaster XM-15 assault rifle that Lanza used. The announcement helped tamp down a rising PR disaster for the Manhattan private equity firm, placating major investors such as the California State Teachers Retirement System (CalSTRS), which had said it was "examining" its $750 million stake in Cerberus after the massacre. The New York Times described the move as "a rare instance of a Wall Street firm bending to concerns about an investment's societal impact."
A year after the Newtown tragedy, however, Cerberus has not sold Freedom Group (also known as Remington Outdoor Company Inc.), the nation's largest firearms and ammunition conglomerate. After buyers failed to materialize early this year, Cerberus CEO Stephen Feinberg announced he and a small group of individuals would seek to buy the company, which also owns brands such as Remington, Marlin, and Dakota Arms. But in July, the Wall Street Journal reported that Feinberg was dropping his bid amid increasingly attractive offers from outside investors. "Cerberus initially planned to seek around $1 billion for the company," the Journal reported, citing an anonymous source, "but now wants more."
Business has boomed for Freedom Group in the year since the mass shooting at Sandy Hook Elementary. Between January and the end of September, the company raked in $94 million in profits on more than $1 billion in gun and ammo sales, compared with just $500,000 in net profits during the same period in 2012. For the full year ending December 31, Freedom Group estimates that its net sales will be up 34 percent to $1.25 billion, according to a financial disclosure (PDF) released Monday. Though Freedom Group doesn't release sales figures specifically for the Bushmaster XM-15 assault rifle, that weapon and similar models reportedly flew off retailers' shelves in the weeks after Sandy Hook, snatched up by firearms enthusiasts who feared the guns would soon be outlawed.
BrotherIvan
(9,126 posts)Fuck the profiteers, fuck gun nuts, fuck the NRA, and fuck lobbyists. Just fuck them. I've had it with so much black-hearted greed, selfishness, ignorance and paranoia. I guess they've won, because I have become as bitter and angry as they are.
oldhippie
(3,249 posts)BrotherIvan
(9,126 posts)Should we have our own group where we can complain without ceasing? Could be fun.
DeSwiss
(27,137 posts)''Kill the head and the body will die......''
They_Live
(3,240 posts)Cerberus /ˈsɜrbərəs/,[1] or Kerberos, (Greek form: ?έ??????, [ˈkerberos])[2] in Greek and Roman mythology, is a multi-headed (usually three-headed) dog, or "hellhound" [1][3][4] with a serpent's tail, a mane of snakes, and a lion's claws.[5] He guards the entrance of the underworld to prevent the dead from escaping and the living from entering.
http://en.wikipedia.org/wiki/Cerberus
3catwoman3
(24,041 posts)...apropos.
Ilsa
(61,698 posts)Leveraging for the purpose of plundering and dumping needs to be made illegal. It hurts employees, medical caregivers, families, communities, and minority stockholders. It pushes the victims onto the social safety net.
Initech
(100,102 posts)Seriously - thank you Jesus, Buddha, Muhammed, Allah, Krishna, Confucius, Joseph Smith, Xenu, Abraham, and the Flying Spaghetti Monster that Mitt Romney was not elected president. We need to lock up these vulture thieves and throw away the key, not prop them up on a global stage.
heaven05
(18,124 posts)at is worst for the employees that have been there for years. The pilot who was in a coma? Tragic. To Cerberus, just trash to throw out. How really disgusting this fucking financial system is. Dirty, greedy, mittens clones. And that POS wanted to be POTUS. America you are really beginning to show your true colors. And they ain't pretty. DanQuayle. I barely remembered him, a true republican though.
WinkyDink
(51,311 posts)MannyGoldstein
(34,589 posts)Regards,
TWM
Enthusiast
(50,983 posts)SoapBox
(18,791 posts)Absolutely criminal.
freshwest
(53,661 posts)Initech
(100,102 posts)I wonder how they sleep at night knowing they destroyed the economy.
rhett o rick
(55,981 posts)The CCC
(463 posts)Psychopaths sleep quite well.
calimary
(81,463 posts)Glad you're here! Sometimes I have trouble choosing between the phrases "vulture capitalists" and "vampire capitalists". Can't decide which is worse (and thereby better-deserved)!
catchnrelease
(1,945 posts)Vultures clean up carrion etc so they are a good thing. Vampires just suck the life blood out of their victims and leave a withered husk. That husk being us!!
AdHocSolver
(2,561 posts)This thread is worth reading for its explaining of the "new" capitalism.
The repeal of the Glass-Steagall Act allowed "investment" banks to take over commercial banks and use depositors' assets to buy out businesses and strip them of their assets.
The Federal Reserve keeps interest rates low to enable the banks to exploit depositors' assets at essentially zero cost.
Then there is the IMF, the World Bank, the WTO, NAFTA, and the destruction of the environment for profit.
It is a shame that, when our civilization has achieved such advances in science, engineering, and medicine, it is going to collapse, just like every empire before it has, due to the greed, desire for unlimited power, and insanity of a handful of those who have already achieved wealth beyond avarice.
The psychopaths are in charge and those who are sane and still have some leverage are doing little or nothing to stop them.
MrScorpio
(73,631 posts)NJCher
(35,729 posts)told me how Cerberus almost did Chrysler in.
Mechanics see things from a different point of view that most of us can. They see the management reflected in the engineering and how the car was built--and thus the repairs. Because of the planning and execution of such plans, it isn't reflected immediately, but a mechanic who has worked in the business for a long time will be able to tell you things like that.
Cher
barbtries
(28,811 posts)how tragic and disgusting.
Enthusiast
(50,983 posts)But they are vulture capitalism.
Babel_17
(5,400 posts)World Airways was self-insured and its health care plan was administered by United Health Care.UHC had access to a fund with which to pay medical claims. On March 29, the company informed employees that 'first lien holder, Cerberus, has swept the bank accounts that funds the United Health Care claims.' Also gone were funds to pay for $2 million in retirement accounts owed to the crewmembers of World Airways.
Saying that Cerberus 'swept the account' is a nice way of saying they looted accounts set up to pay World Airways health insurance claims.
I don't have the words.
Enthusiast
(50,983 posts)A genuine POS.
Fuck private equity groups.
penndragon69
(788 posts)Vulture capitalism will destroy the world .
randr
(12,414 posts)Guarding the gates of Hell
https://en.wikipedia.org/wiki/Cerberus
kairos12
(12,872 posts)3catwoman3
(24,041 posts)...shite hed, I presume the meaning will still be clear.
Response to RandySF (Original post)
santamargarita This message was self-deleted by its author.
BlueJac
(7,838 posts)get the hell out of our lives you fool.