Hunger Strike – Day Nine

I know we had a rogue blog yesterday (see prior post “Some lines for the White House this am” June 23-10). Just thought that I’d give ya a taste of the good ole days.

Not to break from the blogging hunger strike again today (see prior post “Hunger Strike – Day One” June 16-10), but one of my favourite all-time Globe and Mail “imitations”, or perhaps just another “grand coincidence”, took place in June 2007 (see prior post “Is imitation truly flattering?” June 16-07). Perhaps if we’d had a hunger strike after that piece was written, three years to the day that the strike began, none of the cribs that followed would have come to pass.

Here it is, in all of its glory.

I’d attended Henry Kravis’ Halifax speech during the annual CVCA conference, and penned a post on the affair. I never saw the Globe & Mail journo in question, who I understand is a good fellow, but you’d have thought he was there from the very quotes (some of which were off the cuff) that he felt were worthy of reporting upon. They sound an awful lot like the ones I used two weeks before his piece was published. Oh, and the Wall Street Journal appears to have unwittingly lent a hand in the Globe’s research exercise, as well:

Globe & Mail article, June 16th, 2007:

“For the moment, there’s no stopping private equity’s “golden era,” to borrow the phrase that Henry Kravis, the godfather of the LBO, used at a conference in Halifax a few weeks ago.”

Our blog, May 29th, 2007 (“KKR Founder Henry Kravis on PE climate“):

“While [Kravis allowed] that ‘private equity is in its golden era right now’, he sees no reason for that to change.”

Dead Tree Media article, June 16th, 2007:

“When it comes to private equity, the two most frightening words to any Wall Street banker are ‘burning bed,’ the nickname of a famous deal gone awry during the great LBO boom of the late 1980s.”

Wall Street Journal, June 12th, 2007:

The story titled “For KKR, Bumps in Its Buyout Binge” used that same “burning bed” line when it referred to the famous Ohio Mattress LBO deal that ultimately required First Boston to sell itself to Credit Suisse.

Dead Tree Media article, June 16th, 2007:

“Today, a few bankers have publicly voiced concern about foolish lending, among them Bank of America chief executive officer Ken Lewis, who recently got the attention of the world’s banks when he said: “We are close to a time when we’ll look back and say we did some stupid things.”

Our blog, June 1st, 2007 (“Maybe there is a credit bubble after all“):

“‘We are close to a time when we’ll look back and say we did some stupid things,’ Lewis said… ‘We need a little more sanity in a period in which everyone feels invincible and thinks this is different.’ Bank of America Corp. (BAC:NYSE) Chief Executive Officer Ken Lewis”

Dead Tree Media article, June 16th, 2007:

“In the U.S., banks hold just 20 per cent of “leveraged loans,” a term that describes not just buyout loans but other junk debt, according the Standard & Poor’s.

The other 80 per cent is held by institutional investors – hedge funds, mutual funds, pensions, insurance companies and so on. The biggest buyers are financial engineers who acquire a bunch of loans, pool them together as collateralized loan obligations, or CLOs, and sell them off in pieces – very often to those same hedge, mutual and pension funds.”

Our blog, May 31st, 2007 (“Henry Kravis on “the bubble” question“)

“In 1999 there were 62 U.S.-based leveraged loan providers, today they are 236. 80% of U.S. big ticket loans are now sold into these conduits by his estimate.”

– and –

Our blog, June 15th, 2007 (“US subprime borrowers sink deeper into trouble“):

“What impact will a 19% [subprime mortgage] delinquency rate have on the investors that bought packages of these loans in the credit markets?

What does that do to the CLOs, CDOs and syndication groups that are currently funding about 80% of U.S. corporate loans?”

Dead Tree Media article, June 16th, 2007:

“In Halifax, Mr. Kravis tried to puncture the notion that today’s private equity firms are gambling like never before. During the 1980s LBO craze, private equity firms like KKR would routinely buy companies and finance with less than 10 per cent equity, borrowing the rest. Today, it’s more typical to see firms put in 30 per cent equity.”

Our blog, May 31st, 2007 (“Henry Kravis on “the bubble” question“):

“Today, across the entire industry, the U.S. buyout market uses debt to fund an average of 70% of the total purchase price. Largely in keeping with KKR’s mid 90’s deal examples.

When compared with the current leverage component, if 30% of today’s deals are financed with equity, the sub 10% deals of the 1980s look awfully geared by comparison.”

What do you make of it? My Grade 11 English teacher at Humberside Collegiate would have been cross with me, I bet; likely given me an “F”. But, in this new world, am I being too precious with this hunger strike?

MRM
(disclosure – As Photo Editor at The UWO Gazette in 1985, my editor was the Toronto Star’s Kevin Donovan. And no, he’s not changed a bit since those days.)