You Can Plunder, Too
Private Equity firms want average Americans to join in the looting
“How fondly swindlers coddle their dupes! No mother is as caressing or thoughtful towards her adored child as a merchant in hypocrisy toward his milch-cow.” – Honoré de Balzac
Wouldn’t it be fun to take over a company, lay off its employees, sell off its assets, load up its balance sheet with debt, and run off with the profits before it inevitably files bankruptcy and stiffs its lenders?
This is what private equity firms do best, and now they want your retirement funds to widen their swath of financial destruction.
The Financial Times recently reported that the $13 trillion industry is preparing to lobby incoming President Donald Trump for permission to tap the retirement accounts of average Americans. They’re salivating over the trillions of dollars we have saved in tax-deferred retirement plans such as 401ks and IRAs.
Is it because these financial behemoths – such as Apollo Global, Bain Capital, Blackstone, KKR and Warburg Pincus – truly care about our economic well-being? Or is it because they can never get their claws on enough loot?
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“We’ll make the case for a pro-growth regulatory regime that supports small businesses and provides more opportunity to everyday investors,” Drew Maloney, CEO of the American Investment Council, told FT. “We’ll hit the ground running to work with the Trump administration.”
Dogs from hell
Cerberus Capital Management, named after the three-headed hound that guards the gates of Hades, exited its investment in Dallas-based Steward Health System in 2020 with an $800 million profit.
It sold the hospital chain’s real estate in lease-back deals. Then it used to the proceeds to go on an acquisition spree. Then it sold the debt-bloated bundle to a physicians group. Then – Surprise! Surprise! – the chain could no longer afford to pay the rents and service its massive debts, so it filed bankruptcy last year.
Hospitals closed, more than 2,500 employees lost their jobs, and critical services such as obstetrics, behavioral health and cancer care disappeared.
It became a veritable horror show, as reported in a previous Business Blunders:
In Rockledge, Fla. , a Steward hospital was infested with thousands of bats and peppered with guano.
In Phoenix, a Steward hospital lost air conditioning as temperatures topped 100 degrees, forcing patient transfers. Staff said the company had known about the looming issue for years and did nothing about it.
In Boston, a woman died after giving birth because the equipment needed to save her life had been repossessed by the manufacturer.
In Lauderdale Lakes, Fla., bed bugs stayed free of charge, and hazardous medical waste piled up in storage rooms, presumably because the bills had not been paid.
Jilting bondholders and lenders
A company is ten times more likely to file bankruptcy after it’s been taken over by a private equity firm, according to a 2019 study reported in Institutional Investor.
Steward is but one example. Private equity firms were behind most of the billion-dollar-plus bankruptcies filed in the first six months of last year, according to a count by an advocacy group, the Private Equity Stakeholder Project.
The list includes other health care companies, seafood chain Red Lobster and 99 Cents Only, where the lunch-pail-carrying people have to shop.
Private equity firms have a tried-and-true track record. And now these thugs in suits want to use our hard-earned savings to crush our communities and put our employers out of business.
How stupid do they think we are? Or, more to the point, how stupid are we?
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