Romney Bain and GS Technologies
Andrew Sullivan writes something interesting.* No not that Andrew Sullivan, this Andrew Sullivan at Reuters. Fairly excerpted, I think.
in October 1993, Bain Capital, co-founded by Mitt Romney, became majority shareholder in a steel mill that had been operating since 1888.
It was a gamble. The old mill, renamed GS Technologies,
a federal government insurance agency had to pony up $44 million to bail out the company’s underfunded pension plan. Nevertheless, Bain profited on the deal, receiving $12 million on its $8 million initial investment and at least $4.5 million in consulting fees.
Nevertheless, Bain and its partners decided to buy the mill for $75 million. Bain put up about $8 million to gain majority control of the company, renamed GS Technologies Inc. GE Capital, former Armco executives and Leggett & Platt, a major customer for the mill’s wire rods, chipped in the rest of the equity.
Bain got its money back quickly. The new company issued $125 million in bonds and paid Bain a $36.1 million dividend in 1994.
“What ?!$” you ask. Bain put in $ 8 million and took out $ 36.1 million one year later ? If that isn’t looting what is ?
Bain managed to lose $16.5 million of the money buying another steel mil,l hence the safe calculation of “at least $12 million” which means the 8 million back plus $12 million more plus the $4.5 million in fees. Note the similarity between the amount of money Bain made and the $44 million bailout.
And think of the fools who allowed Bain to control the firm after putting up 11.67% of the money ? I sure would like to play poker with them.
** with co author Greg Roumeliotis
In case anyone hasn’t seen the 28 minute documentary about Romney and Bain that Newt’s organization put out, here it is on youtube.
Coming from a Rethug, this is astounding. The implied PoV is far to the left of what we get from Demorats these days.
Vulture capitalism damn sure is looting. It’s destructive of capitalism, impoverishes workers, is bad for the econmomy and the country, and it ought to be illegal.
Instead of running for president, Mitt should be – I’ll just soft-peddle it here and say – in prison.
All these years after Micheal Milken when to jail and Danny DeVeto did Other Peoples money. Man, we are slow, painfully so, learners.
All these years after Micheal Milken went to jail and Danny Devito did Other Peoples Money; Man, we are slow, painfully so, learners.
Putting in 8 million and getting out 36.1 million a year later isn’t looting if they turned around the company. But that doesn’t seem to be the case in the article.
To me, the story reads like a pirate ship happeninig upon a floundering vessel. It sends aboard a raiding team that grabs everything it can, and then sets fire to the lifeboats on its way out. The justification for their behavior: well, by looting the ship of valuables and destroying the lifeboats, the ship that’s dead in the water can stay afloat for a bit longer.
I think the history of Bain also includes raids on ships plying the ocean under full sail, on course. To a pirate, it doesn’t matter if if the ship they are looting is sailing or sinking. Plunder is plunder.