The Times quotes THL defending itself, weakly, but there’s notably no word about this:
Simmons issued debt that required the company to pay a hefty 10 percent annual interest rate. The proceeds were used to pay THL a dividend of $137 million.
From what I can recall, that was a very high interest rate to be paying in 2004, especially when the money being borrowed doesn’t even get reinvested into the company. That’s pretty much looting the company.
So what to do about this kind of stripping and flipping?
That conversation needs to be had. Let’s hope the Times has started one here.
For another case of Private Equity looting a company once they bought in, check out this article: The Deal Magazine called it "The Old Switcheroo."
Ironically, this PE firm fired the Company's CEO for, among other things, accidentally having the company pay his personal car insurance. Hardly compares to Simmon's CEO's paying his Yacht's Captain out of company funds, does it?
http://www.thedeal.com/newsweekly/features/the-old-switcheroo.php
#1 Posted by Jeremy, CJR on Thu 8 Oct 2009 at 07:17 PM