Leveraged Buyouts
Another wall street scam that allows all parties involved to make huge sums of money from the initiator to the corporate heads who use this finance instrument as a hedge on their bonus or golden parachutes. In the final analysis all of this is paid out from the small investors who make stock purchases on companies who they feel will make them a small dividend payout each quarter while those at the top rack in billions.
The buyouts start out being financed by leverage buyout expert who are big players in this huge payout lottery. KKR and BK, the supposedly bankers of the buyout. “The leveraged buyout is perhaps the greatest financial travesty of modern capitalism.
Resembling a home mortgage, the tactic allows financiers, typically private-equity companies like Kohlberg Kravis Roberts (KKR) or the Blackstone Group (BX), to buy an entire company with a comparatively tiny down payment. The rest of the purchase price is financed by debt that is — and this is the critical point — collateralized by the assets of the company being acquired.
And herein lies the problem. The company that’s acquired becomes so overwhelmed with interest payments that it’s forced to cut back in other places. Thus, while a handful of financiers make off like bandits, employees become the unwitting beneficiaries of lower pay and unemployment. There are other players in this scam who make out like bandits also but are lesser known, The corporate heads of the companies who are bought out are paid huge sums of money in golden parachutes which makes me very leary about their implications in these buyouts. Lets not forget about the lawyers who participate in these buyouts, they rack in huge sums also. So everyone who shares in the profits from the buyouts are not the ones who built the company, worked their buts off to make the company profitable or who fought through all the bad times retired thinking they had a pension coming but found out one day in their golden years someone had used their retirement monies to buyout the company they worked and sweated all those years. Now their pension monies are gone because the buyout group took the pension money to finance the buyout.
These are the corporate raiders who prey on those companies who they feel look good on paper and they use their power and vast assets to raid these companies for financial gain. But, as I stated above sometimes the suspects in these dealings are not just the raiders but the CEO, Presidents and Board of Directors who are willing participants in the raiding of the company. Makes you think right???
E. Bishop III, The Money Connection.Com
“Following The Money People”