For some time, I have been posting on various sites that R-MONEY invented "The Bain Way" which is a financial technique to essentially guarantee that Bain made money even when companies that they invested in went bust.
In brief, "The Bain Way" goes like this:
1. Buy a modestly profitable company as cheaply as you can.
2. Load company up with debt to raise cash.
3. Pay yourself a “management fee” and/or a “special dividend” using cash raised in step 2 to pull out all of the money you spent in step 1.
4. Slash expenses to cover the charges to carry the debt the company took on in step 2. Fire workers, minimize wages and benefits for the ones that remain (for example, fire them and hire them back for less), eliminate pensions.
5. If the company does not go bankrupt, sell it for another payday. If it does go bankrupt, not to worry - - the company is on the hook for the debts taken in step 2, but not you.
Now, The New York Times has published an article that basically supports this analysis.
Link: http://www.nytimes.com/...
Cambridge Industries, an automotive plastics supplier whose losses had been building for three consecutive years, finally filed for bankruptcy in May 2000 under a mountain of debt that had ballooned to more than $300 million.
Yet Bain Capital, the private equity firm that controlled the Michigan-based company, continued to religiously collect its $950,000-a-year “advisory fee” in quarterly installments, even to the very end, according to court documents.
In all, Bain garnered more than $10 million in fees from Cambridge over five years, including a $2.25 million payment just for buying the company, according to bankruptcy records and filings with the Securities and Exchange Commission. Meanwhile, Bain’s investors saw their $16 million investment in Cambridge wiped out.
That Bain was able to reap revenue from Cambridge, even as it foundered, was hardly unusual.
The private equity firm, co-founded and run by Mitt Romney, held a majority stake in more than 40 United States-based companies from its inception in 1984 to early 1999, when Mr. Romney left Bain to lead the Salt Lake City Olympics. Of those companies, at least seven eventually filed for bankruptcy while Bain remained involved, or shortly afterward, according to a review by The New York Times. In some instances, hundreds of employees lost their jobs. In most of those cases, however, records and interviews suggest that Bain and its executives still found a way to make money.
Leave it to R-MONEY to look out for HIS OWN interests without regard to who gets hurt in the process.
R-MONEY has no core convictions other than taking care of Mitt. Go tell all your friends ...