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Masterfully played...Or a sign of impending disaster...
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FINCEN
Administrative Assassin


Joined: 08 Mar 2006
Posts: 1351

PostPosted: Tue Jan 25, 2011 4:07 am    Post subject: Masterfully played...Or a sign of impending disaster... Reply with quote

How can one explain the markets reaction to the news that Warner Music Group chief executive Edgar Bronfman Jr., had been found guilty of insider trading in French court and fined $6.7 million as a result. It seems utterly implausible that investors would drive Warner's share price up nearly a quarter by the close of the trading day earning Bronfman enough equity to pay the fine and pocket an additional $2 million. It would certainly seem a bold move that under the circumstances, Warner would announce on this particular day their plan to "vet a bid from private equity firm Kohlberg, Kravis, Roberts and others 'via Goldman Sachs' about a potential sale of certain company assets including but not limited to the entity that holds their publishing licenses. Generally speaking Warner Music's 21% market share in the U.S., would prove a key inducement to potential suitors but overall music sales in the U.S., scaled back an additional 2.4% last year and a number of market analysts see 2011 as a continuation of the decade long slide.

To confuse matters all the more, Warner Music publicly stated it had an interest in acquiring EMI whose owner Terra Firma is on the verge of defaulting on a loan held by Citigroup. In the event that Terra Firma does indeed default, Citigroup is expected to initiate an auction to sell EMI's assets, thereby providing Goldman Sachs a chance to secure EMI on the cheap for Warner Music Group. Were it not for the fact that Thomas H. Lee Partners, the majority holder of Warner Music Group shares at 35% had previously notified CEO Edgar Bronfman Jr., of their intent to sell their stake in the company then I might be inclined to believe the surge was the result of legitimate trading activity. However, not only is Warner Music Group the subject of considerable short interest, but Goldman Sachs legal issue continue to mount and there are questions regarding the true value of the company as a whole. So are we witnessing the unthinkable? Could it be that either the once rock solid Goldman Sachs and or Warner Music Group face the possibility of failing or are these moves apart of a bluff or diversion?

We should consider the possibility of market manipulation on a grand scale. In the 4th quarter of 2010 Alternative Alternative investment firms were the biggest and busiest players in the private investments in public equities. Hedge funds were the most active investors in terms of both deal volume and dollar volume, investing more than $5 billion in 287 deals, according to the PIPEs Report. Private equity and venture capital firms finished a distant second with 52 deals valued at $938.6 million. A few of the key players were Brookfield Asset Management with more than $2.3 billion invested, Pershing Square Capital Management with more than $1 billion and the Blackstone Group with $656 million. Other deep-pocked alternatives firms included Paulson & Co., TPG Capital, Anchorage Advisors, the Carlyle Group, Thomas H. Lee Partners and Soros Fund Management.

Many of these firms are highly leveraged as a result of their past actions and one of the methods they've identified as a plan of action that will help them pay down some of their debt is to back IPO deals. There are two mega-deals set to go public soon that fall into this category. "Nielsen and medical-device company Tournier BV, purchased by Warburg Pincus in 2006, say they will use any cash raised to pay down debt, some of it held by private-equity backers, rather than lavish big rewards on LBO investors. That also was the plan of Harrah's Entertainment Inc., the world's largest casino operator by revenue, which is owned by Apollo and TPG and shelved an IPO last year. That deal could return to the market in 2011."

In the summer of 2006, a consortium of buyout specialists, including KKR, Carlyle, Blackstone and Thomas H. Lee Partners LP, paid more than $4 billion for Nielsen, then called VNU NV. The company was best known as the tracker of consumer behavior in regard to television viewing and Internet use. The buyout specialists restructured the companies management and spun off several industry magazines such as Billboard and the Hollywood Reporter. They pushed Nielsen's business into foreign markets and new media ventures including a joint venture with Facebook Inc. As a result the partners are now claiming increased revenue at precisely the moment they disclosed a plan to sell 21% of itself in a return PO that they are calling an IPO. It should be noted that despite the claims of increased revenue, Nielsen carries a debt load of $8.6 billion. More than twice what the partners paid to acquire the company in 2006.

The public offering will allow the partners to book Nielsen's equity at $7.3 billion which would pit the partners 79% stake at $5.77 billion $1.7 billion profit over a 4 and a half year span. As you can see these are simply paper transactions that will shift the debt load of these financial scammers onto the public. They will then book their profit and the company will be left to deteriorate. The result more market instability and increased job losses as the 'money managers' will demand more cuts that will allow them to show increased savings that are falsely viewed as evidence of increased profitability.
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beemoe
Commission Member


Joined: 07 May 2006
Posts: 845

PostPosted: Mon Jan 31, 2011 5:25 am    Post subject: From Beemoe Reply with quote

I`m impressed with you financial knowledge Jiggy. The PIPES thing is something I`ve been scratching the surface with for about two years now. I hate to admit I still have a ways to go before I understand it. Steve Dresner and Dave Feldman are real good at explaining complex financial topics in their books on the same subject.

I realize that in order to make things happen in the finance world this is a topic that I need to master.
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beemoe
Commission Member


Joined: 07 May 2006
Posts: 845

PostPosted: Mon Jan 31, 2011 5:39 am    Post subject: From Beemoe Reply with quote

Sounds like "Chainsaw" Al Dunlap. You have to admire their ability to pull their profit out and shifting their liabilties. Now I can see why you call these groups "fronts" for somebody else. They`re the same entities over and over.

It reminds me of King Leopold using "straw men" in order to accomplish his goals.
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beemoe
Commission Member


Joined: 07 May 2006
Posts: 845

PostPosted: Tue Feb 01, 2011 10:15 pm    Post subject: From Beemoe Reply with quote

I`ve seen these swaps previously used with "Dutch Sandwiches". Which kinda sounds like what you`re describing without the Dutch or Antilles entities.

I believe there`s something in Dutch Corporate law that allows these swaps and sandwiches to work.
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FINCEN
Administrative Assassin


Joined: 08 Mar 2006
Posts: 1351

PostPosted: Fri Feb 04, 2011 11:03 pm    Post subject: Swaps and Sandwiches Reply with quote

Well B, there is certainly some dispute as to the longterm effectiveness of such activity be it legal or not.
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