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But at Bain, Romney's top priority wasn't to boost employment. As the Wall Street Journal recently noted, creating jobs "wasn't the aim of Bain or other private-equity firms, which measure success by returns produced for investors." And, the newspaper reported, Romney's 100,000-jobs claim is tough to evaluate.
Mother Jones has obtained a video from 1985 in which Romney, describing Bain's formation, showed how he viewed the firm's mission. He explained that its goal was to identify potential and hidden value in companies, buy significant stakes in these businesses, and then "harvest them at a significant profit" within five to eight years.
The video was included in a CD-ROM created in 1998 to mark the 25th anniversary of Bain & Company, the consulting firm that gave birth to Bain Capital. Here is the full clip, as it appeared on that CD-ROM (the editing occurred within the original)
TRANSCRIPT: Bain Capital is an investment partnership which was formed to invest in startup companies and ongoing companies, then to take an active hand in managing them and hopefully, five to eight years later, to harvest them at a significant profit…
In this clip, Romney mentioned that it would routinely take up to eight years to turn around a firm—though he now slams the president for failing to revive the entire US economy in half that time.
What’s clear from a review of the public record during his management of the private-equity firm Bain Capital from 1985 to 1999 is that Romney was fabulously successful in generating high returns for its investors. He did so, in large part, through heavy use of tax-deductible debt, usually to finance outsized dividends for the firm’s partners and investors. When some of the investments went bad, workers and creditors felt most of the pain. Romney privatized the gains and socialized the losses.
Thanks to leverage, 10 of roughly 67 major deals by Bain Capital during Romney’s watch produced about 70 percent of the firm’s profits. Four of those 10 deals, as well as others, later wound up in bankruptcy. It’s worth examining some of them to understand Romney’s investment style at Bain Capital.
In 1992, Bain Capital bought American Pad & Paper by financing 87 percent of the purchase price. In the next three years, Ampad borrowed to make acquisitions, repay existing debt and pay Bain Capital and its investors $60 million in dividends.
As a result, the company’s debt swelled from $11 million in 1993 to $444 million by 1995. The $14 million in annual interest expense on this debt dwarfed the company’s $4.7 million operating cash flow. The proceeds of an initial public offering in July 1996 were used to pay Bain Capital $48 million for part of its stake and to reduce the company’s debt to $270 million.
From 1993 to 1999, Bain Capital charged Ampad about $18 million in various fees. By 1999, the company’s debt was back up to $400 million. Unable to pay the interest costs and drained of cash paid to Bain Capital in fees and dividends, Ampad filed for bankruptcy the following year. Senior secured lenders got less than 50 cents on the dollar, unsecured lenders received two- tenths of a cent on the dollar, and several hundred jobs were lost. Bain Capital had reaped capital gains of $107 million on its $5.1 million investment.
Mitt Romney’s campaign handed out more than $200,000 in bonuses last month to senior staffers, according to new disclosure records filed Thursday.
Richard Beeson, Romney’s national political director, received a $37,500 payment on Aug. 31 in addition to his salary, according to records filed with the Federal Election Commission.
In addition, records show at least six other top staffers each received $25,000 bonuses on the same date: campaign manager Matt Rhoades, general counsel Kathryn Biber, policy advisor Lanhee Chen, communications director Gail Gitcho, digital director Zach Moffatt and advisor Gabriel Schoenfeld. Two other employees received $10,000 bonuses......
Despite strong fundraising since May, new records show that the campaign was struggling badly for money in August because it had run low on primary funds and was unable to tap into contributions collected for the general election until after the nomination. As a result, the campaign borrowed $20 million.
Originally posted by Blackmarketeer
The term "harvest" may not mean as much to some, regarding how Bain and Romney intended to extract their wealth from the process of investing in or de-investing in their acquired companies. What made Bain/Romney's practice so destructive to the companies they acquired was HOW they acquired them - maximizing the use of the leveraged buyout - s this Bloomberg article explains, which loaded the companies with debt, "socialized" the risks and privatized the profits:
Originally posted by Alxandro
In retrospect, it looks like he had a good harvest.
Originally posted by Blackmarketeer
Romney took AmPad's debt from 11 million (prior to being acquired by Bain) to $444 million. Unreal. This is the guy running for president?
I'm reminded of the current situation in Romney's campaign: his campaign is in deep debt, just borrowed another round of millions of dollars - that he then hands out massive bonuses to his staffers.
Originally posted by Grimpachi
Romney personifies what the GOP stands for. Big business and profits.
He is their poster child.
It's sad to see people on ATS cheering on a corporate leech to be president.