Timing is everything. I was just sitting down to type a blog post saying the Rush really really needs to disclose that his paycheck is signed by Bain Capital. That moment, he gave his “full disclosure” (Tuesday @ 2:14 PM ET).
Rush described Bain as being part owner of Clear Channel, his “former” syndication partner. That’s factually wrong or at least misleading. His original syndicator was acquired by Premiere which was bought by Jacor (Randy Michaels) in 1997.
http://clearchannel.com/Radio/PressRelease.aspx?PressReleaseID=1599&p=hidden
Jacor was then acquired by Clear Channel in 1998, giving Clear Channel ownership of Premiere Radio Network, Rush’s past AND current syndicator.
Clear Channel’s ownership is complex by design so you can’t follow the moving pieces. The umbrella corporation (CC Media Holdings) owns both the Clear Channel Radio company and Clear Channel Outdoors – a company that owns outdoor billboards and bus stop signs in the United States and Europe. They used to own LiveNation, but sold that part of the company.
Bain Capital and Thomas H Lee, both of Boston arranged the transaction to “Take Clear Channel Private” in 2007, just as the valuation of radio licenses was falling apart – the transaction closed in July 2008, the same month that Sean Hannity left ABC/Citadel to switch to Premiere as his syndicator.
http://www.clearchannel.com/Corporate/PressRelease.aspx?PressReleaseID=1824
Bain & Lee “won” a bidding war among firms competing to do the transaction:
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=agQHBLy_1o5c
Fidelity (also of Boston) and the California Pension system (CALPERS) both opposed the transaction but didn’t own enough of Clear Channel to stop it.
The two firms run Clear Channel (via their ownership of the non-public stock which elects the Board of directors), but they don’t “own” it using their own money. The money to buy Clear Channel came from about $25 billion that was borrowed from a number of banks and bond sales – several of which are non-US banks, which are not allowed to own or control U.S. radio or TV stations, unless there is a complex ownership structure that makes it look like Deutsche bank isn’t really controlling Clear Channel, just collecting “interest”.
“”Morgan Stanley, Citigroup, and Deutsche Bank as well as Credit Suisse, RBS and Wachovia are acting as financial advisors and providing firm financing commitments to the private equity group. Morgan Stanley, Citigroup, Deutsche Bank, Credit Suisse and RBS are also providing equity commitments.”
After “going private”, Clear Channel immediately sold its TV stations and fairly quickly sold the smaller market radio stations to GAP (now part of Townsquare) to try to refinance the worst part of the debt it took to close the difficult transaction.
The Clear Channel debt is now about $20 billion, which will be popping its head up again this year. What Bain and Thomas Lee have done since going private is to fire substantial numbers of employees, including most of the folks who worked for Premiere (one of whom now works for Glenn Beck), sales people, traffic people, local hosts, program directors – trying to cut costs to the bone in order to keep paying the interest on that $20 billion of debt they arranged to enslave the future of Clear Channel.
So this is exactly what Newt is describing. Bain earned a very large fee for arranging the deal and then steps aside and earns a profit from “managing” the company, but taking none of the downside financial risk if/when the company fails – other than losing their cash flow from managing the company.
Rush then went on to say that “None of my people have been affected by this”. First, Rush’s “people” are employed by his production company, not Clear Channel or Premiere. Rush got a signing bonus for his 5 year contract extension and gets money from Premiere for selling the national ads and charging the radio stations to buy the program, and other revenue from his side ventures like Rush 24, the Rush Newsletter. I have no issue with Rush being a successful capitalist.
What Rush glossed over was the “Main Street” people. At the peak, Clear Channel owned about 1200 radio stations (now around 750) – while Clear Channel put a lot of money into fixing up failing radio stations with SWAT teams of engineers to replace obsolete equipment, much of that was done to install automation to reduce the costs of the “Main Street” employees and become more “efficient”. Much of that was done long before Bain Capital showed up. Clear Channel was using traditional bond funding and the company was publicly traded.
The VC and PE firms like Bain have fundamentally transformed American Capitalism, replacing transparent publicly traded companies with full SEC disclosure about every aspect of the company and its operations, and replaced it with a shadowy system of “Private” ownership using pools of money that have no owners and no national loyalty. Much of that money was just money created by the Federal Reserve and lent to banks in Europe, to turn around and buy up all of America’s companies.
We are socialists now with the government owning Clear Channel, just obfuscated by two or more layers of middlemen. That’s the legacy of Mitt Romney and Bain Capital.
Full Disclosure: I used to work for NASDAQ, the old style of democratic capitalism where individuals, employees pension plans, insurance companies and mutual funds used to own America.
Considering how tough Rush is on Romney, this “disclosure” seems more perfunctory than anything else.
Time will tell. I’m not suggesting Bain capital has any influence on Rush.
But having now ridden his Rush roller coaster a few times, I know that ultimately he will fall in line with the establishment’ choice and lecture us that any other choice is a vote for Obama.
Glenn Beck made a similar “disclosure” today with the same basic story line. Bain Capital and Thomas H Lee is who fired most of the staff of Premiere a year ago and hired Bob Pittman. They defacto run Clear Channel. They don’t own it – clear channel is owned by no identifiable entity – that is why it is called PRIVATE equity.