Well, that was fun. I picked one of the Bain Capital documents from the Gawker dump yesterday and paged through it. Okay, so I have a very strange idea of fun. But you know who has a normal idea of fun?

The Harlem Globetrotters. One of Bain Capital's toys.

It turns out, the Harlem Globetrotters¹ are one of a number of interesting investments Bain's Sankaty Partners High Yield III, L.P. subsidiary made before it (apparently) went bust. But let me get to the interesting investments parts before I get to the went-bust parts. Some of those investments are intrinsically interesting, some are interesting for policy or political reasons.

In addition to the Globetrotters, for example, Santaky's other foray into African-American pop culture is the piece of Snoop Dogg they owned by owning a piece of his agent, The Firm, Inc². Through that equity they also owned a piece of the Dixie Chicks--I wonder what the typical Republican voter thinks of that?--and the Backstreet Boys. Bain Capital also owned chunks of such bands as Linkin Park not only through that agency equity but through equity in and loans to Warner Music and subsidiaries³.

But the most intriguing thing for me, as a Red Sox fan, and, presumably, for Governor Romney as a citizen of Red Sox Nation, are the loans outstanding to the Hicks Sports Group during exactly the period covered. You see, Thomas Hicks owned the Texas Rangers after President George W. Bush. And one of his other sports properties was Liverpool FC of the English Premier League. Which he purchased by saddling the team with debt that it turned out to be unable to service. Debt partly owned by Bain Capital. And which led to a forced sale to John Henry and New England Sports Ventures, the owners of the Red Sox.

It's hard to tell from these two line items⁴ whether Bain was trying to help Hicks maintain ownership or whether they were one of the many putting the screws to Hicks, but I strongly suspect the latter. If you followed the saga closely, as I did (and to catch up, click here for the Guardian's day-by-day coverage), you know that Hicks was in deep because he had senior debt maturing at the end of 2010. And you can see below that Santaky owned senior debt maturing at the end of 2010. And at the time Hicks was claiming that he was working on securing extensions and new financing from unnamed creditors. It all fell through, though, and Hicks got scavenged. And the Red Sox got a soccer club as a new toy to play with. So it may well be that Romney helped the Red Sox screw over the Texas Rangers. Which is a least some small comfort for the way the Rangers under new ownership have walloped the Red Sox on the field the last couple of seasons.

But there are more serious issues, as well. For example, at exactly the period covering the Chapter 11 Bankruptcy proceedings for General Motors, guess who owned General Motors senior bank debt, i.e., was a party to the proceedings? Page 18:

Well, isn't that strange? However, what I find more significant is Santaky's large holdings in the Health Care sector, mostly, it appears, on the provider side. Page 20: 

Do the American people get to know that one of the candidates for president has or has had a significant interest in maximizing profits for health care providers when they listen to him babble incoherently about the health care sector? I think so.

But I think this is the most interesting part. You see, this particular Bain Partnership failed. The document here is the liquidation report of the auditors PricewaterhouseCoopers, and they tell us that this investment vehicle defaulted:

p. 31

On October 9, 2008, the Partnership defaulted on certain covenants of its Notes Payable Indenture which accelerated the principal payment of the Notes (see Note 7). Based on the acceleration and the net assets of the Partnership at this time, the General Partner determined that liquidation of the Partnership was imminent. As a result, the Partnership adopted a liquidation basis of accounting in conformity with accounting principles generally accepted in the United States of America. Under the liquidation basis of accounting, assets are stated at their estimated net realizable values, liabilities are stated at their amount and all expenses at liquidation have been estimated and recognized. Additionally, the Partnership has not disclosed the ratio of net investment income or total expenses to average limited partners' capital and the total return of the Partnership.

P 45

Defaults and Waivers to Indenture

The Indenture requires the Partnership to comply with certain conditions, which include an Over-Collateralization test that requires the Partnership to maintain a level of market value investments that exceeds the principal outstanding on the Notes. On October 9, 2008, the failed this Over--Collateralization test, which triggered an event of default. There are numerous potential consequences if default under the Indenture occurs and is not remedied. Many of those consequences are beyond the control of the Partnership. The occurrence of one or more events of default would give rise to the right of the Noteholders to exercise their remedies under the Indenture, without limitation, which includes the right to accelerate all outstanding debt and take actions authorized in such circumstances, any of which would impair the ability of the Partnership to operate its business as a going concern. During the year ended December 31, 2008, the Noteholders waived certain violations outlined in the Indenture and exercised their right to accelerate the principal payment schedule of the Notes. Based on the terms outlined in the Pledge and lntercreditor Agreement, an event of default bestows control of the Partnership to the Controlling Class. On December 18. 2009, the Partnership was notified by the Controlling Class Representative of a Forbearance and a Notice of Revocation of Liquidation Direction. The Controlling Class Representative has notified the Partnership that it will not approve any Liquidation Acceleration or Liquidation Direction at any time when certain collateralization thresholds are met. The Controlling Class is comprised of more than 35% of the Class A--2 Noteholders, but will move down the tranches of Notes as the principal repayment is accelerated and classes are paid down. 

And it's really not hard to see why. Yeah, 2008 and 2009 were pretty crappy years for the investment community, and most of the loans and equity had lost value over the years covered, but not all THAT much. Even the General Motors debt ended up being worth about 25% of face value. What seems to have killed Santaky High Yield was this. Page 11:

According to explanation on pages 47 & 48, that almost $30 million down the toilet consisted of Collateralized Debt Obligations, that is, CDOs, the subprime garbage that crashed the world economy. The fact that Bain and Mitt Romney aren't totally bankrupt now is, well, a crime.

And that's not a fun toy.

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FOOTNOTES:

¹ Globetrotters, p. 11:

²; ³ Snoop Dogg, Dixie Chicks, Linkin Park,  pp. 15 & 21

⁴ Texas Rangers, Liverpool, Red Sox, pp. 9 & 26