{"id":233,"date":"2009-02-09T16:31:21","date_gmt":"2009-02-09T16:31:21","guid":{"rendered":"http:\/\/global-labour.info\/en\/2009\/02\/09\/eu-commissioner-mccreevy-and-private-equity-funds-launch-new-assault-on-democracy-iuf-2009\/"},"modified":"2009-02-09T16:31:21","modified_gmt":"2009-02-09T16:31:21","slug":"eu-commissioner-mccreevy-and-private-equity-funds-launch-new-assault-on-democracy-iuf-2009","status":"publish","type":"post","link":"https:\/\/global-labour.info\/en\/2009\/02\/09\/eu-commissioner-mccreevy-and-private-equity-funds-launch-new-assault-on-democracy-iuf-2009\/","title":{"rendered":"EU Commissioner McCreevy and Private Equity Funds Launch New Assault on Democracy – IUF (2009)"},"content":{"rendered":"


\nIUF Press Release, Geneva, February 9, 2009<\/strong><\/em>
\nNo one can accuse EU Commissioner for Internal Market and Services Charlie
\nMcCreevy of excessive subtlety, but his current escapades set new benchmarks.
\n“Commissioner McCreevy and the European private equity funds are engaged in
\nan orchestrated maneuver to undercut a clear call for binding regulation of the
\nbuyout industry adopted by a huge majority of the European Parliament last year”,
\naccording to IUF General Secretary Ron Oswald. “McCreevy and the funds want
\nto smuggle in toothless ‘Codes of Conduct’ in place of binding legislation. Left
\nunchecked, this will provide an object lesson in undercutting democracy and pave
\nthe way for similar efforts in North America and elsewhere at a time when there
\nare growing calls to bring private equity activity within the framework of
\ncomprehensive regulation.”
\nIn 2006,McCreevy commissioned a group of private equity funds and investment
\nbankers to author the background “report” for a European Commission White
\nPaper on “Developing European Private Equity” (which the funds and bankers
\nthen “welcomed”).
\nIn October 2008, the European Parliaments adopted (by a cross-party majority of
\n526 to 82) the report prepared by the Party of European Socialists (PES) on
\nlegislative regulation of private equity and hedge funds. The normal response
\nwould be for the Commission to develop concrete legislative proposals.
\nMcCreevy, however, is now maneuvering to subvert the Parliament’s vote by
\npromising private equity firms that they can avoid regulation by signing up to\u2026
\ncodes of conduct. This was McCreevy’s explicit message in a recent speech to
\nthe British Venture Capital Association (BVCA), and he appears to be working on
\nit at EU-level.
\n“The IUF and unions globally have considerable experience with corporate codes
\nof conduct”, says Oswald. “They have always been a move to escape from
\nbinding laws and regulations, either the elaboration of new ones or the effective
\nimplementation of existing ones.”
\nIn the case of private equity, the mother of all codes is the one elaborated in the
\n2007 report of the UK Walker Commission, which was roundly criticized by unions
\nat the time as an inadequate substitute for binding regulations. If McCreevy
\nintends to again turn to the European Venture Capital Association to provide the
\ncover for his assault on democracy, the February 1 Financial Times editorial by
\nBVCA head Simon (not Sir David) Walker may provide more than a few clues.
\nAccording to Walker, the buyout funds have to “keep marching down the path
\ntowards greater transparency” and “the regime of self-regulation” established by
\nthe 2007 report. The report, strictly speaking, establishes no regulations at all, but
\ndeals entirely with a limited number of disclosure issues in a limited number of
\nareas for a limited number of funds – and in fact applies to a mere 56 of some
\n1,300 UK private equity-owned portfolio companies. Moreover, the “disclosures”
\nare essentially useless. A quick trawl through the internet would supply more, and
\nmore relevant, information to workers and all citizens concerned with the impact
\nof private equity on investment, employment and public finances.
\nPermira, Europe’s largest buyout house, blazed “the path towards greater
\ntransparency” by publishing the UK’s first Walker-compliant annual report. Here’s
\nwhat they have to say, for example, about the job they did on Danish
\ntelecommunications company TDC, which they took over as part of a private
\nequity consortium of 5 of the biggest global buyout funds in a 2005 deal which
\nwas 80% debt-financed and took the company’s debt to asset ratio up to 90%.
\nPermira and the other funds then depleted the cash reserves, distributed the
\nequivalent of half the company’s assets to the new owners and top managers and
\neliminated thousands of jobs:
\nTDC has introduced substantial changes over the past two years including: i)
\nsignificantly strengthening the management team; ii) successfully focusing the
\nbusiness on the core Danish operations through disposals of non synergistic
\nassets outside the Nordics (Bite, One, Talkline); and iii) reorganising the company
\ninto a customer-centric organisation. In addition, TDC has developed a new
\ncorporate strategy and launched an extensive cost improvement and complexity
\nreduction programme that is currently being implemented.<\/em>
\nThat’s it. There’s a generic picture of a mobile phone, the names of senior
\nmanagement, and the size of the total investment, but nothing about what really
\nmatters: the debt, how it was financed, who owns it, the evolving debt to equity
\nratio, how they’ve been taking their money out, the company’s tax liabilities (or
\nlack thereof), and so on. There is no information here of any relevance to a union
\ninvolved in collective bargaining or anyone simply seeking to understand the
\nimpact of the buyout on the company, the sector or the country as a whole
\n(unsurprisingly, TDC. is no longer a leader in wireless technology).
\nIn 2004, Permira bought Spanish retailer DinoSol from Ahold for \u20ac895 million. To
\nget their money out quickly, they launched a “sale and lease back” program in
\nJanuary 2005 which freed up cash for Permira but worsened the company’s
\nbalance sheet and piled more debt on to the books, took on additional debt in
\nNovember 2006, and in February 2007 took out more money through a \u20ac488m
\ndividend recapitalization. This is what is driving developments at DinoSol. What
\ndoes the report tell us?
\nThe company is focused on defending and strengthening its competitive position
\nin its core Canary Islands market while improving the performance of the firm\u2019s
\nmainland operations, aiming to increase both footfall and revenue per customer<\/em>.
\nThe “march down the path towards greater transparency” continues through the
\nportfolio, but provides not a clue as to why many of these companies are
\nstaggering under their accumulated leverage and their debt is trading at severely
\n“distressed” levels, a possible prelude to insolvency (of course this can and will
\nbe blamed on “unfavorable circumstances” in whose creation they had no part\u2026).
\nIt’s like reading an account of European history in the first half of the twentieth
\nhistory which compresses two world wars and a devastating depression into a few
\nlines celebrating a successful endeavor at “concentrating on core business”. One
\neagerly awaits the next report’s handling of the financial carnage at Pro-Sieben,
\nEurope’s biggest television broadcaster from which Permira and KKR sucked out
\na \u20ac270 million dividend last summer at a time when the company was struggling
\nwith \u20ac4 billion in debt and plunging deeper into the red.
\nIs this the “new tone” which McCreevy, following Simon Walker, intends to impose
\non private equity as “the course of action” to assure it of a “bright future”?
\n“It is the meltdown in financial markets, not the “self-regulation” of the ludicrous
\nWalker “code of conduct”, which has put a temporary halt to pillage through
\nleverage”, says Oswald. “What Walker and McCreevy are proposing on
\ndisclosure doesn’t even come close to meeting existing requirements to which the
\nfunds should be held to account – and disclosure is only a small, if significant, part
\nof the total regulatory program which is urgently needed.”
\n* * * * *
\nInternational Union of Food, Agricultural, Hotel, Restaurant,
\nCatering, Tobacco and Allied Workers\u2019 Associations
\nRampe du Pont-Rouge, 8, CH-1213 Petit-Lancy (Switzerland)
\ntel: + 41 22 793 22 33, fax + 41 22 793 22 38, e-mail: iuf@iuf.org – www.iuf.org
\npresident: Hans-Olof Nilsson, general secretary: Ron Oswald, press officer: Peter Rossman
\nThe International Union of Food, Agricultural, Hotel, Restaurant, Catering,
\nTobacco and Allied Workers\u2019 Associations (IUF) is an international trade union
\nfederation composed of 397 trade unions in 123 countries with an affiliated
\nmembership of over 2.7 million members. It is based in Geneva, Switzerland.
\nThe IUF Private Equity Buyout Watch (http:\/\/www.iuf.org\/buyoutwatch<\/a>) was
\nestablished in 2007 as a continuously updated source of news and analysis of
\nleveraged buyouts and related financial developments with a focus on the IUF
\nsectors. Copies of A Workers’ Guide to Private Equity Buyouts are available
\nthrough Buyout Watch or from the IUF at www.iuf.org<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"","protected":false},"author":3,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[15],"tags":[],"_links":{"self":[{"href":"https:\/\/global-labour.info\/en\/wp-json\/wp\/v2\/posts\/233"}],"collection":[{"href":"https:\/\/global-labour.info\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/global-labour.info\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/global-labour.info\/en\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/global-labour.info\/en\/wp-json\/wp\/v2\/comments?post=233"}],"version-history":[{"count":0,"href":"https:\/\/global-labour.info\/en\/wp-json\/wp\/v2\/posts\/233\/revisions"}],"wp:attachment":[{"href":"https:\/\/global-labour.info\/en\/wp-json\/wp\/v2\/media?parent=233"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/global-labour.info\/en\/wp-json\/wp\/v2\/categories?post=233"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/global-labour.info\/en\/wp-json\/wp\/v2\/tags?post=233"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}