(From the PBS News Hour Transcript of Potential Risks of Borrowing Money)
JOSH KOSMAN: The Boston Consulting Group last year predicted half of their companies would default. Let's say the companies that go bankrupt end up laying off a quarter of their people, a third. You know, you can easily get to more than a million people. That's a lot of people.
PAUL SOLMAN: In fact, says Kosman, half of the S&P-rated firms that went bankrupt last year, besides banks, that is, were private equity acquisitions, including Chrysler, Simmons, Six Flags, and "Reader's Digest," where retirees, including executives, had their pensions slashed by a debt-driven bankruptcy.
Ken Gordon was president.
KEN GORDON, former president, "Reader's Digest": I have lost 80 percent of my total pension.
PAUL SOLMAN: Did you ever imagine you might not see that money?
KEN GORDON: Not in my wildest dreams.
PAUL SOLMAN: Same for former editor in chief Ed Thompson.
ED THOMPSON, former editor in chief, "Reader's Digest": I lost about $75,000 a year.
PAUL SOLMAN: What was your reaction?
ED THOMPSON: Anger. How could they have screwed up this company to the point where they have to go through bankruptcy
JANE PERSONENI, former head of international advertising, "Reader's Digest": When you begin to see these people taking over, it's like Predator drones are coming in.
PAUL SOLMAN: Jane Personeni, head of international advertising, lost about a third of her pension.
JANE PERSONENI: Am I crying poverty? No, I'm not. But it certainly -- it was something I felt I had earned. It was something I thought was going to keep going. And it stopped.
PAUL SOLMAN: Others are near poverty, however.
Excellent video! And, must see for anyone looking to understand the world of Private Equity. Mr. Kosman's analysis is a forewarning to the enormous amounts of debts coming due between 2012 and 2015 including the $800 billion financing by the U.S. Taxpayers to bailout the Big Banks responsible for the credit debacle.
In the Dunkin' Donuts system, since being acquired by the private equity sponsors, we have seen many franchisor functions outsourced and new distribution channels created in competition with the brick-n-mortar franchise owners. The biggest transition to date was to transfer of the coffee supply chain to P&G which was then acquired by JM Smucker.
Was Mr. Kosman wearing a Hugo Boss suit for the PBS segment? Almost looked a little private equity himself.