Tuesday's Wall Street Journal featured an article on the mess that's become of KKR's and TPG's private buyout of TXU.
When you think of private equity, you often think of wealthy, savvy private capitalists buying underappreciated companies and assets, sprucing them up, then spinning them back out to the public, coining money in the process.
Sometimes, of course, we read about one of the leveraged buyouts which essentially just looted the firm of value by loading it up with debt, paying a 'special dividend' to the buyout firms, then letting it go under or stagger under the onerous debt service costs.
But one paragraph of the Journal story gave me pause. It contained this passage,
"The biggest leveraged buyout of all time has boiled down to an expensive bet on the price of a commodity. Natural gas has fallen 43% since TXU's buyout, and settled at $3.927 a million British themral units on Monday."
Makes you think twice about how smart some of these private equity guys are, doesn't it? Like Cerebrus' purchase of GMAC and Chrysler just before the mortgage-backed mess collapsed in 2008.
Somehow, one is left feeling that TXU should have been left alone, and these private equity guys could have just gone long natural gas futures, if that's really all they were effectively trying to do.
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