Wednesday, July 1st, 2009
The tragic death of the “King of Pop” provides an interesting insight into how hedge funds and private equity groups buy loans in anticipation of future earnings. Michael Jackson made real money during his 40 years as an entertainer; unfortunately, he also lost a lot of money, especially over the last 10 years.
Reports are that Jackson died $500 million in debt. The crushing debt-service payments - combined with losses totaling millions, due to bad investments and money spent to finance his lifestyle - wiped out his fortune and he ended up in hot water with private equity creditors (it should be noted that Jackson was an extraordinary philanthropist, donating $300 million to a multitude of charities during his career.)
In 2003, Fortress Investment Group purchased some of Jackson’s loans from the Bank of America. Jackson’s failure to repay caused Fortress to threaten to call in the loans. Citigroup rode to the rescue and refinanced $300 million of Jackson’s debt. After he fell behind on payments, Fortress moved to foreclose on the Neverland Ranch. Yet another potential savior - Colony Capital - purchased his loans from Fortress and created a joint venture with Jackson to purchase Neverland for $22 million and renovate it for sale. Colony was also backing Jackson’s 50-concert London comeback which had $85 million in sold-out ticket sales at the time of his death. Clearly, Jackson’s brand was perceived to be so valuable (he sold 750 million albums during his career) that the assumption of risk was deemed to be worth it.
Tags: bad investments, Bank of America, brand, charities, Citigroup, Colony, Colony Capital, debt, entertainer, finance, foreclosure, foreign capital, Fortress, Fortress Investment Group, hedge funds, Jackson comeback, joint venture, King of Pop, London comeback, Michael Jackson, millions, money, Neverland Ranch, physician, private equity creditors, refinanced, renovation, risk, tragic death
Posted in Economics, General | 1 Comment »
Friday, June 12th, 2009
Apple may be the Great American Company — the heir to the spirit of Henry Ford who revolutionized corporations worldwide by modernizing the assembly line to facilitate production of his legendary Model T car. Similarly, Apple under Steve Jobs’ leadership expresses everything that Americans naturally do well — innovation, high quality, smart growth, and nimbleness.
The recession and credit crisis are not slowing Apple, Inc.’s growth as the firm announced plans to open 25 new stores worldwide this year. Two of the new stores are in the Chicago area - one a 15,000 SF boutique in the city’s Clybourn Corridor and another in 42,000 SF in west suburban Naperville.
Apple’s balance sheet is firmly in the black, and the firm employs 35,000 individuals globally. After 30 years, the firm’s brand personality is still groundbreaking, sleek and cool. Think how the iPod changed the music business and the iPhone has redefined the P.D.A.
Apple’s culture of collaboration is legendary (the ipod, for example, was created by 4 people under the aegis of Steve Jobs) with a belief in also fostering individuality that draws very talented people. To recognize its top employees, Apple created the Apple Fellows program for those who have made extraordinary technical or leadership contributions to personal computing while at the company. The Apple Fellows include Bill Atkinson an and Steve Capps (two of the creators of the Mac), Guy Kawasaki (marketing guru and legendary blogger) Al Alcorn (one of the brains behind Atari), and Don Norman (cognitive scientist and usability expert). All that talent has translated to a product that is still peerless in its reputation. According to surveys by J. D. Power. Apple has the highest brand and repurchase loyalty of any computer manufacturer worldwide.
It is ironic that Apple’s rejuvenation comes during a time when the automakers - the symbol of the primacy of the American corporate model - have seen their fortunes tumble because of antiquated systems, an ossified culture and diluted brands. As they emerge from Chapter 11, there are few better companies to study than Apple - a firm that Henry Ford would have been proud of.
Tags: Apple, Apple Inc, balance sheet, brand, Chicago, Clybourn Corridor, cool, corporate model, credit crisis, culture, Great American Company, Henry Ford, high quality, Illinois, iPhone, iPod, Model T car, modern, modern culture, music, Naperville, nimble, PDA, recession, rejuvenation, sleek, smart growth, Steve Jobs, west suburan
Posted in General | 1 Comment »