Thread by @doctorow

I have a weird soft spot in my heart for Hertz, because they were the first company to offer satnav systems, and since I have a sense of direction so bad that it verges on a cognitive impairment, this saved my ass a million times in the 90s and 2000s.

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So I was saddened more than I anticipated by the news that Hertz had filed for bankruptcy, felled by the one-two punch of Uber/Lyft weakening demand for short-term rentals and then pandemic killing demand altogether.

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Except, that's not what killed Hertz. The company was killed by private equity looting. Ford sold the company to Clayton Dubilier & Rice in 2005 in a $14.8b "leveraged buyout."

axios.com/hertz-bankrupt…

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That's when a plutes take out a loan on a company they don't own yet, in order to buy the company. That way, the new owners can suck huge sums out of their acquisition in "special dividends" while saddling the company with unsustainable debts.

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PE colonized most sectors of the US economy, draining it of cash reserves and capital assets and drowning it with debt. It's why ER doctors and nurses are being laid off in the middle of a pandemic - their employers are PE companies, not hospitals.

pluralistic.net/2020/05/21/pro…

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It's really hard to overstate how grifty PE is. It is the final stage of late-stage capitalism, in which ever profitable business that provides a useful and beloved product or service is bankrupted, and its assets transferred to the super-rich.

pluralistic.net/2020/04/04/a-m…

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Hertz's leveraged buyout was only 6 months old when the company paid $1B to its investors, "de-risking" them. A few months later, Hertz went public with a 95% debt-to-asset ratio (!). Swollen with IPO cash, Hertz grossly overpaid in acquisitions of Dollar and Thrifty in 2013.

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Meanwhile, its private equity looters quietly "exited," leaving the company drowning in debt and saddled with overvalued acquisitions, its business model structured around grifty, performatively dull financial engineering.

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Hertz created special purpose corporations that issued debt to buy cars that were then rented out and leased, while paying "coupons on the asset-backed securities, hoping to turn profits via the rentals combined with vehicle resale."

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If you're reading that and feeling stupid because it's written in financial High Elvish, that's exactly how you're supposed to feel. "Baffle them with bullshit" is the only real financial business-model - like any con-artist, the billionaire grifter depends on it.

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After all, they don't need to build a business that works - just one that doesn't immediately collapse, remaining upright until the grifter has blown town and deposited his winnings in an offshore account.

eof/