Romney's Work at Bain Capital Helped Companies

Bain Capital is company that focuses on leveraged buyouts, not venture capital investments.Venture Capitalism Good, Leveraged Buyouts BadVenture capitalism is a method by which money holders purchase an interest in a startup company by investing seed money in the company. It is a high risk investment with potentially high rewards. Since the majority of failures of new startups is caused by undercapitalization, this is a very important part of growing the economy. Without it we may never have seen the technological booms of the 1980's and 1990's.[1]Bain Capital was brilliant in that it moved away from startups before the tech bust and focused on leveraged buyouts rather than capital investments.[2] Leveraged buyouts, on the other hand, are not for the good of the company. Leveraged buyouts look for companies that are stable, have a low existing debt load, have generated a steady supply of revenue, have hard assets, and have the potential for short term increases in the bottom line through things like workforce layoffs or job eliminations[3]. The money that is used to gain a controlling interest in the company is often borrowed, and secured by the hard assets of the very company that is being invaded.[3] Worse yet, the debt is non-recourse, meaning that the company being raided is responsible for paying off the debt. It is not unheard of for the companies debt to also be used to pay dividends to the raiders [4] Raided Companies Left in Weakened StateShackled with this debt, many companies find themselves in a weakened position. According to the Washington Post, 22% of the companies in which Bain invested fell into bankruptcy[5] within eight years of being raided. Because of the way Bain would restructure the companies finance (to benefit Bain, not the company), the company could not fulfill its obligations. The company raided Armco Steel in my hometown in 1993. Armco Steel had been operating since 1888 and at its peak employed 4,500 people. Bain took a dividend payout of $36.1 million dollars, at the same time their pension plan was under funded by $44 million. Armco Steel went bankrupt less than a decade after Bain arrived and because of the way leveraged buyouts are funded, Bain did not have to pay for the union pensions to which they helped themselves. Instead, the union had to be bailed out by the government, but only at a fraction of the original pension payout to the members.Just Because Something Survives Does Not Mean It Was HelpedMany years ago leeching was an acceptable form of therapy for most illnesses. Though some patients inevitably survived this bloodletting, many others died. We know now that it was not 'bad blood' that was being drained, just blood; blood that the patient needed to survive. Though my esteemed opponent can certainly point to companies which survived long enough to thrive after being taken over by Bain, there are many other companies besides Armco Steel that had the opposite result.From the New York Post[6]: Bain in 1988 put $5 million down to buy Stage Stores, and in the mid-'90s took it public, collecting $100 million from stock offerings. Stage filed for bankruptcy in 2000. Bain in 1992 bought American Pad & Paper (AMPAD), investing $5 million, and collected $100 million from dividends. The business filed for bankruptcy in 2000. Bain in 1993 invested $60 million when buying GS Industries, and received $65 million from dividends. GS filed for bankruptcy in 2001. Bain in 1997 invested $46 million when buying Details, and made $93 million from stock offerings. The company filed for bankruptcy in 2003. The only positive net effect resulting from Bain involvement is their profit margin. The lives and jobs of the thousands of people that have been negatively affected by the liquidation of 'assets' in order to turn a quick profit were added to the rolls of the unemployed and the empty factories stand as a testamant to the cruelty of the bloodletting.[1] http://en.wikipedia.org...[2] http://en.wikipedia.org...[3] http://en.wikipedia.org...[4] http://news.nationalpost.com...[5] http://online.wsj.com...[6] http://www.nypost.com...