I find it just AMAZING how often we hear about the importance of maintaining contracts with oil companies, banks, hedge fund managers and the like because contract law is sacrosanct. You’ll hear that line often when we talk about forcing executives to take less in their pay because a bank took bailout money or the taxpayer or consumer isn’t getting a square deal. And you know – I agree that contracts should be sacrosanct.
Except – here’s the rub…that same argument never, NEVER seems to apply to the worker in this country. When we have contracts and promises made for pensions and healthcare benefits….those same people who ardently defend the rights of those who signed contracts are energetically and purposefully trying to shred the contracts of those with pensions and money owed for work served. That’s not right. And I want you to read this story…and ask yourself if you think this is the kind of America that you want to live in. It’s a striking indictment on vulture capitalists like Mitt Romney.
They brought in security guards. They fired us all. They walked us out of the building.
CBS News explains what happened today – article HERE:
Biden told the story of Randy Johnson, who used to work at Ampad, a paper plant in Marion, Indiana, that was acquired in 1994 by a company owned by Bain and became SCM Office Supplies.
“The workers were fired, including Randy, and told they could reapply for their jobs but the wages would be lower, health benefits would be less,” Biden said, speaking about Johnson, who introduced the vice president. “Then a year later they shut the plant down — everyone lost their jobs.”
Johnson said he and some of the other employees who were hired back eventually held picket lines in protest to cuts in their pay and benefits. The factory was later closed.
Johnson currently works for United Steelworkers in Pennsylvania.
If you want to see an infographic that explains how Bain structured the deal for AMPAD – click HERE. This deal is a real life re-enactment of a Gordon Gekko deal…
Mass Resistance points us to a 1997 Boston Globe expose called ”The Making of Mitt Romney” – article HERE:
In 1992, Bain Capital acquired American Pad & Paper, or Ampad, from Mead Corp., embarking on a ”roll-up strategy” in which a firm buys up similar companies in the same industry in order to expand revenues and cut costs.
Through Ampad, Bain bought several other office supply makers, borrowing heavily each time. By 1999, Ampad’s debt reached nearly $400 million, up from $11 million in 1993, according to government filings.
Sales grew, too – for a while. But by the late 1990s, foreign competition and increased buying power by superstores like Bain-funded Staples sliced Ampad’s revenues.
The result: Ampad couldn’t pay its debts and plunged into bankruptcy. Workers lost jobs and stockholders were left with worthless shares.
Bain Capital, however, made money – and lots of it. The firm put just $5 million into the deal, but realized big returns in short order. In 1995, several months after shuttering a plant in Indiana and firing roughly 200 workers, Bain Capital borrowed more money to have Ampad buy yet another company, and pay Bain and its investors more than $60 million – in addition to fees for arranging the deal.
Bain Capital took millions more out of Ampad by charging it $2 million a year in management fees, plus additional fees for each Ampad acquisition. In 1995 alone, Ampad paid Bain at least $7 million. The next year, when Ampad began selling shares on public stock exchanges, Bain Capital grabbed another $2 million fee for arranging the initial public offering – on top of the $45 million to $50 million Bain reaped by selling some of its shares.
Bain Capital didn’t escape Ampad’s eventual bankruptcy unscathed. It held about one-third of Ampad’s shares, which became worthless. But while as many as 185 workers near Buffalo lost jobs in a 1999 plant closing, Bain Capital and its investors ultimately made more than $100 million on the deal.
Timeline of AMPAD’s stock price:
July 2, 1996: $15.13 – IPO Price
Jan. 27, 1997: $26.00 – Peak
Sep 16, 1997: $13.13 – Stock loses 42% of its value
Nov 1, 1999: 35 cents – Ampad looks to sell assets to reduce debt
Jan 14, 2000: 15 cents – Ampad forced into bankruptcy
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