Photograph by Ken Cedeno/Bloomberg

Retired Army General David Petraeus, pictured as the top U.S. commander in Iraq, in 2007. Photo by Ken Cedeno / Bloomberg

KKR & Co.  the private-equity firm run by Henry Kravis and George Roberts, is in discussions with former Central Intelligence Agency Director David Petraeus about a role at the company, according to a person with knowledge of the talks.

It hasn’t been decided yet what role he would have at KKR, said the person, who requested anonymity because the discussions are private. Petraeus and Kravis are friends and talk often, according to the person.

Petraeus, 60, resigned from the CIA on Nov. 9 after a probe by the Federal Bureau of Investigation uncovered evidence of an extramarital affair with Paula Broadwell, the author of a biography about the former commander of U.S. military forces in Afghanistan and Iraq entitled “All In.” Last week, City University of New York named Petraeus a visiting professor starting Aug. 1.

Kristi Huller, a spokeswoman for New York-based KKR, declined to comment on the possible hiring. Robert Barnett, a lawyer for Petraeus, didn’t respond to an e-mail requesting comment.

KKR has more than 25 senior advisers, who help the firm find and evaluate investment opportunities, according to its website. Some of them advise KKR-owned companies or serve on their boards.

The firm last year named former Morgan Stanley Chief Executive Officer John Mack as a senior adviser to help make KKR “smarter investors,” Kravis said at the time. Other KKR advisers include Honeywell International Inc. (HON) CEO David Cote, former Caterpillar Inc. CEO James Owens and Qantas Airways Ltd. Chairman Leigh Clifford.

Private-equity firms pool money from investors including pension plans and endowments with a mandate to buy companies within about five to six years, then sell them and return the funds with a profit after about 10 years. The firms, which use debt to finance the deals and amplify returns, typically charge an annual management fee equal to 1.5 percent to 2 percent of committed funds and keep 20 percent of profit from investments.

Kravis, Roberts and their partner Jerome Kohlberg Jr. started KKR in 1976, joining a small group of firms doing leveraged buyouts. Kohlberg left the firm in 1987. Today the industry manages about $3 trillion of assets, according to research firm Preqin Ltd. KKR oversees $78 billion, investing in buyouts, energy, real estate and hedge funds.

See the full report on Petraeus and KKR at Bloomberg.com.

Original post is Petraeus ‘All In’ for Private Equity? by Political Capital.

Photograph by Victor J. Blue/Bloomberg

Stephen Schwarzman, chairman and chief executive officer of Blackstone Group LP.

Steve Schwarzman doesn’t want to lose his right-hand man.

Asked whether his chief operating officer, Hamilton “Tony” James, could be the next Treasury secretary, the Blackstone Group CEO told CNBC this morning that such a prospect worries him — not because James wouldn’t fit the role, but because of his loss to Blackstone.

“That would be terrible for us for sure,” said Schwarzman, co-founder of what is today the world’s largest private-equity and alternative-asset manager. “It’s the last thing I would want.”

James, a supporter of President Barack Obama who held a campaign fundraiser for the president earlier this year, has been rumored to be a contender for the position that will be left by Treasury Secretary Tim Geithner after January, as Obama says he would “love” l to pick a business leader for his economic team.

Schwarzman — who in 2002 hired James in somewhat of an act of faith, yielding some power within rapidly growing Blackstone — said his No. 2 “would be terrific” in the role. “He’s a terrific guy,” Schwarzman said, smiling.

That said, James might not be the absolute best choice, given conditions in Washington. In Schwarzman’s thinking, Obama will probably choose someone already involved in the current fiscal negotiations, such as White House Chief of Staff Jack Lew.

“It would be somebody who is dealing with these types of complex issues,” he said, “because I don’t think they’ll all get resolved.”

Among the rumored, Lew remains a likely choice. Erskine Bowles, who co-chaired Obama’s fiscal commission, told CNBC last month that he wouldn’t be the next Treasury secretary, and Larry Fink, co-founder and CEO of the money manager BlackRock, said last week he won’t leave his job for a role in Washington.

Original post is Schwarzman Hopes to Hold James by Political Capital.

Photograph by Victor J. Blue/Bloomberg

David Rubenstein, co-chief executive officer of Carlyle Group LP.

Written with Jason Kelly

What would David Rubenstein do?

That was the question posed to the private-equity tycoon and former Carter administration policy wonk today in Washington, as the town stares down a so-called fiscal cliff that, if breached, would probably throw the country back into recession.

“The election results change everything,” Rubenstein, co-founder and co-CEO of Washington-based Carlyle Group, said in a lunchtime discussion with Jason Kelly, managing editor for Bloomberg Link, at Bloomberg Government’s offices in the capital. “Once the election was over, I think Republicans recognized that the president had more ability to persuade members of Congress that his way was more likely to be the prevailing way.”

A lifelong Democrat who served as deputy assistant for domestic policy to President Jimmy Carter, Rubenstein said he sees four elements of revenue increases in an eventual fiscal bargain: higher marginal tax rates — “though probably not as high as 39 percent,” a bump in the capital gains tax to 20 percent, a dividend tax rate between 20 percent and 25 percent and a higher estate tax.

Spending cuts, Rubenstein said, will probably be negotiated “down the road.”

As the chief fundraiser for Carlyle, which oversees $157 billion, Rubenstein travels to about 50 countries a year. Everywhere he goes, he said, the first question people ask him is not about Carlyle, but about the fiscal cliff.

“The markets would be in chaos” if the U.S. failed to resolve the $607 billion of spending cuts and tax increases that are set to start in January unless Congress acts to avoid them, Rubenstein said.

Still, according to the global investor, “people have taken the view that this will get resolved. The markets believe a deal will get done.”

Original post is Rubenstein: Markets Expect No Cliff by Political Capital.

Photograph by Nick Ut/AP Photo

Chief Justice John Roberts

Does private-equity giant KKR have Chief Justice John Roberts to thank for a stellar quarter?

Yes and no.

The storied buyout firm, run by cousins Henry Kravis and George Roberts, today posted second-quarter profits of $520 million, more than double its profit for the same period last year. Most metrics — including the aggregate value of KKR’s holdings, its share of investment gains and its earnings eligible for distribution to investors — were up in the quarter.

The vast majority of KKR’s profit came from its stake in Alliance Boots, the largest drugstore chain in Britain. After Walgreen agreed last month to buy 45 percent of Boots for $6.7 billion, KKR marked up the value of its Boots holding to $651 million, from $392 million just three months earlier. KKR said today that the Boots stake, which is valued at 1.9 times the cash KKR paid for it, accounted for 82 percent of pre-tax profit for the quarter.

The remainder of KKR’s profit is where Chief Justice John Roberts comes in.

KKR said the stellar performance of its balance sheet, which heavily impacts the firm’s profit metric, was “largely due to the significant appreciation in Alliance Boots, Dollar General and HCA.”

HCA is the biggest hospital chain in the U.S., and it is 20 percent owned by KKR and its affiliated funds, according to Bloomberg data. At that weight, the value of KKR’s stake in HCA jumped $334 million in the final two days of the quarter, when news rippled through the markets that Roberts’ Supreme Court — with the chief justice writing the 5-4 opinion — upheld the core of President Barack Obama’s health-care overhaul.

When the dust settled and the second quarter was in the history books, KKR had marked up the value of its HCA holdings to $568 million, more than 2.5 times its cost and a jump from $463 million three months earlier.

Commenting today on the sterling run for his firm’s balance sheet, KKR chief financial officer Bill Janetschek said, “This strong performance translated into the highest book value figure we’ve reported as a public company.”

For at least part of that performance, he has Roberts to thank.

Original post is John Roberts’ Role in KKR’s Profits by Political Capital.

Photograph by Kiyoshi Ota/Bloomberg

Wilbur L. Ross Jr., chairman and chief executive officer of W. L.Ross & Co. LLC.

If you ask private-equity executives whether the campaign rhetoric surrounding Mitt Romney’s buyout past is hurting business, most will wave you off.

For billionaire investor Wilbur Ross, on the other hand, the effect has been real — and he’s ready to admit it.

Ross, the chairman and CEO of WL Ross & Co., recently cut the fundraising target for his most recent buyout fund by almost half, closing on $2.2 billion after targeting $4 billion. He told Bloomberg TV today that attacks led by the Obama campaign on Romney’s role at private-equity firm Bain Capital have hurt fundraising.

“All the campaign rhetoric about private equity has not been a helpful thing,” said Ross, 74. “There has been an atmosphere of concern, and that’s the fact. Everybody has had some troubles raising capital this time.”

The concern from Ross — who since 2000 has raised five funds that invest in health care, energy, banks and other industries — comes at a time when big buyout firms are on the road seeking fresh capital. The Carlyle Group, for example, is hunting for cash to feed 11 funds, including a $10 billion flagship.

Ross, a Romney supporter, attributed the difficulty to wariness among the historically exuberant private-equity investors: state and local pensions. Because pension funds are already in the public view as they struggle to meet performance targets, their elected representatives are that much more sensitive to negative advertisements and incisive headlines, said Ross.

“They all live in goldfish bowls,” Ross said. “Things like newspaper headlines do make an impact on them.”

Ross’s view from inside the industry validates concern that some private-equity managers expressed at the beginning of the year, when the primary campaign raged and Romney was under attack from his own Republican peers. Blackstone Group President Tony James wondered at the time whether the campaign rhetoric could penetrate the Washington bubble and find its way into the board room.

“Pension funds have boards — they don’t want to be giving money to an industry that has a taint,” James, an Obama backer, said in February. “Similarly, boards of directors don’t want to sell their company to organizations they don’t view as respectable. So it could be very damaging for the industry.”

Original post is Ross: Private-Equity Rhetoric Hurts by Political Capital.

Photograph by Peter Foley/Bloomberg

Stephen Schwarzman, chairman and chief executive officer of Blackstone Group LP.

In a year when political ads attacking private equity are becoming the norm, the chief of the world’s largest buyout firm has some blunt words for his peers.

“I think the industry has done a miserable job of marketing,” Blackstone Chairman Steve Schwarzman said in an interview this morning on CNBC. “The reason that the industry hasn’t communicated this message is somewhat of a mystery to me.”

The 65-year-old Blackstone co-founder is backing Republican Mitt Romney for the White House, having raised money for the former Bain Capital chief at a Park Avenue fundraiser in December. Schwarzman’s partner, Blackstone President Tony James, is supporting President Barack Obama’s re-election .

Schwarzman said he thinks some Obama supporters misunderstand the buyout industry because not all private-equity investments are successful. “And by the way, in the real world not every company is successful,” he said.

“It’s frustrating if you believe the facts as I know them,” he added.

Schwarzman, sitting next to House Majority Leader Eric Cantor of Virginia, also weighed in on the country’s mounting debt and the impending “fiscal cliff”’ — the year-end’s convergence of Bush-era tax cuts expiring and automatic spending cuts taking effect if Congress does not act on deficit reduction.

“If you keep doing this, something terrible is going to happen,” Schwarzman said of continuing to spend more than the U.S. rakes in. “This is completely unsustainable. Something terrible will happen to us.”

Blackstone oversees about $190 billion in assets across private equity, hedge funds, real estate and credit.

Original post is Private Equity’s `Miserable’ Defense by Political Capital.

Photograph by Jin Lee/Bloomberg

A McDonald's restaurant in New York.

Barack Obama has lost another supporter from private equity.

Paul Levy, a managing director at JLL Partners, voted for Obama in 2008 but now says that if the president were a company, he would not invest in it. Levy told Bloomberg TV’s Stephanie Ruhle today that when he was invited to one of Obama’s New York fundraisers, he said he would only go if it were held at McDonald’s.

“If he’s busy attacking people with wealth, why does he want to go to fancy restaurants and fancy homes to have these events?” Levy said. “If he wants to go where the people go, I’m happy to go where the people go.”

Levy joins Jonathan Nelson, the billionaire co-founder of Providence Equity Partners, in backing away from Obama’s re-election campaign as it drills into Mitt Romney’s past as a buyout executive and questions his qualifications for the country’s top job.

Levy said he doesn’t want his business turned into a “political endeavor.”

Until the end of Obama’s term — whether it ends in January or four years later — Levy said he hopes the president’s Treasury secretary understands the economy. “Because I don’t think the president does,” he said.

Levy’s firm, whose investments include American Dental Partners and Education Affiliates LLC, manages about $4 billion on behalf of pension funds and endowments, including the New York State Teachers’ Retirement System and Harvard University.

Original post is Levy: Obama Needs McDonald’s Fundraiser for Wall Street by Political Capital.

Photograph by Thomas Lee/Bloomberg

Jonathan M. Nelson, chief executive officer of Providence Equity Partners Inc.

Jonathan Nelson, the billionaire co-founder of Providence Equity Partners, supported Hillary Clinton and contributed to Barack Obama in the 2008 election. But as the private-equity executive told Bloomberg TV’s Cristina Alesci, Nelson is backing Mitt Romney this time around, saying he can’t support a candidate who attacks how he makes a living.

Dozens of investment managers have continued to support Obama for re-election while his campaign attacks Romney’s business record at Bain Capital– paying upwards of $35,800 each to hear from the president at New York fundraisers.

Not Nelson, whose Rhode Island firm owns companies including Univision Communications and the cable-TV network of the New York Yankees. He has given $2,500 to Romney and $5,000 to the Private Equity Growth Capital Council, the industry’s main lobbying group in Washington. In 2008, Nelson gave Obama and Clinton $2,300 apiece.

Buyout executives who have continued to support Obama include Tony James, president of the Blackstone Group, who threw a $35,800-a-plate dinner for Obama in May that featured several of James’s colleagues from the investing world.

Meanwhile, when asked about his criticism of Romney’s career and its qualifications for the presidency, Obama has said, “This is what this campaign is going to be about.”

Original post is Trading Obama, Clinton for Romney by Political Capital.

Photograph by Johannes Simon/Getty Images For 2nd CGDC Annual Meeting 2012

Bill Clinton

The ranks of Democrats defending Republican Mitt Romney’s career as a buyout executive have grown with a high-profile addition: former President Bill Clinton.

In an interview last night on CNN, the Obama campaign surrogate refused to fall in line with a campaign that has sought to portray Romney’s business record as one of raiding companies, looting them for profit and destroying jobs in the process. Instead, the former president had another word for Romney’s career: “sterling.”

“I don’t think we ought to get into the position where we say this is bad work; this is good work,” Clinton said of the private-equity industry. “A man who’s been governor and had a sterling business career crosses the qualification threshold” for the presidency, the former Arkansas governor said of the former Massachusetts governor.

Both the Obama and Romney campaigns have made it clear that Mitt Romney’s career as the head of Boston-based Bain Capital will be a focus of the 2012 campaign. While the Obama campaign originally sought to paint Bain as a “vampire,” sucking the life out of profitable companies, it has recently tried to pivot to say the buyout industry is healthy for the economy yet misses the mark when it comes to instilling a presidential candidate with the spirit of the job.

Romney, meanwhile, stresses that his years in finance make him qualified to tackle economic issues such as rising debt and weak job growth.

It remains to be seen whether Clinton will qualify his sterling approval of Romney’s business record. After Newark Mayor Cory Booker called the private-equity debate “nauseating” in a Meet the Press interview, he hurriedly backtracked, taping a YouTube video hours later to encourage the Obama campaign to examine Romney’s Bain career.

Other Democrats who have come to Bain’s defense include Steve Rattner, who headed Obama’s auto task force and previously co-founded the private-equity firm Quadrangle Group, and Massachusetts Governor Deval Patrick, who on Thursday called Bain a “perfectly fine company.”

For all this, Clinton remains on message on at least one Obama campaign talking point: he still thinks Obama will keep the White House in November by five or six percentage points.

Original post is Clinton: Romney’s `Sterling’ Career by Political Capital.

Photograph by Emmanuel Dunand/AFP/Getty Images

A demonstration against Mitt Romney in front of the Waldorf Astoria hotel as Romney holds a campaign fundraiser in New York on March 14, 2012.

When Newt Gingrich released a 28-minute film painting Mitt Romney as a corporate raider who profited from struggling companies, the Romney campaign said it expected that type of criticism not from Republicans, but from President Obama.

That criticism has arrived.

The Obama campaign opened a new line of attack today with a website aimed at undermining Romney’s claims that his business experience makes him more qualified to turn the U.S. economy around.

RomneyEconomics.com hits the former Bain Capital chief with what the Obama campaign says are case studies of companies whose workers suffered under Bain’s ownership, featuring a six-minute video about GST Steel, a Kansas City plant that Bain bought in 1993 and which later filed for bankruptcy. Shorter, ad-length versions also exist.

“It was like a vampire,” says Jack Cobb, one of the plant’s workers depicted in the video. “They came in a sucked the life out of us.”

The criticism mirrors the same attacks leveled at Romney during the primary campaign season. Gingrich and Texas Governor Rick Perry, who have since endorsed Romney, previously called the Republican frontrunner a corporate raider who stripped businesses, loaded them with debt and laid off their workers for profit.

The film Gingrich released in January, entitled “When Mitt Romney Came to Town,” depicted Romney as a son of privilege and a financier ”more ruthless than Wall Street.” A review by Bloomberg News found that the film at times stretched the truth and took some reports out of context or selectively edited them.

Original post is Romney’s Bain Stain by Political Capital.