George Bush: The Unauthorized Biography - Get a Free Blog

the distress of junk bond holders everywhere who saw the firm as a junk bond buyer of
last resort.
By this time, many of the great LBOs had begun to collapse. Robert Campeau's retail
sales empire of Allied and Federated stores blew up in the fall of 1989, bring down
almosty $10 billion of LBO debt. Revco, Freuhauf, Southland (Seven-Eleven stores),
Resorts International, and many other LBOs went into chapter eleven proceedings. As for
KKR's deals, they also began to implode: SCI-TV, a spin-off of Storer Broadcasting,
announced that it could not service its $1.3 billion of debt, and forced the holders of $500
million in junk bonds to settle for new stocks and bonds worth between 20 and 70 cents
on the dollar. Hillsborogh Holdings, a subsidiary of Jim Walker, went bankrupt, and
Seamans Furniture put through a forced restructuring of its debt.
It was clear at the time of the RJR Nabisco LBO that the totality of the company's large
cash flow would be necessary to maintain payments of $25 billion of debt. That will take
a lot of animal crackers and Winstons. If RJR Nabisco had been a foreign country, it
would have ranked among the top 15 debtor nations, coming in between Peru and the
Phillipines. Within a short time after the LBO, RJR Nabisco proved unable to maintain
payments. KKR was forced to inject several billion dollars of new equity, take out new
bank loans, and dunning its clients for an extra $1.7 billion. RJR Nabisco by the early
autumn of 1991 was a time bomb ticking away near the center of a ruined US economy.
If citizens are bright enough to follow the line that leads back from Milken to Kravis to
Bush, RJR and similar horror stories could politically demolish George Bush.
In September 1987, Senator William Proxmire submitted a bill which aimed at restricting
takeovers. Two weeks later, Rep. Rostenkowski of Illinois offered a bill to limit the tax
deductability of the interest on takeover debt. The LBO gang in Wall Street was horrified,
even though it was clear that the Reagan-Bush team would oppose such legislation using
every trick in the book. Later, LBO ideologues blamed the Congress for causing the crash
of October, 1987.
Kravis has always been adamant in opposing any restrictions on the kind of insanity we
have briefly reviewed. "I'm very much of a free-market person," says Kravis. I don't want
interference. My life...you've listened to my life story, I don't want interference! The best
thing to happen to people and this country is a free market system, and I'm very
concerned, if we don't keep the right people in office, that we're not going to have this
free-market environment. And we should have it!" [fn 7]
This corresponds exactly to Bush's policy. During the 1988 campaign, Bush presented his
views on hostile takeovers, using the forum provided by his old friend T. Boone Pickens'
USA Advocate, a monthly newsletter published by the United Shareholders Association,
which Pickens runs. In the October, 1988 issue of this publication, Bush made clear that
he was not worried about leveraged buyouts. Rather, what concerned Bush was the need
to prevent corporations from adopting defenses to deter such attempted hostile takeovers.
Bush indicated he wanted to ban poison pill defenses, which often take the form of a new
class of stock in a company that lets its holders buy stock in the successor company at