Mitt Romney Bain Capital
January 14, 2012 by staff
Mitt Romney Bain Capital, Boston-based Bain Capital LLC more than doubled its money on GS Industries Inc. — the former parent company of Georgetown Steel — under Mitt Romney’s leadership in the 1990s, even as the steel manufacturer went on to cut more than 1,750 jobs, shuttered a division that had been around for 100 years and eventually sank into bankruptcy.
Bain Capital spent $24.5 million to acquire GS Industries in 1993, according to an investment prospectus for the company that was obtained by the Los Angeles Times and reviewed by McClatchy Newspapers. By the end of that decade, Bain Capital estimated its partners had made $58.4 million off its investment in GS Industries, according to the prospectus.
Bain Capital’s partners also earned multimillion-dollar dividends from GS Industries and annual management fees of about $900,000. But by the time GS Industries filed for bankruptcy protection in 2001, it owed $553.9 million in debts against assets valued at $395.2 million.
Romney – who founded Bain Capital, one of the earliest leveraged-buyout firms, in 1984 – was in charge of the firm for most of the time it owned GS Industries. Romney left Bain Capital in 1999, two years before the bankruptcy, to run the organizing committee for the Winter Olympics in Salt Lake City, Utah.
“We were doing well and then Bain Capital bought us and they took everything they could out of the company without making the investments we needed to stay competitive,” said James Sanderson, who has been with the mill since 1974 and served as its union president since 1988. “They ran the company into bankruptcy.”
Bain Capital came to own Georgetown Steel after it provided the financing for a management-led buyout of Armco Worldwide Grinding System of Kansas City, Mo., in 1993. The Armco plant was renamed GS Technologies, which merged with Georgetown Industries in 1995 to become GS Industries Inc. At the time, the combined entities – headquartered in Charlotte, N.C. – had $1 billion in revenue and employed 3,800 people worldwide as the largest producer of carbon wire rods in North America.
Sanderson said Bain Capital replaced longtime managers who had built Georgetown Steel with bean counters looking for ways to cut costs. They demanded increasing financial performance with little idea of how the daily operations were run, he said.
“They were investors. They weren’t steel mill operators,” he said.
Romney has touted his business acumen as an asset in his bid for the Republican Party nomination for president. But he has come under fire from opponents – including other Republican candidates, such as Texas Gov. Rick Perry, who called Romney a “vulture capitalist” – who say Bain Capital preyed on struggling companies and stripped them financially before selling them off or abandoning them in bankruptcy court.
Bain Capital propped up short-term earnings, Romney opponents say, so the venture capital firm could borrow money that went toward investors’ dividends – enriching Bain Capital but leaving the companies with unsustainable debt.
Romney has fought back, saying his goal at Bain Capital always was to make companies successful over the long term, even if that meant painful cuts along the way. Romney says he was successful more often than not, but that in a free enterprise system, some businesses will not be strong enough to survive.
Romney’s campaign officials in South Carolina could not be reached for comment, but he discussed Bain’s investment in GS industries during a Fox News interview last month.
“The steel industry got in trouble in this country,” Romney said. “I think 40 mills went bankrupt the same time (GS Industries) did, in part because of – well, in this case, dumping from places like China into this country. I understand the impact of what happens globally in trade. And businesses, you know, lose and go out of business, and in some cases, lose jobs. It breaks your heart when that happens.”
Jim Jerow, chairman of the Georgetown County Republican Party, said he thinks the attacks on Romney have been unfair.
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