Poncherello, private equity & the men’s room

I got invited to a posh lunch at a private equity company last week. I flew up to Manitowoc, Wisconsin, the home of Pine Coffin Capital Partners LLC after receiving an invite from Frank ‘Ponch’ Poncherello, the chief investment officer and former colleague of mine when I worked for the California Highway Patrol back in the 1980s. Ponch hadn’t changed much. He was still the same macho rambunctious guy that he was back then, with me his straight laced partner on our Harleys. Today he had retired from unpicking huge highway pile-ups and had the easier more relaxed lifestyle of running a private equity business.

On the flight up there I read the website. They are patient investors who like to partner with blah blah. Yep, the usual nonsense that all PE companies put on their ‘About Us’ page. No mention of Ponch trying to impress a good looking lady with his disco moves once a week, or us racing against time to defuse a battery about to explode on an intelligent experimental police robot.

He now runs a private equity investment business.
He now runs a private equity investment business.

After a good solid lunch of boiled moose buttock and french beans cooked by the ‘in house’ chef, coupled with a cold beer or two and some chat about shipping I had to excuse myself from the table to de-ballast. I noticed stuffed behind the cistern was what looked like a brochure. I fished it out and read the cover ‘A Guide To Shipping For Private Equity Investors’ – dated 1992. Other than a couple of pages ripped out towards the back (It was the chapter ‘High Yield Bonds’ – I’m guessing they couldn’t find the spare toilet tissues) it was pretty much intact. The final chapter was entitled ‘Terminology – Translation of Shipping Terms’. I quickly flicked to it and got comfortable. Here’s some extracts:

Pre-Investment phase

Volatility – if said before you invest it is ‘how we make money’

Volatility – if said after you have invested it is ‘why we lost money’

Opportunity – tall tale

Third Party Management Fees – how the owner gets rich

Experienced professional – check High Court records

Cyclical business – you will lose eventually

Cyclical low – we’re broke

Play the cycle – buy high/sell low

Ship owner – Bond villain

Operator – chancer

Commodity trader – robber

Commodity trading house – robber in a house

Long term customer – people we let screw us over

Private equity – mugs

Hedge fund – unicorn rancher

Capital markets – Willy Wonka’s factory

Entry point – best guess

Exit point – bankruptcy

Access to market information – plays golf with a broker

Business model – Powerpoint presentation

Research – Excel spreadsheet

Under-valued – obsolete

Niche sector – dead man’s shoes

A man died wearing these. Try them on for size . . .
A man died wearing these. Try them on for size . . .

Tax efficient – dodgy

High quality tonnage – over-priced crap we want to unload on you

Forward looking statement – guess

Good reputation – always pays brokers

Today’s asset values – the price at which you are about to buy our liabilities

Diversified group – we won’t share the profitable stuff

Family interests – all the good stuff you’ll never get your hands on

Focused strategy – no strategy

End of Year One

Current market – market of six months ago

Core business – bit that we can explain

Business unit – unmanageable employees (often in overseas location)

Peer group – other chancers

EBITDA – Brazilian pole dancer who did the christmas party last year

Discount to NAV – you now own our over-valued assets

End of Year Two

Restructure – no idea what we’re doing

Cash requirement – preparing to run for it

Equity injection – management are updating their CVs

Challenging markets – give it a month and we’re bust

Financial accounts – Disney classic

Profitable – break even

Break even – loss

Small loss – massive loss

Loss – bankrupt

Balance sheet – game of Jenga

Mark to market – see ‘Financial accounts’

Hedge – loss

Profitable hedge – hedge we didn’t understand

Cost cutting – stuff we can’t get away with anymore

Long runway – we’re past V1, but no hope of getting over the airfield fence

Optimistic outlook – we’re doomed

Positive outlook on China – run out of ideas

Chapter XI – longest chapter in any book about shipping

If only this hadn’t been hidden in the men’s room in a tiny office in northern Wisconsin since 1992. It would have been nice for all the ‘patient’ guys who are now stuck up to the wazoolahs with problems to get a better read on ‘shipping speak’. To add insult to considerable financial injury, they are actually getting the blame for today’s woes from some folk for ordering ships. How many private equity funds got into shipping totally out of the blue, receiving no advice from an ‘experienced shipping professional’?

Stepping out for a quick coffee from a private equity shipping meeting
Stepping out for a quick coffee from a private equity shipping meeting

After our most convivial catch-up lunch, Ponch drove me back to the airport. He said that he was thinking of getting back into shipping again. I smiled, looked him in those twinkling eyes and said ‘Then you better look down the back of the toilet in the men’s room. I think you’ll find all that you need to know back there.’ We said our farewells in the manly way (hug is fine, but pat the back, do not rub it) and I slipped my Walkman headphones on and pressed play on ‘Crocodile Shoes’ – the Jimmy Nail cassette single that I liked to play to calm my nerves before flying. If it’s patience people in shipping wanted, they’d be better off hiring Dr Kildare.

One thought on “Poncherello, private equity & the men’s room”

  1. another term to add to the glossary:
    “fees are ‘Baked in’ ” – which means “you have NO idea what the real value of this deal or cost of your investment is. Oh, that return we promised? It’s 400 bps lower. The fees were baked in.”

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